DAX Continues to Print New All-Time Highs Despite Weak Data
German Industrial Production saw an unexpected decline for a second month in a row. Investor sentiment remains bullish on ECB policy action.
- MoM Industrial Production -1%, forecasts at +1.2%
- Dovish ECB sentiment and global stock rally keeping bulls alive
- Price action showing a new bullish momentum
The DAX hit a new all-time high again today, as the index extends into a 5-day continuous rally. The market is riding the U.S. stock market highs and dovish central bank sentiment from both side of the Atlantic.
Weak Economic Data Not a Cause for Concern
The DAX has repeatedly shaken off various releases of poor economic data, the latest is Industrial Production MoM.
Forecasts showed that analysts expected an expansion of 1.2%, while the data showed a contraction of 1.3%. Today’s data is the second monthly decline in a row, and shows the economy is still not clear of recession.
The decline was mostly due to falls in the energy and automotive sectors. Which showed declines of 8.9% and 1.9% respectively.
The economy ministry said, “This means that the industrial economy is still in a downturn,” in a statement.
Dovish ECB Sentiment
The market is still being propped up by an increasing dovish sentiment for ECB policy. Various members of the central bank have stated that there is room for rate cuts and that they would extend into Q1 2025.
Inflations has fallen to the 2% target and expectations are also inline, more importantly GDP growth is mild. In the case of the German economy, the country is almost certain to experience a second consecutive year of contraction.
But forward expectations are helping the DAX reach new highs, together with a weak euro. The common currency is at 2-year lows, which is helping German companies reliant on exports.
Price Action
The chart above for the DAX shows a new bullish momentum after the market retraced to the Ichimoku cloud.
The market created a support on the cloud at 19,000 (red line), the 19 handle acting as a psychological barrier. After breaking the previous ATH, the market surged forward.
The momentum measured by the RSI is strong, above the level of 70, which the indicator didn’t manage to breach in previous ATHs.
However, we are getting close to the upside limits for the distance of price from the cloud. Previous ATHs reached a distance between 1,100 and 1,500 points before retracing down.
The market is currently 1,100 points above the cloud, there is still room for further highs. But expect that won’t take the market further than 20,900. We will also get close to the 21 handle, another psychological barrier.
DAX Live Chart
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