DAX Index Daily Fundamental Forecast – July 24, 2017

The DAX index continued to trade weakly on Friday, in line with the rest of the stock markets in Europe. This is likely to continue in the short and medium term as the market comes to terms with all the tapering talk. It has to be noted that the weakness in the DAX has basically coincided with the strength in the euro and both of these instruments need to be studied very closely to see any signs of change in the short and medium term.

DAX To Remain Weak

The talk of tapering has been affecting all the stock indexes in Europe as tapering would mean that the ECB would no longer continue to pump in billions of euros into the markets. This is likely to affect the buy side in the stock markets and that is why we are seeing many traders trying to exit their positions in the stock markets and moving to other instruments and this is the reason for the fall in the DAX. Also, with many countries of the world at the end of their rate cut policy, the yields and bonds in these countries have become attractive instruments for returns and that is also one of the reasons for funds being pulled out of stock markets.

In the specific case of the DAX, we have a risk event looming ahead in the form of elections in Germany in September which are likely to have a bearing on the DAX. Though it is widely expected that Merkel would continue to lead the way after the elections as well, 2 months is a very long time in politics and anything can happen between then and now. This is also in the back of the minds of the traders and that is why they are unwilling to enter into the DAX in hordes as yet.

Looking ahead to the rest of the week, we do not have any major news from Germany for today and so we can safely expect some consolidation in the DAX index for today, especially with the strong support of 12200 waiting just below.