DAX Index Fundamental Analysis – week of September 4, 2017

After having suffered earlier in the week, the DAX index managed to close the week in a strong manner but for us, we believe that the index continues to trade in a tight range and it is likely to continue to do so in the short and medium term. The fact that the index recovered during the course of the week should give a lot of confidence for the bulls but it remains to be seen whether they would be able to translate that into a strong bull run in the coming days.

DAX Closes the Week In a Strong Manner

The DAX index began the week on the backfoot as Draghi chose not to address the strong euro during his speech at Jackson Hole which was basically viewed as a signal for the euro bulls to continue their euro buying. This was a dampener for the stock markets in Europe as a strong euro would affect the corporates and would also mean that the QE tapering was getting close to hand. This pushed the DAX through the 12000 region and the escalation in tension between North Korea and the US, due to another missile test from North Korea, did not help matters as the index turned very weak.

But as time wore on, the tension and the risk subsided and this helped the DAX to recover and push itself back through the 12000 region and the turn around was complete on Friday when a report came in stating that the ECB would be looking at tapering only sometime in December and not anytime sooner. This disappointed the euro bulls and this news was cheered by the stock markets in Europe. This helped the DAX to close the week in a strong manner above the 12100 region.

Looking ahead to the coming week, we do not have any major news from Germany but we have the ECB rate announcement and press conference which will be watched closely for further hints on the timing of the QE tapering. We believe that the postponement of the tapering would continue to fuel the DAX index and we could see it move towards the 12300 mark during the course of the coming week though a break through that region, with the German elections around the corner, looks doubtful for the short term.