DAX Index Today: 20,000 in Sight on ECB Rate Path Bets and Falling Inflation

The Overview of the DAX Performance

The DAX gained 0.46% on Friday (May 10). Following a 1.02% rally on Thursday (May 9), the DAX closed the session at 18,773. Significantly, the DAX extended its winning streak to six sessions and struck a new all-time high of 18,846.

ECB Monetary Policy Meeting Minutes Under the Spotlight

On Friday (May 10), the ECB monetary policy meeting minutes were in focus, drawing investor attention.

The ECB meeting minutes aligned with investor expectations of a June ECB interest rate cut, driving buyer demand for DAX-listed stocks.

Investor expectations of lower interest rates and falling inflation are tailwinds for the DAX. An improving macroeconomic environment and lower interest rates support the view that the euro area economy will improve in H2 2024.

Michigan Inflation Expectations and Fed Speakers Send Hawkish Fed Signals

Later in the Friday session, Michigan Inflation Expectation numbers and hawkish Fed commentary contributed to a pullback from the intraday high.

The Michigan Inflation Expectations Index unexpectedly increased from 3.2% to 3.5% in April, raising uncertainty about the Fed rate path.

FOMC members Lorie Logan and Neel Kashkari delivered a hawkish spin on monetary policy. Both FOMC members raised concerns about the current interest rate environment being sufficiently restrictive to bring inflation to the 2% target.

Nevertheless, it was a mixed session for the US equity markets. On Friday (May 9), the Nasdaq Composite Index slipped by 0.03%. The Dow and S&P 500 ended the session up 0.32% and 0.16%, respectively.

The Friday Market Movers

Siemens Energy AG continued extending its gains after an improved outlook for 2024, rallying 4.07%. Siemens AG gained 2.35%.

Zalando SE rallied 3.32% as investors reacted to Berenberg upgrading the stock from hold to buy. Adidas ended the session up 0.49%. The markets expect falling inflation and interest rate cuts to fuel consumer spending, driving demand for DAX-listed retail stocks.

However, it was another mixed session for the auto sector. Porsche and Volkswagen fell by 0.62% and 0.38%, respectively. Mercedes Benz Group declined by 0.23%, with BMW ending the session down 0.05%. Daimler Truck Holding bucked the trend again, gaining 0.36% on improving sentiment toward demand from China and Europe.

China Inflation and ECB Commentary in Focus

On Monday (May 13), ECB commentary remains a focal point, with investors eyeing forward guidance beyond June.

ECB Executive Board members Piero Cipollone and Claudia Buch are on the calendar to speak. Support for multiple ECB interest rate cuts could drive buyer demand for DAX-listed stocks.

However, economic data from China will likely set the tone for the Monday session. Over the weekend, consumer prices for China signaled an improving demand environment. The annual inflation rate increased from 0.1% to 0.3% in April. Nevertheless, producer price trends remained a concern. Producer prices declined by 2.5% year-on-year after falling 2.8% in March.

US Economic Calendar: Consumer Inflation Expectations and the Fed

On Monday, the US economic calendar also needs consideration. Consumer Inflation Expectations will attract investor interest after the Michigan numbers. Economists forecast consumer inflation expectations to rise from 3.0% to 3.1% in April. Higher-than-expected numbers could fuel speculation about a Fed rate hike before the all-important US CPI Report (Wed).

Beyond the numbers, investors should monitor FOMC member chatter. FOMC members Loretta Mester and Philip Jefferson are on the calendar to speak. Views on inflation and monetary policy could move the dial.

Near-Term Outlook

Near-term trends for the DAX will hinge on ECB forward guidance, US inflation numbers, and FOMC member commentary. Support for multiple ECB interest rate cuts could continue driving buyer demand for DAX-listed stocks. However, a more hawkish Fed and hotter-than-expected US inflation numbers could impact market risk sentiment.

On the Futures markets, the DAX and the Nasdaq mini were up by 29 and 21 points, respectively.

DAX Technical Indicators

Daily Chart

The DAX sat well above the 50-day and 200-day EMAs, affirming the bullish price signals.

A DAX break above the Friday (May 10) all-time high of 18,846 could give the bulls a run at 19,000.

ECB Executive Board member chatter, US consumer inflation expectations, and FOMC member speeches need consideration.

However, a drop below 18,700 could signal a fall toward the 18,500 level. A break below 18,500 could signal a DAX retreat toward the 18,350 handle.

The 14-day RSI at 69.18 shows the DAX on the border with overbought territory (70.0). Selling pressure could intensify at the Friday high of 18,846.

4-Hourly Chart

The DAX remained comfortably above the 50-day and 200-day EMAs, confirming the bullish price trends.

A DAX breakout from the all-time high of 18,846 would support a move toward 19,000.

Conversely, a DAX drop below the 18,700 handle could give the bears a run at the 18,500 handle.

The 14-period 4-hour RSI at 77.97 shows the DAX in overbought territory. Selling pressure may increase at the all-time high of 18,846.