Monday has been a bullish day so far for EU equity indices, despite some weakness in US benchmarks. US indices were down slightly at the time of writing, but the German DAX was trading half a percent higher, rising above 15,800 EUR.
Focus on German and US data
Earlier today, German retail sales weakened notably, printing -0.9% year-on-year in September , down from 0.4% previously. The monthly change dropped to -2.5%, from 1.1% scored in August. Both numbers came out well below expectations.
From other news, the US ISM manufacturing PMI for October slid marginally to 60.8, down from 61.1 . However, it remains well above the critical 50.0 threshold. In addition, the inflation subindex, priced paid, jumped to record highs of 85.7, up from 81.2 previously, while the employment subindex also increased from 50.2 to 52.0.
It looks like the ECB would not start tightening monetary policy anytime soon , and rates might stay at the current harmful levels forever as the central bank continues to downplay the inflation spike as temporary.
From other news, US Treasury Secretary Janet Yellen said on Monday that they expect China to fulfill the trade deal commitments. The current inflation surge is a result of supply bottlenecks, higher energy prices. Inflation should ease in 2H 2022, she continued.
Daily chart looks bullish
On Friday, the DAX index posted a nice bullish pin bar as the price retested its 50-day moving average and bounced higher . That was a strong bullish signal, sending prices higher today. Additionally, it might have confirmed the medium-term uptrend.
The next target for bulls is expected in the 15,800 – 16,000 EUR zone, where the current cycle highs are.
Alternatively, the support could be found at 15,700 EUR, followed by Friday’s lows and the 50-day average at around 15,550 EUR.