DAX Index Today: German Services PMI, the ECB, and the Fed in Focus

Overview of the DAX Performance on Wednesday

The DAX gained 0.46% on Wednesday. Partially reversing a 1.13% slide from Tuesday, the DAX ended the session at 18,368. Significantly, the DAX saw a ninth daily gain from ten sessions.

Eurozone Inflation Raises Bets on an ECB Rate Cut

Eurozone inflation figures fueled bets on a June ECB interest rate cut. The annual core inflation rate eased from 3.1% to 2.9% in March, with the inflation rate down from 2.6% to 2.4%.

Softer inflation and the unemployment rate for the Eurozone signaled the need for policy support. The unemployment rate remained unchanged at 6.5% in February.

US Economic Calendar: ISM Services PMI and Fed Chair Powell Extended Gains

The all-important US ISM Services PMI survey and Fed Chair Powell contributed to the Wednesday gains. The ISM Services PMI unexpectedly declined from 52.6 to 41.4 in March.

Fed Chair Powell offered assurances that the Fed will cut rates this year. Powell stated that recent inflation figures didn’t materially affect the Fed’s view vis-à-vis inflation and rate cuts.

The ISM survey-based numbers and Fed Chair Powell offset the impact of the ADP Employment Report. On Wednesday, the ADP reported an 184k increase in nonfarm payrolls in March.

10-year US Treasury yields ended the Wednesday session down 0.09% to 4.349%. On Wednesday, the Nasdaq Composite Index and the S&P 500 advanced by 0.23% and 0.11%, respectively. The Dow fell by 0.11%.

The Wednesday Market Movers

Auto stocks led the way on Wednesday. BMW rallied 4.88%, with Volkswagen and Porsche gaining 2.24 and 3.29%, respectively. Mercedes Benz Group advanced by 0.60%.

Tech stocks also benefited from the US economic calendar and the pullback in US Treasury yields. Infineon Technologies and SAP saw gains of 2.40% and 0.66%, respectively. JPMorgan Chase (JPM) upgraded Infineon from neutral to overweight, contributing to the extended gains.

However, retail stocks had a mixed session. Zalando SE ended the session flat, while Adidas declined by 0.49%.

German and Eurozone Services PMIs in the Spotlight

German and Eurozone Services PMIs could influence investor bets on a June ECB rate cut. The services sector remains the main contributor to German and euro area inflation. Softer input and output price trends could cement bets on a June rate cut.

According to preliminary numbers, the German Services PMI increased from 48.3 to 49.8 in March. The Eurozone Services PMI advanced from 50.2 to 51.1. The German PMI was higher despite softer input and output prices.

Amidst rising ECB support for a June interest rate cut, the ECB Monetary Policy Meeting Minutes are out later in the session. However, the Minutes should have a limited impact on the DAX. Recent inflation figures and ECB guidance gave a more up-to-date picture of the likely ECB rate path.

US Economic Calendar: Jobless Claims and Fed Speeches

The US labor market will be in focus again. Weekly jobless claims figures will draw investor interest before the Friday US Jobs Report. An unexpected slide in jobless claims could spook investors after the ADP nonfarm payroll numbers.

A slide in jobless claims could signal a hotter-than-forecast US Jobs Report. A pickup in wage growth and a jump in nonfarm payrolls could sink bets on a June Fed rate cut.

Economists forecast initial jobless claims to increase from 210k to 214k in the week ending March 30.

Beyond the numbers, FOMC members Thomas Barkin and Austan Goolsbee are on the calendar to speak. Comments regarding interest rate cuts could move the dial.

Short-term Forecast

Near-term trends for the DAX will hinge on Services PMIs, the US Jobs Report, and central bank commentary. The US Jobs Report could overshadow recent economic indicators from the euro area that signal an ECB rate cut.

In the futures markets, the DAX was down 2 points while the Nasdaq Mini was up by 75 points.

DAX Technical Indicators

Daily Chart

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

A DAX break above the 18,400 handle could give the bulls a run at the April 2 all-time high of 18,567.

Services PMIs, US jobless claims, and FOMC member commentary could impact buyer demand for DAX-listed stocks.

A fall through the 18,250 handle could signal a DAX drop below the 18,000 level.

The 14-day RSI at 71.87 shows the DAX in overbought territory. Selling pressure may intensify at the 18,500 handle.

4-Hourly Chart

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

A DAX return to the 18,400 handle could support a move to the all-time high of 18,567.

Conversely, a drop below the 18,250 handle could signal a fall through the 18,000 handle.

The 14-period 4-hour RSI at 58.85 indicates a DAX return to the all-time high of 18,567 before entering overbought territory.