DAX Index Daily Fundamental Forecast – January 29, 2018

The DAX index had a strong day on Monday as the inverse corelation between the euro and the DAX continues to hold sway in the markets on Friday. We had pointed out to this relationship a few days earlier and said that this was something to watch out for and we are now seeing that this is working out the way as planned.

DAX Likely to Move Higher

The euro has been moving lower on the back of some dollar strength but this has helped the DAX to move higher. It remains to be seen whether this would be enough for the index to break through its normal range as the threat of an end to the QE continues to haunt the European stock markets. This is likely to happen towards the end of the year and though the ECB members have tried to be tight lipped about it, the market can sense such a thing happening and that is why they have been pushing the euro higher and the stock index lower.

This is likely to continue for the next few days. It is during this period that the geopolitical developments are likely to come back into the picture. Merkel has been in negotiations for formation of a coalition and it looks as though a deal might be near. A report says that the deal is likely to be made within the next week or so and it is likely that the index would be buoyed on this news. As said earlier, it may not be enough for the DAX to break through its range but it should be enough to keep the bulls busy.

Looking ahead to the rest of the day, it is the first day of the week and hence the start of the markets is likely to be slow and steady. Also, we are heading towards the end of the month and hence there are likely to be month end flows and rollovers that need to be managed by the traders and hence we are likely to see some additional volatility and price action based on these moves.