DAX Index Today: FOMC Insights and ECB Projections Stir DAX Market Sentiment

The Overview of the DAX Performance

The DAX declined by 0.22% on Tuesday (May 21). Partially reversing a 0.35% gain from Monday (May 20), the DAX ended the session at 18,727.

German Producer Prices and ECB President Lagarde

German producer prices sent waning demand signals on Tuesday (May 21). Producer prices declined by 3.3% year-on-year in April after falling 2.9% in March.

Producers cut prices in a weakening demand environment, reducing costs for consumers. While the numbers raised concerns about the economic outlook, the more marked decline supported investor bets on a June ECB rate cut.

However, labor cost data for the Eurozone could support calls for caution after a June rate cut. Eurozone labor costs increased 4.9% year-on-year in Q1 2024 after advancing 3.4% in Q4 2023. Higher labor costs could fuel demand-driven inflation and force the ECB to take a more hawkish interest rate trajectory.

Trade data for the Eurozone was upbeat, with the trade surplus widening from €22.8 billion to €24.1 billion.

ECB President Lagarde said she was confident inflation was under control, supporting a more dovish ECB rate path. The ECB President delivered favorable comments despite the uptick in labor costs.

FOMC Member Speakers Test Buyer Demand for Riskier Assets

Fed speakers also garnered investor interest. FOMC members Christopher Waller and Raphael Bostic reiterated the need for a higher-for-longer rate path to return inflation to the target.

There were no surprise comments to spook investors before the FOMC meeting minutes after the European closing bell on Wednesday.

On Tuesday, the Dow gained 0.17%. The Nasdaq Composite Index and S&P 500 ended the session up 0.22% and 0.25%, respectively. Nvidia’s (NVDA) earnings result on Thursday (May 23) remained a focal point.

The Tuesday Market Movers

Infineon Technologies led the way down, sliding by 3.05%, with Siemens Energy AG declining by 1.36%.

Auto stocks contributed to the losses despite a mixed session for the sector.

Mercedes Benz Group declined by 0.48%. BMW and Volkswagen ended the day down 0.19% and 0.04%, respectively. Daimler Truck Holding and Porsche bucked the trend, gaining 0.62% and 0.04%, respectively.

ECB in the Spotlight

On Wednesday (May 22), the ECB will be in focus. ECB President Christine Lagarde is on the calendar to speak.

Views on inflation and the ECB interest rate trajectory require investor attention. Support for post-June rate cuts could drive buyer demand for DAX-listed stocks.

There are no stats for Germany or the Eurozone to consider before preliminary private sector PMIs on Thursday.

US Economic Calendar: US Housing Data and the Fed

Later in the Wednesday session, US housing sector data also needs investor consideration. Economists forecast existing home sales to increase by 0.5% in April after sliding by 4.3% in March.

Investors consider the US housing market a litmus test of the US economy. A pickup in housing sector activity could influence the Fed rate path.

However, investors should also monitor FOMC member chatter before the FOMC meeting minutes. The Fed will release the FOMC meeting minutes after the European closing bell.

Near-Term Outlook

Near-term trends for the DAX will hinge on central bank comments and the looming private sector PMI numbers. A pickup in US service sector activity could further reduce investor expectations of a September Fed rate cut. The ECB may prefer to wait for a Fed rate cut before more policy moves after the broadcasted June rate cut.

On the Futures markets, the DAX and the Nasdaq mini were up 20 and 12 points, respectively.

DAX Technical Indicators

Daily Chart

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

A DAX return to the 18,750 handle would support a move to the May 15 all-time high of 18,893. A break above the all-time high could bring the 20,000 handle into play.

ECB and Fed chatter need investor consideration.

However, a DAX fall through the 18,650 handle could signal a drop to the 18,500 handle.

The 14-day RSI at 62.56 suggests a move to the May 15 all-time high before entering overbought territory.

4-Hourly Chart

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

A DAX breakout from the 18,750 handle could give the bulls a run at the all-time high (18,893).

Conversely, a DAX fall through the 18,650 handle could signal a drop to the 18,500 handle.

The 14-period 4-hour RSI at 56.10 suggests a DAX return to the May 15 all-time high before entering overbought territory.