DAX Index Daily Fundamental Forecast – April 19, 2017

We had mentioned in our forecast yesterday that we expected the DAX to open stronger for the day after the Easter holiday and also following the cue from the US stock markets from the previous day which had closed at its highs for the day. This came true as the index rocketed through 12100 and traded strongly for the first couple of hours before the fall began.

DAX In Free Fall Before Recovery

The fall was triggered by the news that the UK PM May had called for a quick poll on June 8 in a move that is likely to help her win by an even greater majority and thus give her a very strong mandate, both domestically and also in the Brexit negotiations that are likely to begin following the elections. This is a big boost for the UK economy as it would mean that May would be able to extract much more the the Eurozone with a strong mandate behind her but this is not so good for the Eurozone as such as it would mean that the negotiations are likely to be even tougher.

It could also mean that the Euro leaders would have to concede more to the UK in these negotiations and this could be viewed as a negative for Germany and the other major Euro economies. Due to this view, we saw some strong selling coming into the DAX following this news and this pushed the index back below 12100 and the selling picked up pace after that. This led to the index falling below 12000 for a brief while before the buying came into the picture and helped to push the index back above 12000 where it is trading as of this writing.

Looking ahead to the rest of the day, there is no major news from Germany for the day and so we can expect the index to trade heavy and the bearish pressure is likely to continue for the day which could see the index move below 12000 for today as well and the support at the 11950 region is likely to come under test once again.