DAX Index Forecast: Bulls Eye 17,500 on Earnings and Bets on Rate Cuts

Overview of the DAX Performance on Thursday

The DAX rallied 1.47%. Following a 0.29% gain on Wednesday, the DAX ended the session at 17,371. Significantly, the DAX reached an all-time high of 17,430.

German and Eurozone Services PMIs Beat Forecasts

On Thursday, private sector PMIs for Germany and the Eurozone drew investor interest. The German Services PMI increased from 47.7 to 48.2 in February. Economists forecast the PMI to rise to 48.0. Significantly, the Eurozone Services PMI rose from 48.4 to 50.0. Economists forecast an increase to 48.8.

The February numbers eased fears of a prolonged Eurozone recession. However, the upswing came despite services input price inflation rising to a nine-month high.

US Services PMI, the Fed, and NVIDIA Influenced Risk Sentiment

Weaker than expected US Services PMI numbers for February raised bets on a June Fed rate cut. The Services PMI fell from 52.5 to 51.3. Significantly, input price inflation softened, suggesting a softer outlook for selling prices.

Despite the weaker PMI, US economic indicators supported expectations of a US soft landing. Labor market conditions remained tight in mid-February. Initial jobless claims declined from 213k to 202k in the week ending February 17.

Beyond the data, Fed speakers and market reaction to the NVIDIA earnings fueled buyer demand for DAX-listed stocks. FOMC member Philip Jefferson discussed cutting interest rates in 2024 but refrained from offering a timeline. The support for rate cuts came despite recent US consumer and producer price inflation reports that impacted bets on the Fed cutting rates in March and May.

NVIDIA (NVDA) also fueled demand for riskier assets, surging 16.40% to $785.38 as investors reacted to earnings from Wednesday.

On Thursday, the Nasdaq Composite Index and S&P 500 surged 2.96% and 2.11%, respectively. The Dow ended the session up 1.18%.

The Thursday Market Movers

Auto stocks were among the front-runners for the second consecutive session. Porsche rallied 5.31%, with Mercedes-Benz Group ending the session up 4.70%. Investors responded to better-than-expected earnings from Mercedes-Benz Group. BMW and Volkswagen saw gains of 0.75% and 2.36%, respectively.

The tech sector frenzy contributed to gains for SAP and Infineon Technologies, which ended the session up 3.04% and 2.17%, respectively.

The German Economy, Earnings, and the ECB in Focus

On Friday, finalized Q4 GDP numbers for Germany will garner investor interest before the opening bell. Revisions to preliminary numbers could influence bets on an April ECB rate cut and buyer demand for DAX-listed stocks.

According to preliminary numbers, the German economy contracted by 0.3% in Q4 after stalling in Q3.

Later in the morning session, Ifo Business Climate Index numbers from Germany also warrant investor attention. A marked pickup in German business sentiment could ease fears of a prolonged recession. Economists forecast the Ifo Business Climate Index to increase from 85.2 to 85.5 in February.

Beyond the numbers, ECB surveys, ECB member chatter, and corporate earnings could influence risk sentiment.

The ECB Consumer Expectations Survey needs consideration. A pickup in inflation expectations could test buyer demand for rate-sensitive stocks. ECB President Christine Lagarde and Executive Board member Isabel Schnabel are also on the calendar to speak.

Timelines for rate cuts could influence market risk appetite.

However, corporate earnings will move the dial. Deutsche Telekom AG, BASF, and Allianz are among the big names to release earnings on Friday.

US Economic Calendar: Fed Speakers in Focus

On Friday, investors must track Fed commentary throughout the session. Support for H1 2024 Fed rate cuts may support the appetite for riskier assets.

Investors must consider comments about the economic outlook, inflation, and the timeline for cutting rates.

There are no US economic indicators for investors to consider.

Short-term Forecast

Near-term trends for the DAX will likely hinge on ECB and Fed speeches. Support for H1 2024 ECB and Fed rate cuts could support the buyer appetite for DAX-listed stocks. However, corporate earnings also need consideration.

On Thursday, the DAX futures and Nasdaq mini were up 29 and 2 points, respectively.

DAX Technical Indicators

Daily Chart

The DAX remained well above the 50-day and 200-day EMAs, sending the bullish price signals.

A DAX break above the Thursday all-time high of 17,430 would bring 17,500 into play.

German economic data, central bank commentary, and earnings need consideration.

A break below the 17,300 handle would support a fall toward the 50-day EMA.

The 14-day RSI at 69.96 shows the DAX on the border with overbought territory. Selling pressure could intensify at the ATH of 17,430.

4-Hourly Chart

The DAX sat above the 50-day and 200-day EMAs, confirming the bullish price trends.

A DAX return to the 17,400 handle would support a breakout from the all-time high of 17,430 to target the 17,500 handle.

However, a fall below the 17,300 handle would bring the 50-day EMA into view.

The 14-period 4-hour RSI at 72.51 shows the DAX sitting in overbought territory. Selling pressure could intensify at the all-time high of 17,430.