Dax Index trades higher despite fears of a plunge in domestic consumption

Dax Index trades higher despite fears of a plunge in domestic consumption

  • DAX trades higher today, adding to a strong close yesterday
  • One third of poll respondents expect to spend less in coming months, with 43% businesses face cancelling order
  • The buyers are aiming for a break of 11,300 resistance

The DAX Index gapped slightly higher today, further adding to its yesterday’s gains of 1.44%. The move higher comes despite the results of the new poll released today in Germany that show a significant plunge in the consumption expected for this year.

Fundamental analysis: One third of Germans expect to spend less 

The GfK market research group released results of its poll today that show worrying expectations that domestic consumption may take a significant hit in the months to come. 

Around 7% of respondents said that they are looking to postpone purchases of products like clothing, cars or luxury goods, while one third said they are looking to spend less in the coming months.

“People who have lost their jobs – and many of those that didn’t – will be facing safety and financial pressures, thus reducing their ability to spend,” said Justin Low from ForexLive. 

In a separate business-oriented study conducted by Germany’s Chambers of Industry and Commerce (DIHK), findings show that 43% of companies are facing cancelling orders. This is in addition to around 50% of businesses having to partially/completely halt their business activity in the past few weeks. 

“Big firms, for the most part, are going to survive this but smaller firms are going to bear heavy consequences considering the likely reduction in business activity and demand in the coming months – not just during lockdown,” added Low. 

As expected, the travel sector is facing the biggest hit. The GfK’s poll shows that as much as 25% of the poll participants have cancelled their planned vacation for this year. Similarly, the DIHK findings showed that around 50% of travel agencies are fearing insolvency as a result of the COVID-19 outbreak, national lockdowns and a plunge in global travel demand. 

Technical analysis: DAX Index grinds higher

Following a strong last week that resulted in gains of more than 5%, the DAX Index is fighting to sustain the last week’s jump. The price action has struggled to sustain gains after printing a 7-week high above the 11,200 mark last week, coming just shy of the major horizontal resistance near 11,300. 

DAX Index daily chart (TradingView)

A break of this resistance level would open the door for a move towards the 12,000 zone, which hosts the 100-DMA and 200-DMA. On the downside, the buyers enjoy support from a confluence of technical indicators between 10,000 and 10,300. 

Summary

DAX Index is trading modestly higher today despite worrisome predictions about the domestic consumption for the rest of the year. Furthermore, a separate study showed that around 43% of German companies have faced cancelled orders amid the COVID-19 outbreak and lockdown measures imposed by the Government. 

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.

Investing is speculative. When investing your capital is at risk. This site is not intended for use in jurisdictions in which the trading or investments described are prohibited and should only be used by such persons and in such ways as are legally permitted. Your investment may not qualify for investor protection in your country or state of residence, so please conduct your own due diligence. This website is free for you to use but we may receive commission from the companies we feature on this site. Click here for more information.