DAX Index Daily Fundamental Forecast – January 8, 2018

The DAX index continues to rocket higher as the incoming data from Germany gets better and the political situation in Germany also seems to be heading to a conclusion, this way or that. The risk sentiment around the globe has also been very good of late and this has further fuelled the move higher in the DAX which should continue to remain buoyant in the short term.

DAX Continues Higher

The political situation seems to be heading to a finish over the next couple of weeks as Merkel gets ready to start negotiations with the old SPD party. After the fractured verdict following the elections a few months back, Merkel has been trying to settle the coalition with few smaller parties but she has been unable to do so. This has placed her government in jeopardy and she is now reaching out to the SPD party as a last resort. The talks are expected to go on for a week or so and at the end of that, we should either see the formation of a coalition or the announcement for new elections.

Any new elections would not be good for the DAX and the markets in general as this is likely to lead to another round of uncertainty and hence Merkel would be happy to wrap this up this week. It remains to be seen whether that is going to happen but the market seems to be driven up by the news at this point of time. If the agreement does come through, we should see the DAX pushing through 13500 in no time. The improved risk sentiment around the world, with the stock indices in the US moving to all time highs, is also likely to further fuel the rally.

Looking ahead to the rest of the day, we do not have any major news from Germany or the Eurozone but the above events should keep the DAX buoyant for this week with the 13500 region capping the highs for now.