DAX in the Hands of German Inflation and the ECB Economic Bulletin

It was a bullish Wednesday for the DAX, which rose by 1.23% to end the day at 15,329.

Banking sector jitters eased further on Wednesday, supporting the bullish session, with tech stocks finding support on the news of Alibaba Group Holdings Limited planning to split into six entities. The announcement followed recent commentary that Chinese authorities plan to ease market restrictions.

Economic indicators from Germany failed to move the dial, with investors also brushing aside economic indicators from the US.

However, while the banking crisis story may be running out of steam, the fear of a credit crunch lingers. With stats from China disappointing and Germany’s manufacturing sector struggling, the threat of a weakening macroeconomic environment remains as the effects of central bank synchronized rate hikes filter through.

German Consumer Sentiment Sees Modest Improvement

In Germany, consumer sentiment showed marginal improvement in March, leading to a modest improvement in the April outlook.

The GfK Consumer Climate Indicator increased from -30.6 to -29.5 in April. Economists forecast a rise to -29.2.

According to the March survey,

• Income expectations continued to recover, with the indicator rising from -21.3 to -24.3, marking the sixth consecutive monthly increase.
• However, the economic expectations indicator fell from 5.0 to 3.7. Despite the first decline in five months, the indicator sits 12.6 points above the same time last year.
• The propensity to buy indicator was flat in March, rising by 0.3 points to -17.0. In March, the propensity to buy indicator is down 15 points from one year ago.

From the US, housing sector data had a muted impact on the DAX. Pending home sales increased by 0.8% in February, following an 8.1% surge in January.

The Market Movers

It was a mixed Wednesday for the auto sector. Porsche reversed the Tuesday pullback, rising by 1.67%, with Volkswagen and Continental seeing gains of 0.59% and 0.52%, respectively. BMW saw a more modest 0.14% rise, while Daimler bucked the trend, falling by 2.13%.

However, it was also a bullish session for the banks. Commerzbank gained 1.07%, with Deutsche Bank rising by 2.48%.

The Day Ahead for the DAX

It is a busier day ahead on the economic calendar. The Eurozone Business and Consumer survey will be in focus early in the European session. Following a modest improvement in the GfK Consumer Climate Indicator, the numbers will likely have a limited impact on the DAX.

However, prelim German inflation figures for March will move the dial. Economists forecast the German annual inflation rate to soften from 9.3% to 7.5%.

While the stats will draw plenty of attention, the ECB Economic Bulletin will also need consideration.

This afternoon, US Q4 GDP and jobless claims figures will influence investor sentiment. An unexpected jump in jobless claims would be bearish.

DAX Technical Indicators

The DAX has to avoid the 15,286 pivot to target the First Major Resistance Level (R1) at 15,385. A move through the Wednesday high of 15,342 would signal a bullish session. However, the DAX would need the ECB and 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 $15,441 and resistance at 15,500. The Third Major Resistance Level (R3) sits at 15,596.

A fall through the pivot would bring the First Major Support Level (S1) at 15,230 into play. However, barring a flight to safety, the DAX should avoid sub-$15,000. The Second Major Support Level (S2) at 15,131 should limit the downside. The Third Major Support Level (S3) sits at 14,976.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The DAX sits above the 100-day EMA (15,190). The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA pulling away from the 200-day EMA, delivering bullish signals.

A hold above the 100-day EMA (15,190) would support a breakout from R1 (15,385) to give the bulls a run at R2 (15,441) and 15,500. However, a fall through S1 (15,230) would bring the 100-day (15,190) and 50-day (15,175) EMAs and S2 (15,131) into view. A fall through the 50-day EMA (15,159) would send a bearish signal.

The DAX Futures Sees Green

Looking at the futures markets, DAX was up 49 points, while the NASDAQ mini fell by 12.5 points. The Dow mini declined by 5 points.

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