DAX Index Today: German Trade, the US Labor Market, and Fed Chair Powell Testimony

Overview of the DAX Performance on Tuesday

The DAX declined 0.10% on Tuesday. Following a 0.11% loss on Monday, the DAX ended the session at 17,698.

German and Eurozone Services PMIs Signal Shift in Momentum

On Tuesday, finalized Services PMIs for Germany and the Eurozone drew investor interest. Upward revisions to preliminary PMIs signaled a possible shift in momentum. The German Services PMI increased from 47.7 to 48.3, up from a preliminary 48.2.

The Eurozone Services PMI rose from 48.4 to 50.2, up from a preliminary 50.0. Significantly, the Eurozone PMI survey highlighted persistent wage growth pressures. Operating costs rose at the most marked pace in ten months.

The survey-based data aligned with rising bets on a June ECB rate cut. Investors previously anticipated an April ECB rate cut.

US Services PMI Impacts Market Risk Sentiment

Later in the Tuesday session, the ISM Services PMI impacted market risk sentiment. The ISM Services PMI declined from 53.4 to 52.6 in February. In February, the ISM Services Employment Index declined from 50.5 to 48.0. The ISM Services Prices fell from 64.0 to 58.6.

The ISM Survey-based numbers sent mixed signals. The Employment and Prices Index declines supported bets on a June Fed rate cut. However, the sharp pullback in employment raised concerns about the US economy, impacting riskier assets.

On Tuesday, the Nasdaq Composite Index slid by 1.65%. The Dow and the S&P 500 ended the session down 1.04% and 1.02%, respectively.

The Tuesday Market Movers

Bayer tumbled 7.57%. Investors reacted to updates about splitting up the company. Siemens Energy AG and Siemens AG saw losses of 1.77% and 1.40%, respectively. Infineon Technologies and SAP declined by 1.25% and 0.99%, respectively. Risk aversion weighed on tech stocks.

In contrast, auto stocks had a mixed session. Volkswagen declined by 1.26%, with BMW and Porsche seeing losses of 0.53% and 0.43%, respectively. Mercedes-Benz Group bucked the trend, gaining 0.03%.

German Trade and Eurozone Retail Sales in Focus

On Wednesday, German trade data will garner investor interest. Another marked decline in imports and exports could signal a prolonged economic recession. Economists forecast the German trade surplus to narrow from €22.4 billion to €21.5 billion in January. Significantly, economists expect exports to increase by 1.5% month-on-month after sliding by 4.6% in December.

While another slide in exports would send red flags, the numbers are unlikely to influence the ECB rate path.

However, Eurozone retail sales figures for January could have more impact on ECB policy goals. Economists forecast retail sales to increase by 0.1% in January after falling by 1.1% in December. Weak consumer spending could dampen demand-driven inflation and support bets on an H1 2024 ECB rate cut.

US Economic Calendar: Labor Market and Fed Chair Powell

On Wednesday, the US labor market will also be in focus. ADP employment change and JOLTs Job Openings will draw investor attention. Tighter labor market conditions could cool bets on a June Fed rate hike and impact the demand for riskier assets.

Economists forecast ADP employment to increase by 150k in February after rising by 107k in December. However, economists expect JOLTs Job Openings to fall from 9.026 million to 8.900 million in January.

Weaker-than-expected numbers would support bets on a June Fed rate cut. However, significantly weaker numbers could spook investors.

While the numbers need consideration, Fed Chair Powell will be the focal point. The Fed Chair will give testimony on Capitol Hill. Views on the economy, inflation, and the Fed rate path would influence buyer appetite for DAX-listed stocks.

Short-term Forecast

Near-term trends for the DAX will likely hinge on Fed Chair Powell and the ECB monetary policy decision. More hawkish-than-expected outlooks on the respective rate paths could pressure the DAX at current levels.

On Wednesday, the DAX futures and the Nasdaq mini were up 23 and 48 points, respectively.

DAX Technical Indicators

Daily Chart

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

A DAX breakout from the Friday all-time high of 17,817 would bring the 18,000 handle into play.

Euro area and US economic indicators and Fed Chair Powell need consideration.

A fall through the 17,650 handle could give the bears a run at the 17,500 handle.

The 14-day RSI at 75.84 shows the DAX in overbought territory. Selling pressure could intensify at the ATH of 17,817.

4-Hourly Chart

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

A DAX break above the 17,817 all-time high would support a move to the 18,000 handle.

However, a DAX break below the 17,650 handle would bring the 17,500 handle into play.

The 14-period 4-hour RSI at 68.70 suggests a DAX return to the 17,800 handle before entering overbought territory.