DAX Index Fundamental Analysis – week of May 21, 2018

The DAX index had a pretty strong week where the most important point of note was the fact that the index managed to close the week above the 13000 region which should give a lot of hope for the bulls in the upcoming week. This has been a good turn around of sorts for the bulls over the last couple of week after having struggled to surmount the range for several weeks.

DAX Index Through 13000

During that period, the index had been locked in a tight range as there was increasing anticipation that the QE program would be tapered and ended eventually by the end of this year. But the weak incoming data from the Eurozone has put paid to those hopes and the ECB also did not sound very hawkish the last time. This has made it clear that the QE program is unlikely to go away anytime soon and this has helped the index higher.

Once the range broke, it became clear that the index was likely to move higher in a slow and steady manner and this is what we have been seeing over the last couple of weeks. But the index is now in a strong resistance region and hence we are seeing the rise being slowed down though the uptrend has not been stopped as yet. The weak data from the Eurozone and the choppiness of the data has only fuelled the move higher and this is also one of the main reasons for the uptrend to continue.

Looking ahead to the coming week, the focus of the markets is likely to be more on the FOMC and the UK data as the amount of data from he Eurozone and Germany is pretty much limited. We do have the German business climate and GDP data but that does not have much of an impact on the DAX unless the data deviates a lot from the expected range. So, we expect some tight consolidation and ranging in the coming week with an upside bias which is likely to keep the index buoyed and also help the uptrend to continue in the medium term.