DAX Index Fundamental Analysis – week of May 14, 2018

The DAX index had a strong week and what should make the bulls even more happier is the fact that they managed to close the week in a strong manner which should augur well for the coming week. The improvment in the global risk sentiment was the main contributing factor but the roots for this move higher had come about in the weeks before.

DAX Pushes Higher But Likely to Face Selling

The index had been under a lot of pressure over the last couple of months as it was widely expected that the QE  from the ECB would be tapered off and ended within the next few months and some of the traders and the investors were also hoping to see the first rate hike in quite some time, during the early part of next year. But the incoming data from the region during the last few months has been pretty week and this has led to the anticipation that the QE tapering would be delayed for more time than what was expected.

As much was implied by the ECB in their statement a few weeks back and since then, the index has been on a bullish trend. We saw some of the same last week as well as the index pushed through the 13000 region for a few times. There is going to be a lot of selling in this region and hence further progress through this region is going to be difficult in the short and medium term as well. The data from the Eurozone continues to be choppy which means that the tapering is going to be further delayed but the index is likely to face a period of consolidation and ranging.

In the coming week we have the PPI data from Germany and also a speech from Draghi which will be watched closely by the market for any further hints about QE. If there is none, we could see some correction and consolidation in the index in the coming week as the traders begin to take some profits off the table and the selling in the resistance region begins to grow in a slow and steady manner. There needs to be much more momentum in the short term for the index to push higher in this region and we believe that the DAX is not ready for such a push as yet.