Europe's Mid-Session Bell: Sentiment shifts keep markets on edge, DAX at key level

European shares fell on Wednesday as investors looked at corporate earnings and updates on U.S.-China trade talks before the Federal Reserve's rate decision later in the day.

U.S. Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer will meet China's top economic official in Switzerland this weekend to discuss ways to end a trade war affecting the global economy.

Market participants were hoping for a boost in sentiment following these reports. However, sentiment shifted quickly as markets remain concerned by the amount of companies issuing warnings during earning calls which have added a modicum of concern among market participants.

Escalating tensions between India and Pakistan have also added a new dimension to the risk debate. India launched rockets at parts of Pakistan which it claims are terrorist outposts with these attacks being met by Pakistan launching some operations in Kashmir territory controlled by Pakistan.

The Indian rupee dropped 0.2%, and Mumbai stocks slipped 0.1% as investors turned their attention from India-Pakistan military strikes to trade talks. On Tuesday, India and the UK signed a major trade deal. Meanwhile, Pakistan’s stock index fell over 6%.

On the FX front, the U.S. dollar strengthened against the yen and Swiss franc and held steady against the euro as investors awaited the Federal Reserve's policy meeting outcome and tariff talks.

The U.S. dollar rose 0.54% against the yen to 143.18, ending a three-day losing streak as Japanese markets reopened after a two-day break. It also gained 0.3% against the Swiss franc to 0.8248, after hitting its lowest level since January 2015 at 0.8032 on Monday.

Currency Strength Chart, Strongest - Weakest: USD, EUR, GBP, NZD, CAD, AUD, CHF, JPY

Gold prices slipped to around $3,380 per ounce on Wednesday, ending a two-day rally as sentiment is seeing some improvement this morning. The drop could also be down to some profit taking as market participants may remain cautious until recent highs at $3500/oz is conquered.

Oil prices rose on Wednesday, holding slightly above recent four-year lows as markets eye lower US output and a potential US-China trade deal. Lower oil prices in recent weeks have led some U.S. energy companies, like Diamondback Energy and Coterra Energy, to cut back on rigs, which analysts believe could help boost prices by lowering supply.

From a data standpoint, it is a quiet morning for EU data. The main releases were EU retail sales and German factory orders, both of which have already been released.

Retail trade in the Eurozone dropped 0.1% in March 2025, after a revised 0.2% rise in February, missing predictions of no change.

Factory orders in Germany rose by 3.6% in March 2025, much higher than the expected 1.3%, bouncing back from no growth the month before. This was the biggest rise since December.

Markets will shift attention to the US FOMC meeting later in the day. For a preview of the FOMC, please read Trading the FOMC Meeting: Key Levels & Analysis for EURUSD and USDJPY

From a technical standpoint, the DAX index is now at a confluence area where the previous drop in price began.

Crucially, the index printed a hanging man candlestick yesterday which would hint at further downside ahead.

Of course candlesticks are not always 100% accurate but if trade negotiation announcements are not forthcoming and sentiment sours once more, a drop may be on the cards for the DAX.

Immeidate support rests at 23212 and 28900 before the 22405 handle comes into focus.

If the DAX manages to break higher there is no historical price action to look at.

With that in mind i will focus on whole numbers and key psychological levels such as the 23750, 24000 and 24250 respectively.

DAX Daily Chart, May 7, 2025

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