DAX Index Daily Fundamental Forecast – August 4, 2017

The DAX index was in a very tight consolidation mode over the last 24 hours as the daily range was less than 100 points with it having visited the lows just below the 12100 region and the high which was just below the 12200 region. This consolidation is expected to continue in the short term as we wait and see whether the NFP is likely to have any impact on the stock markets.

DAX Still In Consolidation

Even if the NFP brings in some volatility in the stock markets, we expect the DAX to not be affected much by this as the European stock markets have been having a mind of their own, of late. They have been swung this way and that over the last 3 weeks due to all the talk of tapering and though the US stock markets continue to trade very strongly, despite the economic data being weak, the DAX has bee trading in a very weak manner. This continues to happen despite the strong economic data from Germany and the Eurozone in general.

The index has been chopping around with some economic data being greeted with a bounce while others are being greeted with a continuation of the downtrend and there does not seem to be any specific pattern in the response of the DAX to economic data. Which makes us look ahead to the elections in September as the one event which is likely to reverse this consolidation trend with a bearish bias and push the DAX higher. We expect a Merkel victory in that election and if that happens, we are likely to see a relief rally in the DAX which wiill push it higher.

Till that time, the traders have to survive through this choppy face and it would be better for them to stay out and let the trend show itself before getting back into the DAX index. We have the factory orders data from Germany for today but that is unlikely to have too much of an effect on the DAX which is likely to continue its consolidation.