As the week comes to an end, market participants are closely monitoring key economic releases that could influence short-term volatility. Friday’s high-impact events include the UK’s Retail Sales data, followed by Canada’s monthly Retail Sales figures. These reports are expected to provide further insight into consumer demand trends in two major economies.
Meanwhile, the DAX continues to attract attention as it sustains its recovery from the April lows. Technical signals remain broadly supportive of the bullish momentum, though emerging divergences call for cautious optimism. Traders are also digesting softer German PMI data, which reflect a weakening services sector, modest manufacturing gains, and easing inflation pressures—adding a complex backdrop to the index’s price action.
Since bottoming at 19,019.22 on April 7, the DAX has mounted a meaningful recovery, initially signaled by bullish Japanese candlestick reversal patterns and later confirmed by key technical indicators and chart formations. A pivotal signal was the emergence of aGolden Cross, marked by the 20-period Exponential Moving Average (EMA) crossing above the 50-period EMA—a classic indication of a shift toward bullish sentiment.
Price action remains decisively above the 20-period EMA, underlining continued upward momentum. This is further supported by the Momentum Oscillator, which remains firmly above the 100 level, and the Relative Strength Index (RSI), which holds well above the neutral 50 mark—both reinforcing the prevailing buying pressure.
However, a degree of caution is warranted. The emergence of a bearish divergence between the Momentum Oscillator and price action suggests that while the trend remains intact, the rally may be losing internal strength. This divergence raises the risk of a short-term consolidation or corrective pullback.
Key Resistance Levels
Should the buyers maintain market control, traders may direct their attention toward the four potential resistance levels below:
24,155.72: The initial resistance level is identified at 24,155.72, aligning with the daily high from May 21.
24,569.15: The second price target is set at 24,569.15, aligning with the weekly resistance, R3, calculated using the standard Pivot Points methodology.
25,180.23: The third price objective is observed at 25,180.23.
25,483.15: An additional upside target is projected at 25,483.15, mirroring the 423.6% Fibonacci Extension drawn from 23,896.96 to 23,406.79.
Key Support Levels
Should the sellers take market control, traders may consider the four potential support levels listed below:
23,374.79: The initial support level is estimated at 23,374.79, corresponding to the peak marked March 18.
22,925.87: The second support level is identified at 22,925.87, representing the weekly support, S3, calculated using the standard Pivot Points methodology.
22,227.96: A third support level is 22,227.96, mirroring the 38.2% Fibonacci Retracement between 19,109.22 and 24,155.72.
21,520.01: An additional downside target is seen at 21,520.01, reflecting a daily high from April 9.
Fundamentals
Germany’s private sector contracted in May for the first time this year, with the HCOB Flash Composite PMI falling to 48.6 from 50.1 in April. The decline was driven by a sharper downturn in the services sector, which posted its steepest contraction in two-and-a-half years. In contrast, manufacturing output continued to grow, supported by a pickup in new export orders, particularly from the U.S. and Europe.
Employment slipped slightly as job losses in manufacturing outweighed modest hiring in services. Business confidence improved from April’s lows, especially among manufacturers, amid optimism around public spending and potential U.S.-EU trade agreements. However, new business inflows declined across both sectors, reflecting persistent demand weakness.
On the inflation front, price pressures eased, with output price inflation for goods and services hitting a seven-month low. Factory gate prices resumed falling, while services inflation slowed but remained elevated.
Conclusion
With sentiment in the DAX remaining cautiously optimistic, market participants weigh a technically resilient recovery against mixed fundamental signals. While momentum indicators point to continued bullish potential, bearish divergences and softening macro data—particularly from Germany’s services sector—inject an element of uncertainty. As the week wraps up, attention will be on Friday’s retail sales data from the UK and Canada, which may offer further clarity on global demand dynamics and help shape short-term market direction. Traders are encouraged to stay alert to evolving signals across both technical and macroeconomic fronts.
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