DAX Index Daily Fundamental Forecast – June 16, 2017

We had mentioned in our forecast yesterday that the DAX was likely to start the day in a weak manner due to the hike in the rates from the Fed on the day before. This rate hike is likely to impact the stock markets in the short term as they come to terms with the changed rates. The biggest impact would be the attractiveness that the dollar would have now, as it would be able to generate more returns than usual. With the Fed sounding hawkish despite the bad economic data from the US over the last fee weeks, it seems determined to have atleast one more rate hike before the year is closed.

DAX Back Into Range

This would further increasing the attractiveness of the dollar and this could be one of the reasons why the funds are pulled out of the stock markets and pushed into the dollar. Of course, this would in turn strengthen the dollar and this would not please Trump in the medium term and that is the balance that the Fed would need to strike. But that is for later and for now, it is all about the impact that this would have on the stock markets and the DAX has been an indicator with it dropping back into range yesterday.

It had made a push to the highs on the previous days on the back of some bad data from the US which raised the possibility of the Fed delaying its rate hike but the Fed put paid to the hopes of the DAX bulls and hence, the DAX index has sold off since then and is back into the previous range where it is likely to continue to trade in the short term.

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