DAX Index Daily Fundamental Forecast – January 26, 2018

The DAX index and the euro seem to be moving in opposite directions over the last 24 hours. While the index had a bearish first half of the day, it managed to pick itself up during the second half of the day and move higher and it ended the day above the 13300 region which makes it quite possible that the index would continue its way higher in the coming days.

DAX Likely to Stay Bullish

The index had been stuck mainly due to the fact that the euro was rising in anticipation of the ECB coming out with more signals for the ending of QE. We had advised caution to the traders in our forecast yesterday as we felt that the ECB press conference could bring in a lot of volatility. This is what happened when Draghi addressed the press and did not sound overly dovish. There did not seem to be much effort to talk down the euro. Draghi is generally known to be a dovish President of the ECB and his meet was on the expected lines only. Also, the incoming data over the last few weeks has made it almost impossible for the ECB to talk down the euro or the data.

The data has been consistently good over the last few months and apart from the essential tip of the hat saying how the FX rates could affect growth, there was no specific attempt from him to talk down the growth or the euro or the fact that they are likely to end QE by the end of the year. This led to a weakening of the stock markets in Europe as the index headed towards the support region at 13200. From there, it was able to bounce back a bit as Trump sounded a conciliatory note for the dollar which help the risk sentiment to pick up again.

Looking ahead to the rest of the day, we do not have any major economic news or data from the US or the Eurozone as we head to the end of the month, where the flows begin to dominate. We expect the slight bullishness to continue for today with the markets having a steady opening.