DAX Index Daily Price Forecast – DAX to Trade in Red on Caution Ahead of UK No-Deal Vote

European market yesterday saw mixed performance in forex and equity market on headlines driven momentum. Trading activities for the week opened on a positive note following last week’s sharp declines. However, price action in the market this week is dictated by Brexit proceedings and since the outcome of Brexit is likely to have a major impact on the European economy, even the smallest headlines have great influence over price action in European markets. Hopes for positive proceedings and expectations for the deal to be approved in UK Parliament on a last-minute modification made to PM May’s Brexit deal over EU Juncker’s legally binding concessions on Irish backstop agreement helped equities across all major European stock exchanges open on a positive note.

Brexit Woes Play Major Role in Influencing Directional Bias

However, UK Attorney General Geoffrey Cox’s comments ahead of  UK Parliament meeting in which he stated that while concessions reduced to the risk of being struck with backstop agreement indefinitely it doesn’t negate the risk totally resulted in a fresh wave dovish influence which caused major European indices and stocks to decline slightly ahead of Parliament vote. As investors feared the possibility of the deal being rejected, they held back from making any major moves and this resulted in European equities and major indices seeing the mixed outcome at trading session closed for the day. At EOD, the Frankfurt stock exchange saw mixed outcome as visible from the performance of benchmark indices and sectoral indices. Out of the total of 778 stocks trading in the exchange 357 closed in green while 102 stocks closed unchanged with 9 of 18 sectoral indices closing positive and two of three most-watched german indices closing in the red. DAX and TECDAX were down by 0.17% & 0.46% on the day while MDAX was up by 0.37% as the trading session closed in the European market. Later in the day, investors fear came true and PM May’s deal was voted down resulting in parliament meeting extending for two more sessions to vote on no-deal Brexit & extension of article 50 deadline which is expected to take place today and tomorrow.

Further, comments from European Council President Donald Tusk’s spokesperson suggested that extension to the deadline may not easily be granted owing to EU members viewing rejection of PM May’s deal in a negative light. Given the EU’s preparations for the no-deal Brexit scenario since the beginning of the year, the odds of the no-deal exit scenario seems high in the current market. This has resulted in investors turning cautious and holding back from making any major moves today. Asian market today saw dovish price action in major markets such as Singapore, Japan, and China owing to risk-averse investor sentiment on dovish US macro data and Brexit woes. DAX futures trading in the international market were down by 0.16% ahead of the Frankfurt market opening. Dovish cues from the international market and cautious investor sentiment in European markets are expected to influence dovish opening and price action of DAX index and German equities.