DAX Daily Fundamental Forecast – January 20, 2017

The DAX index weakened yesterday as the stock markets around the world seemed to be in the grip of some unknown fear. Though there was no fundamentals or economic data to drive this move, the fall in the DAX was in line with the general moves of the major stock markets around the world. One of the reasons could be the fact that the ECB chose to have a different opinion about the rising inflation but this stance was generally known across the markets and should not have come as a surprise to anyone.

Yesterday, we had the ECB rate statement and the press conference that followed soon after that where the ECB President made it clear that there would be no reduction in the QE in the near future. He also stated that the recent increase in inflation was due to the rising energy prices and hence would soon moderate, a view that is opposite to that held by Germany which believes that the inflation is due to rising of general prices overall and needs to be combated quickly. This view of the ECB seemed to dampen the German stock market and the DAX came back down through 11600 and trades just above 11500 as of this writing. We continue to believe in the strong bull market that the DAX seems to be in and any kind of correction needs to be used as an opportunity to go long with tight stop losses.

Looking ahead to today, we do not have any major economic news from any part of the eurozone today but with the US stock markets closing lower yesterday, we can expect a reaction to that in the DAX today and we expect the DAX to open lower. The markets seem to be in a risk off mode as the new Trump administration assumes charge and this effect is likely to last for a few days when the DAX would consolidate with a bullish bias.