DAX: Stock Market Rally Ahead of US Inflation & FOMC Meeting

German stock index is up 0.40% today awaiting U.S inflation data and the post FOMC meeting press conference.

The ECB’s rate cut last week had already been priced in by the market, and what followed was lateral volatility. The market was undecided as to whether more rate cuts are likely to follow in the next meetings.

While the NASDAQ set a new all-time high yesterday, this morning the DAX opened with renewed confidence. ECB President Lagarde’s comments made it clear that the central bank would only consider further cuts if backed by data.

So, we’ll have to wait and see, but the ECB’s monetary loosening anticipated the Fed on one of very few occasions. So, the market will be watching closely as to what the Fed chair Powell might say at the post meeting conference.

The ECB will certainly be concerned about cutting rates again ahead of a Fed move. Lower interest rates in the Eurozone would further weaken a very low euro. A low forex rate will create imported price pressure and would be contrary to the ECB’s objective.

Technical View

The day chart for the DAX shows a retracement from the all-time high of 18,928 has found support close to the 0.382 Fibonacci level of 18,343. Today’s candle is in line with that level, and we have the next resistance at the 0.236 Fibo level of 18,566.

To the downside we have support at 18,237 (crimson line) which was set by a double top in April. That level also coincides with the Ichimoku cloud, making it all the more significant. To the upside we would need a break above a previous high of 18,634 (blue line) set on April 1.

For now the bullish trend is still intact, and the current retracement has failed to break below the 0.382 Fibo level on 3 occasions.

ABOUT THE AUTHOR See More

Gino Bruno D'Alessio

Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.

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