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The DAX awaits ECB’s move

After the DAX hit its temporary all-time high at 12,950 points about a month ago, we are now facing the defining market phase. 

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What initially started as a short-term upward trend consolidation (May-June 2017) has now become a threat to the middle-term upward trend seen since the beginning of 2016. In particular, the strong euro seems currently to have a negative effect on the performance of the Germany’s leading index since a strong euro affects German exports. Furthermore, the ECB plays yet again a key role. Even though the today‘s rate decision is not expected to bring a rate rise, the markets still wait in suspense for the press conference with Mario Draghi to find out more about the future moves in the central bank’s policy. There is a danger here that tightening monetary policy will result in an exodus of capital from the DAX.

The DAX is currently testing the upward trend seen since the beginning of 2016. At the same time, the 2015 high can be found at 12,400 points, which highlights the importance of the current trading range. Should both barriers on the daily chart be broken based on the closing price, the outlook for future developments in the DAX will be further clouded. On the way towards 12,000 points the double-bottom at 12,310 points would be the short-term objective in that case. On the upward side, we would have to first see a move up above 12,490/12,530 which would open the way towards 12,700.

It is expected that the today‘s speech and the subsequent Q&A session with Mario Draghi will provide the necessary impetus initiating a momentous move. Act with caution and hedge your exposure.

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