DAX Set for a Bearish Open with GDP numbers and Inflation in Focus

Highlights

• It was a bullish Thursday for the DAX, rallying 1.70% to end the day at 16,406.
• US GDP numbers and ECB President Christine Lagarde delivered a breakout session.
• It is a busy day ahead, with French and German inflation and GDP numbers in focus ahead of the US session.

It was a bullish Thursday for the DAX, which rallied by 1.70%. Reversing a 0.49% loss from Wednesday, the DAX ended the day at 16,406. Significantly, the DAX struck a new 2023 high of 16,409.

US economic indicators kickstarted a breakout session, with ECB President Christine Lagarde supporting further gains, with the ECB uncommitted to raising rates further in September.

Economic Indicators Deliver DAX Support

It was a busy Thursday session on the economic calendar. German GfK Consumer Climate numbers provided modest support. Despite deteriorating economic conditions, the German GfK Consumer Climate increased from -25.4 to -24.4 for August versus a forecasted -24.7.

Significantly, income expectations hit the highest level since February 2022, while there was only a modest increase in the propensity to buy indicator. Sentiment toward the economy remained unchanged, supported by stable employment conditions.

However, US economic indicators beat forecasts in the afternoon session. The US economy expanded by 2.4% in Q2 versus 2.0% in Q1, with initial jobless claims falling from 228k to 221k. Economists forecast the US economy to grow by 1.8% and for initial jobless claims to rise to 235k.

The Market Movers

It was a mixed session for the auto sector. BMW and Mercedes-Benz Group rallied by 2.61% and 3.95%, respectively. Porsche and Continental AG saw more modest gains of 0.30% and 0.66%, respectively. However, Volkswagen bucked the trend, sliding by 2.06%, on a cut in sales forecasts.

It was a bearish session for the banks. Commerzbank and Deutsche Bank ended the day with losses of 1.14% and 3.34%, respectively.

Infineon led the way, rallying 5.56% on product expansion news.

The Day Ahead for the DAX

French and German GDP and inflation figures will move the dial this morning. Softer inflation and weaker-than-expected GDP numbers would support the ECB hitting the brakes on its monetary policy tightening cycle.

No ECB members are on the calendar to speak, leaving chatter with the media to move the dial.

Looking ahead to the US session, US Core PCE Price Index and personal spending numbers will be the stats to track. Fed Chair Powell left the door ajar for a September rate hike. A hotter-than-expected core PCE price index and personal spending would support a more hawkish Fed policy outlook.

While the economic indicators will provide direction, investors should consider the Bank of Japan press conference. Overnight, reports of the Bank of Japan planning to allow longer-term interest rates to rise above the 0.5% cap for 10-year government bonds sent the US equity markets into the red. The news pushed US yields higher, weighing on riskier assets.

The Bank of Japan left monetary policy unchanged this morning. However, confirmation of a plan to tweak the Yield Curve Control Policy in the press conference would test buyer appetite.

DAX Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The DAX sat above the 50-day (16,102) and 200-day (15,923) EMAs, signaling bullish momentum over the near and longer term.

Significantly, the 50-day EMA pulled further away from the 200-day EMA, sending bullish price signals and supporting a breakout from the 16,310 – 16,360 resistance band.

A DAX move through the July high of 16,409 would bring 16,500 into play. However, euro area and US economic indicators must be DAX-friendly for a run at 16,500.

A fall through the upper level of the 16,360 – 16,310 resistance band would bring the 16,080 – 16,000 support ban into view.

The 14-4H RSI sits at 63.90, sending bullish signals, with buying pressure overweighing selling pressure. Significantly, the RSI aligns with the EMAs, supporting a breakout from the July high (16,409) to target 16,500.

For a look at the economic events, check out our economic calendar.