DAX at the Top: What to Expect?
The DAX index starts on an uptrend, boosted by the positive close on Wall Street. Today, several crucial and expectation-boosting releases are expected from the German market, including Q4 2023 GDP growth, which is anticipated to be slightly negative at around -0.3% vs. 0% previously, as well as business sentiment reports from the IFO Institute at the University of Munich, which are expected to show a more positive outlook than in previous reports.
In mid-morning, we will be watching for releases on consumer inflation and statements from European Central Bank (ECB) board member Isabel Schnabel. Schnabel has emphasized in her September statement the inflationary acceleration, attributing it to the pandemic cycle and the excessive increase in money demand as a need to be met, advocating output to combat recession and strong disinflation. Will the ECB's "quantitative money theory" follow suit? This could have a big impact on the euro zone. According to Schnabel: "inflation is not always everywhere a monetary phenomenon", and it is true that the ECB has expanded capital on a par with the US Fed. We will see if they continue along these lines.
If the Euro zone decides to apply a rate adjustment to curb its inflation, it could generate a liquidity problem, and if it does not do so, it could continue to increase inflation considerably, which could collaterally generate a devaluation of the currency, and it is possible that the euro could become a Carry-On-Trade currency for the large banking operators if it continues in this way. Japan and Australia are already clearly in a similar economic period to Europe with a totally different debt composition, more internal than external. But Europe has a problem of excessive public spending that must be curtailed, and this could also have a major impact on the DAX and the euro. The DAX movement could also be influenced with the US elections after the first quarter, and Ursula von der Leyen's self-appointed second term as president of the European Commission yesterday. You should pay attention to these developments.
From a technical point of view, the DAX has been in an uptrend since November, surpassing previous highs during the Christmas rally. After a correction in early January, coming out of its previous accumulation zone, it has climbed creating a new price accumulation zone, which was pierced on February 16, made support on the 20th and yesterday has returned to highs. Focusing on the RSI divergence we see that its trading strength has fallen to 59% versus the 78.13% it reached yesterday at 12 midnight European time. Although today we see a slight trend exhaustion, the ECB seems to be able to support this trend, which could take the index to the 18000 area in this quarter with probability, given that it is the upper zone of a channel of greater monthly progression, and must test that area in some way or another, this rebound that is forming today looks like a stop to take breath of a higher rise. Currently its all-time high price is at 17433.20, so it would not be unusual to see another strong engulfing move. Clearly the value building has been organized by the smart money that wants to collect interest thanks to the dividend of many companies listed in the German index.
Ion Jauregui - AT Analyst
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
In mid-morning, we will be watching for releases on consumer inflation and statements from European Central Bank (ECB) board member Isabel Schnabel. Schnabel has emphasized in her September statement the inflationary acceleration, attributing it to the pandemic cycle and the excessive increase in money demand as a need to be met, advocating output to combat recession and strong disinflation. Will the ECB's "quantitative money theory" follow suit? This could have a big impact on the euro zone. According to Schnabel: "inflation is not always everywhere a monetary phenomenon", and it is true that the ECB has expanded capital on a par with the US Fed. We will see if they continue along these lines.
If the Euro zone decides to apply a rate adjustment to curb its inflation, it could generate a liquidity problem, and if it does not do so, it could continue to increase inflation considerably, which could collaterally generate a devaluation of the currency, and it is possible that the euro could become a Carry-On-Trade currency for the large banking operators if it continues in this way. Japan and Australia are already clearly in a similar economic period to Europe with a totally different debt composition, more internal than external. But Europe has a problem of excessive public spending that must be curtailed, and this could also have a major impact on the DAX and the euro. The DAX movement could also be influenced with the US elections after the first quarter, and Ursula von der Leyen's self-appointed second term as president of the European Commission yesterday. You should pay attention to these developments.
From a technical point of view, the DAX has been in an uptrend since November, surpassing previous highs during the Christmas rally. After a correction in early January, coming out of its previous accumulation zone, it has climbed creating a new price accumulation zone, which was pierced on February 16, made support on the 20th and yesterday has returned to highs. Focusing on the RSI divergence we see that its trading strength has fallen to 59% versus the 78.13% it reached yesterday at 12 midnight European time. Although today we see a slight trend exhaustion, the ECB seems to be able to support this trend, which could take the index to the 18000 area in this quarter with probability, given that it is the upper zone of a channel of greater monthly progression, and must test that area in some way or another, this rebound that is forming today looks like a stop to take breath of a higher rise. Currently its all-time high price is at 17433.20, so it would not be unusual to see another strong engulfing move. Clearly the value building has been organized by the smart money that wants to collect interest thanks to the dividend of many companies listed in the German index.
Ion Jauregui - AT Analyst
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
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