DAX Index Today: Futures Flash Red as Investors Turn Cautious Pre Fed

Overview of the DAX Performance on Tuesday

The DAX gained 0.31% on Tuesday. Ending a four-day losing streak, the DAX closed the session at 17,988.

German and Eurozone Sentiment Improves

On Tuesday, ZEW Economic Sentiment figures for Germany and the Eurozone garnered investor interest. Improved investor sentiment toward the respective economies supported buyer demand for DAX-listed stocks.

The German ZEW Economic Sentiment Index increased by 19.9 to 31.7 in March, with the Eurozone Index rising from 25.0 to 33.5. Economists forecast Index values of 20.5 and 28.0, respectively.

ECB commentary was also market-friendly. On Tuesday, ECB member Martins Kazaks reportedly supported the current market pricing for ECB interest rate cuts.

US Housing Sector Signals a Resilient US Economy

On Tuesday, the US housing market was in focus again. Building permit and housing start data signaled a pickup in demand. The better-than-expected US housing sector data suggested upbeat consumer confidence and a resilient US economy.

US building permits increased by 1.9%, with housing starts surging 10.7% in February. Economists forecast building permits to decline by 0.2% and housing starts to increase by 7.0%.

10-year US Treasury yields declined by 0.72% on Tuesday, ending the session at 4.293%. The pullback in Treasury yields supported the appetite for riskier assets. On Tuesday, the Dow rallied 0.83%. The Nasdaq Composite and S&P 500 ended the session up 0.39% and 0.56%, respectively.

The Tuesday Market Movers

Bank stocks were among the front-runners on Tuesday. Commerzbank and Deutsche Bank rallied 3.49% and 1.70%, respectively.

Auto stocks extended the gains from the Monday session. Volkswagen gained 1.61%, with BMW and Mercedes Benz Group advancing by 1.08% and 1.08%, respectively. Porsche ended the session up 0.25%.

German Producer Prices, Eurozone Consumer Confidence, and the ECB

On Wednesday, German producer prices will draw investor interest early in the European session. Economists forecast producer prices to decline by 3.8% year-on-year in February after falling 4.4% in January.

However, economists expect producer prices to fall by 0.1% month-on-month after rising by 0.2% in January. A fall in producer prices would signal a weak demand environment and support bets on a June ECB rate cut. Bets on an H1 2024 ECB rate cut remains a tailwind for the DAX.

Later in the session, Eurozone consumer confidence numbers also need consideration. Economists expect the Consumer Confidence Index to increase from -15.5 to -15.0. However, barring a marked increase in the Consumer Confidence Index, the numbers are unlikely to influence sentiment toward an H1 2024 ECB rate cut.

Away from the numbers, ECB President Christine Lagarde and Chief Economist Philip Lane are on the calendar to speak.

Views on the economic outlook, inflation, and the timeline for interest rate cuts could move the dial.

There are no economic indicators from the US to consider. However, investors will be mindful of the FOMC interest rate decision, projections, and press conference after the European closing bell.

Short-term Forecast

Near-term trends for the DAX will hinge on inflation and wage growth trends for the euro area and the Fed interest rate decision.

Sticky inflation, upward trends in euro area wage growth, and a hawkish Fed could test buyer demand for DAX-listed stocks.

In the futures, the DAX and Nasdaq mini were down 22 and 25 points, respectively.

DAX Technical Indicators

Daily Chart

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

A DAX return to the March 14 all-time high of 18,039 could give the bulls a run at the 18,200 level.

Euro area economic indicators and ECB chatter warrant investor attention.

Conversely, a drop below the 17,900 handle could signal a fall to the 17,750 handle.

The 14-day RSI at 76.17 shows the DAX in overbought territory. Selling pressure may intensify at the March 14 high of 18,039.

4-Hourly Chart

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

A DAX break above an all-time high of 18,039 would support a move toward the 18,200 handle.

However, a fall through the 17,900 handle could give the bears a run at the 50-day EMA.

The 14-period 4-hour RSI at 61.76 suggests a DAX return to the March 14 all-time high of 18,039 before entering overbought territory.