Indices Face Tough Test in Coming Sessions

European indices are poised to open higher this morning, after stumbling briefly on Tuesday on the back of another batch of worrying trade data from China.

The trade numbers were yet another niggling reminder of the many challenges facing both China and the global economy this year, even if they were distorted somewhat by the timing of Chinese new year. Yet, investors appear to have seen them as simply an opportunity to take their foot off the gas a little, take some profit and wait for further opportunities.

Indices have been on a great run over the last month, during which time many have reversed the bulk of the losses that were suffered at the start of the year, which is some achievement. Many are now trading at important technical levels though so it’s not too surprising that we saw some profit taking.

The DAX is still some way from erasing those heavy losses from the start of the year but is facing a big test to break back above 10,000 having fallen short last week. A failure to do so could strongly suggest that more pain lies ahead, despite the index having lost almost 30% of its value between April last year and its lowest point last month.

DAX 30 Weekly

This morning we’ll get some manufacturing and industrial production numbers from the U.K., which are expected to once again point to difficulties in the sector that has been a constant thorn in the side of the U.K. economy in recent years. This will be followed later by crude oil inventory numbers which will be followed very closely given the resurgence in prices over the last month.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.