Dax Index News: Hawkish Fed Projections Threaten DAX Support Levels – Analysis Today

Four straight losses for the DAX – How Will the DAX React to the Fed?

On Wednesday, December 18, the DAX slipped by 0.02%, following Tuesday’s 0.33% decline to close at 20,246. Significantly, the DAX extended its losing streak to four sessions as investors awaited the Fed interest rate decision.

Tech and Bank Stocks Advance

Commerzbank advanced by 1.37% as investors reacted to news of UniCredit raising its stake, while Deutsche Bank gained 0.71%.

Tech stocks also moved higher ahead of the Fed interest rate decision, with Infineon Technologies rallying 2.15%.

However, auto stocks had another mixed session. BMW and Mercedes Benz Group declined by 0.46% and 0.20%, respectively. By contrast, Porsche and Volkswagen posted gains on news of merger talks between Nissan Motor Corp. and Honda Motor Corp.

Eurozone Inflation Offers a Mixed Outlook

The Eurozone’s annual inflation rate increased from 2.0% in October to 2.2% in November, down from a preliminary 2.3%.

While surpassing the ECB’s 2% target, the downward revision provided market relief. Higher inflation remains a concern as it could delay ECB rate cuts, potentially driving borrowing costs higher. Higher borrowing costs could squeeze company profits.

Access our in-depth analysis of ECB policies and their impact on Eurozone markets.

German Consumer Sentiment Improves

German consumer confidence improved modestly heading into 2025. The GfK German Consumer Climate Indicator increased from -23.3 for December to -21.3 for January.

A pickup in consumer confidence could boost consumer spending, potentially bolstering the German economy. However, signals of a pickup in consumption could raise inflation concerns, potentially weighing on the DAX. Rising inflation could delay ECB rate cuts.

What Do the Experts Think About the Economic Outlook?

Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, pointed to political uncertainty in Germany and France as barriers to economic growth. He stated,

“Germany and France, the Eurozone’s two biggest economies, are currently in politically uncertain waters. This is preventing the necessary reforms from being implemented in the short term to boost growth again and is contributing to the ongoing weakness in both countries. However, this situation also entails upside risks. If future governments manage to chart a clear course, there could still be positive surprises next year.”

Will the US Federal Reserve’s Projections Sink the DAX

On Wednesday, the Fed cut interest rates by 25 basis points as widely anticipated. However, the FOMC Economic Projections signaled fewer Fed rate cuts in 2025. The Fed now projects the Fed Funds Rate to fall to 3.9% in 2025, up from September’s 3.4% forecast. The more hawkish outlook drove US Treasury yields higher, dampening demand for riskier assets.

Explore our comprehensive guide to central bank commentary and market reactions.

US Markets Sink as Fed Delivers a Cut and Hold Maneuver

US equity markets ended the Wednesday session with heavy losses as investors reacted to the Fed’s rate path outlook. The Nasdaq Composite Index tumbled 3.56%, with the S&P 500 sliding by 2.95%. Meanwhile, the Dow declined by 2.58%, extending its losing streak to ten sessions.

10-year Treasury yields jumped to a session high of 4.506%, exacerbating market declines.

Will US Jobless Claims Influence the DAX?

In Thursday’s US session, the market focus will shift to the US labor market. Economists expect initial jobless claims to fall from 242k (week ending December 7) to 230k (week ending December 14).

A larger-than-expected fall could signal a robust US economy, supporting the Fed’s more hawkish policy outlook. Positive US labor market data could drag the DAX below the crucial 20,000 level. Conversely, an unexpected spike in claims may suggest weaker consumer spending, potentially dampening inflationary pressures. A looser labor market may push the DAX toward 20,350.

Other stats include finalized Q3 GDP and Philly Fed Manufacturing data. However, these will likely play second fiddle to the labor market data.

Near-Term Outlook

The DAX’s near-term trends hinge on US labor market data and central bank commentary. Hawkish Fed chatter and cautious ECB signals could pull the DAX below 20,000. However, weak US labor market data could retrigger Fed rate cut bets, supporting a DAX move toward 20,500.

Tariff-related developments from the US also remain a key risk factor.

As of Thursday morning, futures pointed to a sharp sell-off. DAX futures were down 264 points, while the Nasdaq-mini futures declined by 28 points.

DAX Technical Indicators

Daily Chart

Despite a four-day losing streak, the DAX sits well above the 50-day and 200-day EMAs, affirming bullish price signals.

If the DAX returns to 20,350, it could signal a move toward Friday’s record high of 20,523 next. Furthermore, a breakout from 20,523 could bring the 20,750 mark into sight.

Central bank commentary and US labor market data will influence DAX trends.

Conversely, a DAX break below 20,000 could signal a fall toward the 19,675 support level and 50-day EMA.

With the 14-day RSI at 63.77, the DAX could climb above the record high of 20,523 before entering overbought territory.

Final Thoughts

The DAX remains highly sensitive to global drivers, including US economic data, US tariff concerns, and ECB forward guidance. Investors should expect further volatility following the Fed’s cut-and-hold move. Explore in-depth forecasts and actionable strategies here for navigating DAX volatility.