DAX Index Daily Fundamental Forecast – August 25, 2017

The DAX index is likely to consolidate and range for the day today, just as how it has been doing since the beginning of the week, including yesterday. This is ahead of the important speech from Draghi on the sidelines of the meeting at Jackson Hole and his speech is likely to determine the short term direction for the European stock markets. But with his speech scheduled pretty late in the day, it is doubtful whether the markets would get a chance to react to it.

DAX In Consolidation Mode

The reason for his speech to be the event to look forward to is due to the fact that a part of the market expects him to be hawkish and spell out guidelines for some major policy changes including the tapering of the QE. We do not expect Draghi to spell out any such guidelines or timelines today or in the near future as we expect the talks about QE tapering to begin only sometime in October. But if he does touch upon this topic, then the stock markets, which are already jittery, are likely to be hit hard and we could see the DAX challenging the 12000 region on Monday.

If he does not talk about tapering and chooses to adopt a middle line, then that is expected to be positive for the stock markets which might then see a small bounce. This bounce is likely to be temporary as the fact that tapering is on the radar of the ECB is something that cannot be denied or washed over. So, expect a bull run in the short term which is likely to be chance to sell in the DAX index and other European stock markets.

For the rest of the day, the German Ifo Busineess Climate data is likely to bring in a bit of volatility in the London session while the focus for the US session would be on Jackson Hole.