DAX Index Daily Fundamental Forecast – January 9, 2018

The DAX index continued to trade near the highs of its range yesterday and what should encourage the bulls is the fact that there has not been a correction in the index during this period and the index continues to trade at the highs which could point to further progress. That would depend a great deal on how the rest of the situation pans out as far as the political troubles of Merkel are concerned.

DAX Consolidates at Highs

As we had mentioned yesterday, the index has been boosted by the news that Merkel is reaching out to the old SPD party in order to thrash out a deal and ensure that a coalition government is formed. It is anticipated that the deal would progress smoothly and finalised within a week or so. As long as things go according to plan, Merkel should be able to sew this up and the DAX should get a boost due to that. This is what the market is hoping for and as usual, the traders tend to overrun the actual situation and move the markets in a specific direction.

This is what we have been seeing over the last few days though the fact that the risk sentiment has improved globally and the fact that the incoming data from Germany has been positive has also helped the index to push higher. Now it seems only a waiting game as the market awaits further development in this regard. Failure by Merkel to thrash out a deal could be disastrous for the markets as that is likely to lead to another round of elections and further uncertainty.

Looking ahead to the rest of the day, we do not have any major economic data from Germany or the Eurozone and hence we can expect the market to have a close eye on the political developments. We are also likely to see this consolidation and ranging to continue in the market for today as the traders play a waiting game for further developments.