DAX Index Daily Fundamental Forecast – July 5, 2017

As mentioned in our forecast yesterday, the DAX index had a period of consolidation and ranging with a bullish bias yesterday as the stock markets around the world picked up steam again. After undergoing a lot of correction over the last week or so, the DAX index posted some strong gains on Monday on the back of some positive PMI data from Germany and also on the back of the recovery in the dollar.

DAX Consolidates and Awaits Direction

The stock markets around the world wait in anticipation of some good data from the US over the coming days and this has helped the markets to recover somewhat and acquire a bullish tone. We are also seeing that the economy in Germany and in the Eurozone in general has been very good of late and this is evident from the strong economic data from that region over the last few months. This has helped to keep the stock markets buoyant. On the other hand, a positive outlook on the rates policy has also helped in the increase of bonds and yields and what this has done is to force the investors to reallocate some of their holdings into these instruments and this is one of the reasons why the stock markets have not been able to build on their bullishness.

This is especially evident in the case of the DAX where we saw that it was unable to push through to 13000 despite some solid bullish pressure and it was also not able to sustain the bullish for too long and that is why we have seen a correction in the index over the last few days. This has basically turned the trend from being bullish to bearish and placed the index under further pressure as the investors take profit on their stock holdings and push them into currencies and bonds.

Looking ahead to the rest of the day, we have the Services PMI data from Germany and we also have the FOMC minutes from the US. A strong PMI data is likely to help the DAX index move back towards the broken support at the 12550 region but we dont expect the index to move much beyond that in the short term.