DAX Eyes the IMF/World Bank Meetings and the US CPI Report

It was a bullish Tuesday session. The DAX rose by 0.37% to end the day at 15,655.

Economic indicators from China delivered support for riskier assets, with inflationary pressures easing in March.

China’s annual inflation rate softened from 1.0% to 0.7% in March, with consumer prices falling by 0.3% month-on-month. Economists forecast an annual inflation rate of 1.0% and for inflation to rise by 0.2% in March.

While the CPI numbers were down, the producer price index figures further eased fears of a near-term build-up in inflationary pressure. The producer price index declined by 2.5% year-over-year versus a 1.4% fall in February. Economists forecast a 2.5% decline.

However, economic data from the euro area and warnings from the IMF pegged the DAX back from a more meaningful breakout.

On Tuesday, the IMF set the tone for the week, warning of the risks of a new crisis that could impact global growth. The IMF also called on central banks to continue to tighten monetary policy to tame inflation.

On Tuesday, the NASDAQ Composite Index fell by 0.43%, while the Dow Jones gained a modest 0.29%. The S&P 500 ended the day flat.

Euro Area Economic Indicators Disappoint

On Tuesday, euro area retail sales figures reflected the impact of inflation on consumer spending. Retail sales fell by 0.8% across the euro area, reversing a 0.8% increase in January. Economists forecast a 0.8% decline.

While the numbers were disappointing, the fall in retail sales is unlikely to derail ECB plans to continue tightening monetary policy.

There were no US economic indicators to influence during the afternoon session, leaving IMF comments to resonate. According to the CEM FedWatch Tool, the probability of a 25-basis point interest rate hike stood at 66.9%, down from 72.2% on Monday.

The Market Movers

It was a bullish Tuesday for the auto sector. BMW rallied by 2.33%, with Continental and Volkswagen seeing gains of 1.69% and 1.65%, respectively. Mercedes-Benz Group and Porsche rose by 1.56% and 1.42%, respectively.

It was also a bullish session for the banks. Commerzbank and Deutsche Bank ended the day with gains of 0.41% and 1.15%, respectively.

The Day Ahead for the DAX

It is a quiet day ahead on the economic calendar. There are no economic indicators from the euro area to influence.

The lack of stats will leave the US economic calendar and chatter from the IMF/World Bank Spring Meetings to influence.

An unexpected acceleration in US inflation could fuel bets of a more aggressive interest rate trajectory to test buyer sentiment. After the European closing bell, the FMOC meeting minutes will also be out.

DAX Technical Indicators

The DAX has to move through the 15,669 pivot to target the First Major Resistance Level (R1) at 15,712 and the Tuesday high of 15,726. A return to $15,700 would send a bullish signal. However, the DAX would need US stats and central bank commentary to support a bullish session.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $15,769. The Third Major Resistance Level (R3) sits at 15,869.

A fall through the pivot would bring the First Major Support Level (S1) at 15,612 into play. However, barring a flight to safety, the DAX should avoid sub-$15,600 and the Second Major Support Level (S2) at 15,569. The Third Major Support Level (S3) sits at 15,469.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The DAX sits above the 50-day EMA (15,416). The 50-day EMA pulled further away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the Major Support Levels and the 50-day EMA (15,416) would support a breakout from R1 (15,712) to give the bulls a run at R2 (15,769). However, a risk-off event would deliver a fall through S1 (15,612) to bring S2 (15,569) into view. A fall through the 50-day (15,416) would signal a near-term bullish trend reversal.

The DAX Futures Sees Green

Looking at the futures markets, DAX was up 3 points, with the NASDAQ mini rising by 6.75. The Dow mini was up by 27 points.

For a look at the economic events, check out our economic calendar.