DAX Index Fundamental Analysis – week of April 16, 2018

The DAX index rose to the highs of its range over the last week as the possibility of an extension in the QE program has helped to give a boost to the index. The index closed the week near its highs and this should give a lot of energy and momentum for the bulls when they begin the next week and try and push the index through the highs.

DAX Rushes Higher

The index had been on the backfoot over the last few weeks as the ECB was mulling the possibility of tapering the QE program and ending it by the end of the year. In fact, there was even the talk that the ECB would be looking to hike rates in the first part of the next year. If all these did turn out to be true, then there would be a dearth of free flow of funds that we are seeing now and this is likely to affect the buy side of the index in due course of time. But there has been a growing realisation among the traders that the incoming data has not been as good as was originally expected.

Towards the end of last year, the incoming data had been strong and even the normally dour ECB was forced to acknowledge the incoming data and its strength and plan for the end of the QE. But the data has tapered off in recent weeks and though the ECB continues to defend the data and promises that the data has been on target, the market does not seem to be too convinced as yet and is still looking at the possibility of the QE continuing for longer and this is the reason for the bulls being in control so far.

But we are not sure how long they can be in control considering all the global risks that have been dominating the markets in recent times. The war in Syria has escalated over the last few days and this is going to pose a huge risk for the bulls in the coming week. We have had reports of missiles being launched there and this is only an indication that things are only going to get even worse in the coming days. This could pose a risk to the current bull run and though there is not much news from Germany or Eurozone in the coming week, we believe that this risk would dominate the markets in the coming days and could keep the DAX under pressure.