DAX Index Consolidates Near Range Highs

The DAX index spent most of the day yesterday in consolidation and within a tight range during this period. The ranging is going on near the highs of its larger range and this is likely to continue for some time. The index has been able to push higher due to the fact that the ECB seems to be inclined to delay the tapering and the ending of the QE due to the not-so-good incoming data from the Eurozone.

DAX Near Range Highs

Yesterday, we had the ECB member Novotny making an emphatic statement that the QE would be done and dusted by the end of the year. This caused the euro to shoot higher during the course of the day but the impact on the index seemed to be a bit limited. Also, a few hours later, the ECB came out stating that the views of Novotny were his personal views and that it did not reflect the views of the ECB as such. This caused a bit of uncertainty in the markets but through all this, the index remained stable.

This is going to be an open question over the next few weeks. While the fact that the incoming data has been getting weaker is something that cannot be denied, the same size of the data has not been enough to conclude that the QE would need to be continued to longer. The ECB would prefer a situation where it could see the incoming data for a few more weeks before it can decide one way or the other.

Looking ahead to the rest of the day, we do not have any major news from Germany or the Eurozone and so the consolidation is likely to continue. Also, the index is near the highs of its range and there are no fundamentals to generate the momentum to push the index higher at this point of time. The FOMC is scheduled to be released later in the day and this could generate some volatility.