As data released this morning showed:
→ Purchasing Managers' Index (PMI) in France: actual = 42.6, expected = 44.4, a month ago = 43.6. Thus, the index dropped to its lowest level since the panic associated with the spread of coronavirus.
→ PMI in Germany: actual = 40.7, expected = 40.1, a month ago = 39.8.
Since the values of the PMI index (considered a leading indicator of the state of the economy, calculated by S&P Global) are significantly below 50, this indicates a contraction of the economy in the 2 most important countries of Europe in the context of high interest rates.
It is not surprising that the European stock index Eurostoxx 50 shows bearish dynamics: the price is below the SMA (100), which is directed downwards. The publication of PMI values added negativity. Will the bearish trend continue?
The Eurostoxx 50 chart gives hope, because the Eurostoxx 50 has dropped to key support, which is located at the psychological level of 4,000. In the past, this level has had a noticeable impact on market dynamics: the price either bounced or made a breakout with a subsequent test. This psychological level property can be used to find an entry point into a position while reducing risk.
It is possible that the level of 4,000 may become a factor for the emergence of a bullish impulse, which will lead to a noticeable rebound; the proximity to the lower line of the ascending channel (shown in blue) can also add courage to the bulls.
But for the rebound to develop into a sustainable upward trend, it can be assumed that positive evidence about the state of the European economy will be required.
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