DAX index price prediction ahead of factory orders report

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Oct 5, 2021
  • DAX has weakened from its recent highs
  • Germany's economic output depends on exports
  • Opel will shut down a factory in Eisenach

Germany’s DAX index has weakened from its recent highs above 16,000 points, but it has stabilized above the current support level at 15,000 points. According to the German Economic Ministry, the outlook for the industry remains positive, while the German central bank expects that the German economy could grow 3.7% this year.

Despite this, the German economy could be hit by the world’s supply chains crisis because of its dependence on exports. The German economy is particularly vulnerable to shortages of key parts and raw materials, and more than 40% of companies reported they had lost sales because of supply problems.

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The auto industry has been hit the hardest, and many big companies scaled back production of some of their largest, most profitable models because of the ongoing semiconductor shortage. The semiconductor shortage throttling global car production suggests more pain for the automotive industry, and many employees will be furloughed.

Opel announced last month that it would shut down a factory in Eisenach until the beginning of 2022 year because of a shortage of semiconductors. The slowdown of the German manufacturing powerhouse represents a big issue, and some economists have begun to predict a “bottleneck recession.”

The problem is not only the ongoing semiconductor shortage but also copper, aluminum, plywood, plastics, and raw materials like cobalt, lithium, nickel, and graphite. Oliver Knapp, a senior partner at Roland Berger, a Munich-based consultancy, said:

The impact is dramatic; nearly half of Germany’s economic output depends on exports of cars, machine tools, and other goods, compared with only 12% in the United States.

The European Central Bank recently reported that exports from Eurozone would have been at least 7% higher in the first half of the year if not for supply bottlenecks.

Inflation in the Eurozone surged to 3.4% YoY in September according to preliminary estimates, but European Central Bank President Christine Lagarde repeated once again that ECB would maintain its accommodative policy for as long as necessary.

Germany will publish factory orders for August this Wednesday, which could significantly influence on DAX index in the near term.

15,000 points represent support

Data source: tradingview.com

DAX index has stabilized above the current support level at 15,000 points, and if the price jumps above 15,300 points, the next target could be at 15,500. On the other side, if the price falls once again below 15,000 points, it would be a firm “sell” signal, and the next target could be around 14,500 points.

Summary

Germany’s DAX index has weakened from its recent highs above 16,000 points, but it has stabilized above the current support level at 15,000 points. According to the German Economic Ministry, the outlook for the industry remains positive, but the German economy could be hit by the crisis in the world’s supply chains because of its dependence on exports.

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