DAX Index Fundamental Analysis – week of March 12, 2018

The DAX index ended the week on a strong note as the index bounced off from the lows of the range and move higher through the 12300 region. The bulls should realise that they are still not out of the woods as the highs of the range is at the 12600 region and it is clear that it is going to take a lot of effort from them, with some fundamental and geopolitical developments favoring it, for the index to continue to move higher.

DAX Recovers from Range Lows

The week began with the index at the lows as the tariffs that were proposed to be imposed by the US on imports of steel and aluminium were expected to affect Germany and also lead to a large global trade war. This risk and uncertainty placed the index under a lot of pressure but we had also mentioned that the index was near the lows of its range which should act as support. This turned out to be true as the support helped the index to bounce higher and though this bounce was very slow and steady during the beginning of the week, it picked up pace later on.

The bounce was helped along by the fact that the tariff plan that was actually signed off by Trump turned out to be a much watered down version of the original plan and it kept the doors open for further exemptions for many countries as well. This was positive news for the stock markets and the DAX bulls showed their appreciation by pushing the index higher during the end of the week and this helped the index to close the week above the 12300 region.

Looking ahead to the coming week, we expect the DAX to continue to trade in a steady and buoyant manner as the strong employment report from the US is expected to keep the risk trades running. We doubt whether this momentum would be enough to break through the high of the range in the 12600 region, as the DAX grapples with its own issues surrounding the tapering and the end of the QE by the end of this year. It is likely to be an interesting week which should see consolidation and ranging for much of it.