DAX Index Daily Fundamental Forecast – July 28, 2017

The DAX index continued to stay weak but the bulls are trying hard to make a stand here and reverse the overwhelming sentiment. The trigger for the move in the markets yesterday was strength in tthe US economic data which brought into the view again, the possibility of another rate hike in the US sometime this year. As it is clear by now, any such happening is likely to alter the market dynamics even further and this is likely to keep the stock markets under pressure.

DAX Continues to Weaken

For the European stock markets, there is another thing that they need to look out for and that is tapering by the ECB towards the end of the year. This is the reason why we are seeing the surprising scenario of strong data from Germany being met with even more selling in the DAX. Normally, the situation would be the reverse where good economic data would be cheered by buying in the DAX but in this case, good economic data would mean that the tapering choice becomes easier and sooner for the ECB and this would mean that the tapering would lead to less funding of the markets from the ECB.

This scenario would mean that the liquidity and the buying in the stock markets would no longer be supported as much by the ECB and that is why we are seeing a large number of investors and traders heading to the exit as far as the DAX is concerned. Yesterday, it was more of the same scenario as the pair moved and closed below the 12200 mark.

Today, we expect the weakness to continue in the DAX index though there is not much economic data from Germany for today. We expect the region around 12000 to hold any such down move in the short term.