German 30 (DAX) Index Gains on ECB Rate Cut and Fed Speculation

The DAX Index, a key benchmark for the German stock market, was trading at 18,632.00 on Friday, reflecting a 0.37% gain.

This recovery from recent lows signals renewed optimism among investors and marks positive sentiment in European equities, largely driven by expectations of improved economic conditions in the Eurozone. The DAX’s upward trajectory is influenced by several factors, including favorable European Central Bank (ECB) policies and Germany’s central role in the Eurozone economy.

ECB Rate Cut and Revised Forecast Boost Market Confidence

The Eurozone’s economic conditions have played a pivotal role in the DAX’s recent performance. On Thursday, German wholesale prices fell by 1.1% year-on-year for August, following a modest 0.1% drop in July.

Huge £430bn excess British savings could be the fuel the UK stock market needs, especially with current cheap valuations!
The FTSE 100 has lagged behind the German DAX. Time for the English to catch up.#StockMarket https://t.co/xvXxXiUOqD

— Market Observer (@Market0bserver8) September 13, 2024

This decline underscored weaker demand and fueled speculation about further monetary easing from the ECB. In response, the ECB cut its key interest rate by 25 basis points to 3.50%, aligning with investor expectations. Additionally, the central bank revised its 2024 growth forecast down to 0.8%, from the previous 0.9%.

The ECB’s dovish policy stance has been a catalyst for the DAX, boosting investor sentiment despite mixed economic data from the Eurozone. Although Eurozone industrial production declined by 0.3% in July, the ECB’s rate cut helped to offset some of the negative impact, signaling a more supportive environment for economic growth. Speculation about a possible further rate cut in December has also contributed to the DAX’s positive momentum, enhancing investor confidence in German stocks.

Weaker US Dollar and Fed Rate Cut Speculation Drive Global Markets

On the global front, US economic data and speculation surrounding the Federal Reserve’s upcoming monetary policy decisions have also influenced the DAX. The US Producer Price Index (PPI) for August came in weaker than expected, with a year-over-year increase of 1.7%, slightly below the forecast of 1.8%.

This has led to increased speculation that the Federal Reserve may cut interest rates by 50 basis points, with the probability of such a move rising to 43%. The prospect of a Fed rate cut has weakened the US Dollar, boosting global markets, including the DAX.

A weaker US Dollar generally supports European exports by making them more competitive internationally, thus providing a tailwind for European indices like the DAX. The combination of weaker inflationary pressure in the US and the anticipation of a dovish Federal Reserve policy has helped reinforce positive sentiment in global markets, including Germany’s DAX Index.

One can be sure that #Americans will buy #European and #German goods like hell before the November #US #PresidentialElection2024 due to the risk of high #import #tariffs which could be imposed by Trump 2.0.
Until Jan. '25 don't worry about #German #exports. $eur $usd #dax40 $dax

— Polarizer Trading (@PolarizerTrader) September 13, 2024

DAX Index Technical Outlook

The DAX Index continues its recovery, trading at 18,632.63, up 0.08% for the session. The index is finding short-term support near the 50-day Exponential Moving Average (EMA) at 18,496.69, signaling a cautious upward trend. Immediate resistance lies at 18,680.46, a critical level to watch. A break above this resistance could push the DAX towards its next target of 18,833.14, opening the door for further bullish momentum.

The Relative Strength Index (RSI) currently stands at 57.18, indicating a neutral-to-bullish sentiment, with room for further gains. However, should the DAX fail to breach the 18,680.46 resistance, it may retrace to support levels at 18,509.18 and 18,341.96.

Traders are advised to keep a close eye on the RSI and the 50-day EMA for potential direction changes, as these indicators will likely dictate the next move in the DAX Index.

In conclusion, the DAX’s recent rally has been driven by supportive monetary policy from the ECB and speculation of a Fed rate cut, coupled with a weaker US Dollar. These factors are expected to continue influencing the market, with the potential for further gains if key resistance levels are breached.