DAX Index Daily Fundamental Forecast – July 27, 2017

The DAX index rose during the start of the session yesterday, something which we had pointed to, in our forecast and it did spend quite a bit of time above the 12300 region but later corrected towards the end of the day and closed the day below 12300 once again. The index seems to be locked within a tight range and it is expected some push from somewhere but with this being the last week of the month, when the volatility and the liquidity is low, there is not much to expect and hence we expect this ranging trend to continue in the short term.

DAX In a Stalemate

The 2 big risk events as far as the DAX is concerned are the Brexit negotiations and the German elections. With the tapering talk pushed to the autumn and any further decision on that, expected to happen only in October, the focus is on these 2 events that are listed above. Of these, the Brexit negotiations are an ongoing process and so far there has not been much developments in this regard. It is only during the fag end of the process that we expect to see some proposals lining up and then the market would need to decide whether it is good for the Eurozone or not.

On the other hand, we have the elections in Germany in September and this is expected to keep the markets on tenterhooks for much of the next 2 months or so. Of course, Merkel is widely expected to win but we have seen the fate of elections over the past 2 years in which many such results were expected to be foregone conclusions but were anything but. So, the market is likely to keep its options open and that is why we are seeing the buyers unable to commit themselves at this point of time. The bears are also not in a mood to begin large scale selling as yet, with the global markets continuing to be strong, and hence this stalemate is expected to last for some time.

Looking ahead to the rest of the day, we do not have any major news from Germany for today and so we can safely expect some consolidation and ranging to happen on either side of 12300 for today.