DAX Set for a Bullish Open Ahead of US Stats and Bank Earnings

It was a bullish Thursday session. The DAX rose by 0.16% to end the day at 15,730. Notably, the DAX extended its winning streak to four sessions.

Economic data from Germany and the US provided support. Significantly an unexpected fall in the US Producer Price Index fueled bets of the Fed hitting the pause button after a 25-basis point interest rate hike in May.

The NASDAQ Composite Index responded to the US stats, rallying 1.99%, with the S&P 500 and Dow seeing gains of 1.33% and 1.14%, respectively.

US Wholesale Inflation Report Delivers a Bullish Thursday Session

German inflation figures and euro area industrial production numbers delivered early support.

In March, the German annual inflation rate softened from 8.7% to 7.4%, with euro area industrial production rising by 1.5% in February. Economists forecast a 1.0% increase.

However, US wholesale inflation figures were the key.

The US producer price index fell by 0.5% in March versus a forecasted 0.1% increase. Also bullish was a larger-than-expected rise in US initial jobless claims. Claims increased from 228k to 239k versus a forecasted 232k.

After the US inflation numbers, bets of a 25-basis point Fed interest rate hike in May have stayed steady. However, the chance of a post-May hike was almost zero. According to FedWatchTool, the probability of a 25-basis point May interest rate hike fell from 70.4% to 66.8% over 24 hours.

The Market Movers

It was a mixed Thursday for the auto sector. Continental and Mercedes-Benz Group saw gains of 0.73% and 0.65%, respectively, with Volkswagen rising by 0.45%.

However, BMW and Porsche ended the day with losses of 0.35% and 0.19%, respectively.

It was also a mixed session for the banks. Commerzbank rose by 0.88%, while Deutsche Bank ended the day up by 0.80%.

The Day Ahead for the DAX

It is a busy day ahead on the economic calendar. Finalized French and Spanish inflation numbers will be in focus. However, barring downward revisions, the numbers should have a limited impact on the DAX.

US economic indicators will move the dial, with retail sales, industrial production, and Michigan Consumer Sentiment numbers in the spotlight.

Weak retail sales figures should support the Fed doves and the end of the monetary policy tightening cycle in May.

While the stats will influence, investors also need to consider corporate earnings. Blackrock (BLK), Citi (C), JPMorgan (JPM), and Wells Fargo (WFC) deliver earnings results ahead of the US opening bell. Beyond the earnings numbers, references to the banking crisis will draw interest.

DAX Technical Indicators

The DAX has to avoid the 15,720 pivot to target the First Major Resistance Level (R1) at 15,765. A move through the Thursday high of $15,755 would send a bullish signal. However, the DAX would need US stats and central bank commentary to support a bullish session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $15,800. The Third Major Resistance Level (R3) sits at 15,880.

A fall through the pivot would bring the First Major Support Level (S1) at 15,685 into play. However, barring a flight to safety, the DAX should avoid sub-$15,600. The Second Major Support Level (S2) at 15,640 should limit the downside. The Third Major Support Level (S3) sits at 15,560.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The DAX sits above the 50-day EMA (15,478). The 50-day EMA pulled further away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the Major Support Levels and the 50-day EMA (15,478) would support a breakout from R1 (15,765) to give the bulls a run at R2 (15,800). However, a risk-off event would deliver a fall through S1 (15,685) to bring S2 (15,640) into view. A fall through the 50-day (15,478) would signal a near-term bullish trend reversal.

The DAX Futures Sees Green

Looking at the futures markets, DAX was up 49 points, while the NASDAQ mini fell by 16.25. The Dow mini was down by 63.

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