DAX Index Fundamental Analysis – week of March 5, 2018

The DAX index crashed lower during the course of trading over the last week but it ended the week close to the lows which should now act as some decent support. The week had been very volatile with the index trying to push higher but the geopolitical developments during the week brought in a lot of pressure on the index and this caused the index to move below the 12000 region towards the end of the week.

DAX Crashes Lower

The week did start off on the right note but soon, the dollar strength began to have an impact on the stock indices around the world. There was not much going on domestically in Germany but the testimony from the new Fed Chief Powell was enough to drive the dollar higher and the stock indices lower and this had an impact on the DAX as well.

But the worst was yet to come. It came towards the end of the week as the US administration announced import tariffs on steel and aluminium. This was a drastic move that is likely to affect the car industry in the US but it is also likely to affect the exports from countries like Germany and China. This led to a fear that there would be a trade war between the major economic powers with countries like China expected to retaliate in kind. This has led to a lot of risk and uncertainty and this led the global stock indices lower and caused the index to crash through 12000.

But it managed to find some support in the 11800 region which was the low from the huge fall in the DAX that we saw a few weeks back. This drop has now completed a round trip from where the drop started to the bottom of the drop and hence we should see some consolidation in the week ahead. We will be having a slew of data from the US, including the NFP, and also the rate announcement from the ECB and all of this is likely to have an impact on the DAX index.

But with the technical support nearby, we should see ranging and consolidation for the first half of the week while the moves in the second half would be determined by the data. We doubt whether this support would be broken and hence traders can use this chance to go long with a tight stop loss.