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DAX to Face a mixed Session on Fed Fear and ECB Chatter

By:
Bob Mason
Updated: Mar 21, 2023, 07:57 UTC

It is a busy day ahead for the DAX, with ZEW Economic Sentiment figures and ECB President Lagarde in focus. Bank chatter and Fed Fear will also influence.

DAX and the FTSE 100 to face Fed Fear - FX Empire

It was a bullish Monday session for the DAX, which rose by 1.12% to end the day at 14,933.

Easing bank contagion risk supported the DAX and broader equity markets as investors responded to news of UBS AG (UBS) agreeing to acquire Credit Suisse Group AG (CS).

Economic indicators from the Eurozone took a back seat, with ECB President Lagarde unable to spook investors with the commitment to push interest rates higher to curb inflation.

On Thursday, the ECB raised interest rates by 50 basis points despite the deepening banking sector crisis and signaled more rates to come.

The FTSE 100 also enjoyed a bullish session, rising by 0.93%. However, the upside was modest, with a strong Pound limiting the upside. On Monday, the GBP to USD rose by 0.86% to $1.22776.

Easing Bank Contagion Mutes Economic Indicators

The German producer price index fell by 0.3% in February versus a forecasted 0.5% decline. In January, the producer price index declined by 1.0%. Year-over-year, the producer price index rose by 15.8% versus an expected increase of 14.5%. In January, the index increased by 17.6%.

According to Destatis,

  • Compared with February 2022, the highest contribution came from energy prices.
  • Energy prices rose by 27.6% year-over-year attributable to natural gas (distribution) prices.
  • Year-over-year, natural gas prices rose by 38.9%
  • In contrast, energy prices were the main drag on the index in February, falling by 1.4%. Prices of natural gas were the main drag.

Later in the European session, euro area trade data drew interest but failed to sink the DAX. The euro area trade deficit widened from €8.8 billion to €30.6 billion in January. Economists forecast a more modest widening to €12.5 billion.

There were no US stats for investors to consider. However, ECB President Lagarde was in focus. The ECB President warned that market turbulence would not hinder the ECB’s efforts to bring inflation to target. Lagarde pointed out that prevailing market conditions could help the ECB in its inflation commitments, saying,

“Clearly financial stability tensions might have an impact on demand and might actually do part of the work that would otherwise be done by monetary policy and interest rate hikes.”

delivered further commitments to bring inflation to target, saying,

However, the ECB President warned that further rate hikes were needed.

The Market Movers

It was a mixed Monday for the auto sector.  BMW rose by 0.80%, with Continental gaining 0.19%. However, Volkswagen ended the day with a 0.17% loss. Daimler and Porsche ended the day down 0.17% and 0.59%, respectively.

Bank stocks also had a mixed session. Deutsche Bank fell by 0.50%, while Commerzbank ended the day up by 1.50%.

The Day Ahead for the DAX

It is a quiet day ahead on the economic calendar. German and Eurozone ZEW Economic Sentiment figures for March will draw interest.

However, Investor sentiment improved this week on news of UBS AG (UBS) agreeing to acquire Credit Suisse Group (CS), easing fears of a global financial crisis. Therefore, we expect the markets to forgive weak numbers likely impacted by the collapse of Silicon Valley Bank and Signature Bank (SBNY).

US economic indicators should have a muted impact on the DAX, with banking sector-related news and sentiment toward the Fed interest rate decision likely to overshadow existing home sales numbers.

With the US stats unlikely to influence, ECB President Lagarde and ECB Executive Board Member Enria speak today and could move the dial.

An ECB commitment to drive interest rates higher to combat inflation would test buyer appetite.

DAX Technical Indicators

The DAX has to avoid the 14,790 pivot to target the First Major Resistance Level (R1) at 15,123. A move through the Monday high of 14,980 would signal a bullish session. However, the DAX would need the German ZEW Economic Sentiment figures and ECB President Lagarde to support a bullish session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $15,312. The Third Major Resistance Level (R3) sits at 15,834.

A fall through the pivot would bring the First Major Support Level (S1) at 14,601 into play. However, barring another flight to safety, the DAX should avoid sub-$14,500 and the Second Major Support Level (S2) at 14,268. The Third Major Support Level (S3) sits at 13,746.

Chart, line chart Description automatically generated

Looking at the EMAs and the 4-hourly chart, the EMAs send bearish signals. The DAX sits below the 50-day EMA (15,190). The 50-day EMA pulled back from the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A DAX move through R1 (15,123) would give the bulls a run at 50-day (15,190) and 100-day (15,205) EMAs and R2 (15,312). However, a fall through the 200-day EMA (14,718) would leave the Major Support Levels in play. A move through the 50-day EMA would send a bullish signal.

The DAX Futures Sees Green

Looking at the futures markets, DAX was up 83 points, with the NASDAQ mini gaining 6.25 points. The Dow mini was up 20 points.

For a look at all of today’s economic events, check out our economic calendar.

 

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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