DAX Index: DAX 30’s Tug of War – ECB’s Concerns vs. US Economic Indicators

Highlights

• The DAX declined by 0.23% on Thursday, ending the session at 15,425.
• The US CPI report propelled bets on a potential Fed rate hike, dampening risk appetite.
• DAX-listed stocks may face challenges as China’s inflation and trade data sends contrasting signals.

DAX Thursday Overview

On Thursday, the DAX declined by 0.23%. Reversing a 0.24% gain from Wednesday, the DAX ended the day at 15,425.

ECB Growth Concerns and US CPI Report Weighed

The ECB monetary policy meeting minutes revealed an uncertain interest rate outlook. Executive board members deemed the risk to inflation more balanced while raising concerns about growth.

While the ECB minutes drew interest, the US CPI Report sent the DAX into negative territory for the session. A hotter-than-expected US CPI Report raised bets on a Fed rate hike, weighing on demand for riskier assets.

US initial jobless claims continued to signal a tight labor market, giving the Fed more reason to push interest rates higher.

The US equity markets responded to the numbers with modest losses. On Thursday, the Nasdaq Composite Index fell by 0.63%. The S&P 500 and the Dow ended the day down 0.62% and 0.51%, respectively.

The Thursday Market Movers

Defense stock Rheinmetall (+2.72%) continued to rise as investors responded further to the Middle East conflict.

However, the negative sentiment toward the economic outlook left online retailer Zalando (-1.71%) deep in negative territory.

Bank stocks also struggled, with Commerzbank and Deutsche Bank ending the day down 1.01% and 0.53%, respectively.

It was a mixed session for the auto sector. While stimulus plans from China offered support, a gloomy outlook for the European economy tested buyer appetite.

Continental and Volkswagen saw losses of 1.49% and 0.60%, with Porsche and BMW falling by 0.13% and 0.06%. Mercedes Benz Group and Daimler Truck Holding bucked the trend, gaining 0.52% and 0.29%, respectively.

Central Bank Commentary and US Consumer Sentiment in Focus

On Friday, Eurozone industrial production figures will garner investor interest. Economists forecast industrial production to increase by 0.1% in August vs. a 1.1% fall in July.

After the ECB monetary policy meeting minutes, ECB President Lagarde may offer further guidance on interest rate goals. The ECB President is attending the IMF/World Bank Annual Meetings.

However, US economic indicators and Fed speeches may have more influence on investor sentiment. After the US CPI Report, an unexpected rise in consumer sentiment would support a Fed rate hike to curb inflation. Economists forecast the Michigan Consumer Sentiment Index to fall from 68.1 to 67.2 in October.

Beyond the numbers, Fed speeches will warrant consideration. Reaction to the US CPI Report would move the dial. FOMC member Patrick Harker is on the economic calendar to speak.

Earlier today, inflation and trade data from China sent mixed signals. A continued year-over-year fall in producer prices may test buyer appetite for DAX-listed stocks.

The DAX was down 24 points, while the Nasdaq mini was up 13 points this morning.

Short-Term Forecast

Near-term trends hinge on central bank monetary policy intentions. A more hawkish Fed interest rate path will likely pressure the DAX. The negative outlook toward the German economy remains another headwind amidst ECB plans to keep interest rates higher for longer.

DAX Technical Indicators

Daily Chart

The DAX sat below the 50-day and 200-day EMAs, sending bearish price signals.

A break above the 200-day EMA and 15,459 resistance level would support a move toward the 50-day EMA and 15,619 resistance level. However, selling pressure will likely intensify at 15,450. The 200-day EMA is confluent with the 15,459 resistance level.

Weaker-than-expected US consumer sentiment numbers and dovish Fed speeches would support a positive session.

However, failure to break above the 200-day EMA would leave the 15,245 support level in play.

The 14-day RSI reading of 49.06 suggests a DAX fall to the 15,245 support level before entering oversold territory.

4-Hourly Chart

The DAX sits above the 50-day EMA while remaining below the 200-day EMA, sending bullish near-term but bearish longer-term price signals. A DAX break above the 15,459 resistance level would support a move toward the 15,619 resistance level and 200-day EMA.

However, a fall through the 50-day EMA would give the bears a run at the 15,245 support level.

The 56.51 14-4 hour RSI reading indicates a DAX break above the 15,459 resistance level and a return to 15,500 before entering the overbought territory.

For a look at the economic events, check out our economic calendar.