Europe Steady as Fed, BoE, and Earnings Ahead

Weekly – Europe Forecast | 5 May 2025

🇺🇸 US Labor Market & Economy

• April NFP: +177,000 jobs (above expectations by ~40K), but prior months revised down by 58K.
• Unemployment steady at 4.2%, labor force participation ticked up to 62.6%.
• Wages: +0.2% MoM / +3.8% YoY (both slightly below expectations).
• Result: Fed rate cut bets slightly reduced, pushing yields, USD, and equities higher.
• ISM Manufacturing PMI: down to 48.7, remains in contraction. Export orders and production weakened.
• Persistent economic uncertainty is pressuring margins and slowing growth.

📉 Markets Recap (April)

• S&P 500 saw large swings:
• -5th biggest 2-day drop since 1945 after April 2 tariffs.
• +9.5% rally on April 9 after tariff pause – biggest since 2008.
• Finished April down just 0.7%.
• USD Index fell 7.6% (Mar–Apr), largest 2-month drop since 2002.
• Gold: Strongest yearly start since 2006.
• Oil (Brent/WTI): -15%+ amid demand fears.
• Late April trade talk optimism boosted risk appetite modestly.

 

🇪🇺 Eurozone Inflation & Labor

• Headline inflation: Held at 2.2% YoY, vs expectations for a decline.
• Core inflation: Rose to 2.7% (from 2.4%), driven by services inflation (+3.9% YoY).
• Unemployment rate: Steady at 6.2%, a record low.
• Implication: Rising wage pressures could limit ECB rate cuts beyond the one priced for June.
• Bond yields in the eurozone rose; EUR firmed slightly.

 

DE – DAX 4H Technical Analysis

The Germany 40 (DAX)– 4H chart shows the index trading at 23,172.9 (+0.11%), pressing into a key resistance zone near previous swing highs from early March. The rally from the April lows has been sharp and well-structured, with price now at a critical decision point.

🔍 Technical Breakdown:

• EMA Alignment:
• Price remains well above all major EMAs (20/50/100/200), showing strong trend momentum.
• All EMAs are now in a bullish sequence (20 > 50 > 100 > 200), supporting continued upside unless broken.
• Momentum Indicators:
• RSI is at 77.12 — firmly in overbought territory, which doesn't imply reversal, but warns of potential consolidation.
• Stochastic RSI is also cooling from overbought levels (crossing down), reinforcing the idea that the rally might be pausing.

📌 Key Levels:

Resistance:

• 🔴 23,200–23,300 → Key resistance from the March breakdown; current area of interest
• 🔺 Breakout above this could open the door to 23,500+

Support:

• 🟢 22,865 (20 EMA) → First intraday dynamic support
• 🟠 22,468 (50 EMA) → Next major support level if momentum fades
• 🔵 20,474 → Structural pivot and key zone from April breakout

⚠️ Outlook:

The DAX is still strongly bullish, but short-term indicators suggest upside may be temporarily stretched. If price fails to break cleanly above 23,200–23,300, expect a healthy pullback toward 22,800–22,500 to refresh momentum.

📈 Bias: Bullish, but cautious at resistance. Watch for breakout above 23,300 or rejection/pullback into EMA support.

 

🌐 This Week’s Calendar Highlights

Monday

• Quiet start due to holiday closures.
• Data: Swiss CPI, US ISM Services PMI.
• Palantir earnings after market.

Tuesday

• Calm day; watch for SNB Chair Schlegel (London session) and Canada Ivey PMI.
• AMD & Electronic Arts earnings after market.

Wednesday

• Busy day:
• NZ employment (early Asia),
• UK Construction PMI,
• Fed rate decision – key event of the week.
• Earnings: Uber, Walt Disney (premarket).

Thursday

• Focus: Bank of England rate cut expected.
• US Weekly Jobless Claims also due.
• Earnings: Rheinmetall, Shopify, Coinbase.

Friday

• Speakers: BoE's Bailey, then multiple Fed officials (Kugler, Waller, Williams, etc.).
• Canada employment data released at NY open.

🔍 Asset Snapshot

• Asia equities opened soft (0% to -0.5%).
• EU indices slightly subdued.
• Silver +1%.
• Crude oil -3% at $56, pressured by OPEC+ output hikes and looming surplus.

Key Focus This Week

➡️ Fed rate decision (Wednesday)
➡️ Bank of England (Thursday)
➡️ Central bank speeches + earnings → tone for global markets.