DAX Index Daily Fundamental Forecast – january 25, 2018

The DAX index corrected back below the 13500 region during the course of tradin yesterday as the PMI data came in weaker than expected. The PMI data from both Germany and the Eurozone came in weaker and though it did not seem to affect the euro, it did have a decent impact on the stock markets and led it lower and truly commencing the battle between the bulls and the bears.

DAX Corrects a Little

The index was also affected by the fact that the euro continued to move higher and push through the 1.24 region while trading over the last 24 hours. The euro rose as the anticipation that the QE would end soon has increased over the last few weeks. This would be good for the euro but bad for the stock markets in Europe as it would mean drying up of the funds for buying and this would affect the buy side.

The index had largely ignored the impact of that over the last few days but as we get closer to the ECB press conference that would be attended by Draghi, the market has started to get a bit jittery. He usually tends to talk down the euro and with the euro shooting up, he would want to calm down the markets by laying down a dovish timeline for the end of QE. But if he goes contrary to expectations, then that would only add to the pressure on the index and move it lower even further.

Looking ahead to the rest of the day, the focus would clearly be on the ECB as the press conference is scheduled for later in the day. We have the business sentiment data from Germany before that but that is unlikely to have much of an impact on the DAX. Traders are likely to take profits or stay on the sidelines in the lead up to the meeting.