DAX Futures Flash Red with the Powell Conference to Deliver Direction

It was a bullish Wednesday session for the DAX, which rose by 0.14% to end the day at 15,216.

There were no economic indicators from the euro area or the US to distract investors ahead of the Fed interest rate decision, FOMC Projections, and Fed Chair Powell’s press conference.

The lack of economic indicators left investors to consider the possible implications of the banking crisis on the Fed’s interest rate trajectory. Inflation remains sticky, with labor market conditions still very tight. Recent economic indicators suggest the need for more interest rate hikes to bring inflation to target.

However, easing bets of a 50-basis point Fed rate hike and expectations of a pause and rate cut in H2 2023 provided support throughout the session.

A Quiet Economic Calendar Left the DAX Flat Ahead of the Fed

There were no economic indicators from the euro area or the US to distract investors from the heavily anticipated Fed interest rate decision, FOMC projections, and Fed Chair Powell’s press conference.

Bets of a hawkish Fed had eased in response to the banking crisis. However, Powell sent the US equity markets into negative territory, which could pressure the DAX this morning.

The Market Movers

It was a bullish Wednesday for the auto sector. Porsche and Daimler led the way, rising by 1.00% and 0.98%, respectively. BMW ended the day up 0.88%, with Continental and Volkswagen seeing gains of 0.24% and 0.50%, respectively.

However, bank stocks struggled ahead of the Fed. Deutsche Bank and Commerzbank saw losses of 2.24% and 2.09%, respectively.

The Day Ahead for the DAX

It is a quiet day ahead on the economic calendar. There are no economic indicators from the euro area for investors to consider. With no economic indicators to influence, we expect investors to respond to the Wednesday Fed interest rate hike, FOMC projections, and Fed Chair Powell press conference.

On Wednesday, the NASDAQ Composite Index fell by 1.60%, with the Dow and S&P 500 seeing losses of 1.63% and 1.65%, respectively.

The FOMC projections revealed an upward revision to the median Federal Funds Rate to 4.3% in 2024 while leaving the median for 2023 at 5.1%.

A change in forward guidance was insufficient to provide price support.

Powell discussed the possible influences of the banking sector on monetary policy, saying,

“We no longer state that we anticipate that ongoing rate increases will be appropriate to quell inflation. Instead, we now anticipate that some additional policy firming may be appropriate.”

However, Powell reiterated the commitment to bring inflation to target, which was enough to send the US indexes into negative territory. The talk of a credit crunch was also bearish, with the curtailing of lending likely to impact the economic growth prospects.

Later in the European session, US economic indicators will draw interest, with the labor market in the spotlight. Economists forecast initial jobless claims to rise from 192k to 197k. Sub-200k would continue to signal very tight labor market conditions.

ECB member chatter will also provide direction today, with Chief Economist Philip Lane in focus this afternoon.

DAX Technical Indicators

The DAX has to move through the 15,227 pivot to target the First Major Resistance Level (R1) at 15,288 and the Wednesday high of 15,299. A return to 15,250 would signal a bullish session. However, the DAX would need ECB chatter and US economic indicators to support a bullish session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $15,359. The Third Major Resistance Level (R3) sits at 15,491.

Failure to move through the pivot would leave the First Major Support Level (S1) at 15,156 in play. However, barring a flight to safety, the DAX should avoid sub-$15,000. The Second Major Support Level (S2) at 15,095 should limit the downside. The Third Major Support Level (S3) sits at 14,963.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The DAX sits above the 100-day EMA (15,206). The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA widening to the 200-day EMA, delivering bullish signals.

A hold above the 100-day EMA ($15,206) would support a breakout from R1 (15,288) to give the bulls a run at R2 (15,359). However, a fall through the 100-day EMA (15,206) and the 50-day EMA (15,196) would give the bears a run at S1 (15,156) and 15,000. A fall through the 50-day EMA would send a bearish signal.

The DAX Futures Sees Red

Looking at the futures markets, DAX was down 54 points, while the NASDAQ mini was up 63.5 points. The Dow mini rose by 143 points.

For a look at the economic events, check out our economic calendar.