DAX in the Hands of Eurozone Q4 Wages and US Consumer Sentiment

It was a bullish Thursday session for the DAX, which rose by 1.57% to end the day at 14,967.

Eurozone and US economic indicators took a back seat for a second consecutive day. Easing fears of a global banking crisis supported riskier assets throughout the European session.

Following comments from the US administration on Monday, the Swiss National Bank (SNB) delivered market relief. After the European close on Wednesday, the SNB announced it would provide additional liquidity if required. The Swiss central bank also highlighted that Credit Suisse Group (CS) meets all capital and liquidity requirements.

On Thursday, Credit Suisse Group AG surged by 19.15%, partially reversing the 24.24% tumble from Tuesday.

While receding banking crisis risks delivered support, the ECB capped the upside on Thursday. In line with expectations, the ECB lifted interest rates by 50 basis points, raising concerns that the commitment to bring inflation to target could damage the economy.

Economic Indicators Play Second Fiddle to the ECB

It was a quiet day on the European economic calendar. Finalized inflation figures from Italy had a muted impact on the DAX. In February, Italy’s annual inflation rate softened from 10.0% to 9.1%, down from a prelim of 9.2%. While the softer number was DAX-friendly, the ECB monetary policy decision and all-important press conference were the key drivers.

Better-than-expected US labor market numbers failed to pressure the DAX, with the latest round of US inflation numbers and the collapse of Silicon Valley Bank (SIVB) and Signature Bank (SBNY) questioning the Fed’s ability to push ahead with an aggressive interest rate trajectory to bring inflation to target.

The Market Movers

It was a mixed day for the auto sector. Continental fell by 0.90%, with Volkswagen ending the day with a 0.54% loss. However, BMW rose by 1.14%, with Daimler and Porsche seeing gains of 0.30% and 0.50%, respectively.

Bank stocks had a mixed session despite easing banking crisis jitters. Deutsche Bank fell by 1.29%, while Commerzbank ended the day up by 0.30.

The Day Ahead for the DAX

It is a quiet day ahead on the economic calendar. Finalized February inflation figures and Q4 wage growth figures for the euro area will be in the spotlight. While the eurozone inflation numbers will draw interest, we expect wage growth to move the dial. A pickup in wage growth would support a hawkish ECB policy outlook, which would weigh on the DAX.

US economic indicators will also draw interest, with the Michigan Consumer Sentiment and sub-components in the spotlight. While the headline Consumer Sentiment figure will provide direction, the year-ahead inflation expectations number will likely have more influence.

DAX Technical Indicators

The DAX has to avoid the 14,883 pivot to target the First Major Resistance Level (R1) at 15,102. A move through the Thursday high of 15,018 would signal a bullish session. However, the DAX would need banking sector tensions to ease and euro area wages to support a breakout session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $15,237. The Third Major Resistance Level (R3) sits at 15,591.

A fall through the pivot would bring the First Major Support Level (S1) at 14,748 into play. However, barring a flight to safety, the DAX should avoid sub-$14,500. The Second Major Support Level (S2) at 14,529 should limit the downside. The Third Major Support Level (S3) sits at 14,175.

Looking at the EMAs and the 4-hourly chart, the EMAs send bearish signals. The DAX sits below the 200-day EMA (14,971). The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A move through the 200-day EMA (14,971) would support a breakout from R1 (15,102) to give the bulls a run at R2 (15,237) and the 100-day (15,248) and 50-day (15,276) EMAs. However, failure to move through the 200-day EMA (14,971) would leave the Major Support Levels in play. A move through the 50-day EMA would send a bullish signal.

The DAX Futures Sees Green

Looking at the futures markets, DAX was up 26 points, with the NASDAQ mini gaining 16.5 points. However, the Dow mini was down 42 points.

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