DAX Index Today: 17,800 in the Hands of German and US Inflation Reports

Overview of the DAX Performance on Wednesday

The DAX rose by 0.25% on Wednesday. Following a 0.76% gain on Tuesday, the DAX ended the session at 17,602. Significantly, the DAX reached an all-time high of 17,606. On Wednesday, the DAX extended the winning streak to six sessions.

Eurozone Economic Sentiment Dips in February

On Wednesday, economic sentiment figures for the Eurozone drew investor interest. Economic sentiment unexpectedly deteriorated in February. The Eurozone Economic Sentiment Index fell from 96.1 to 95.4. Economists forecast an increase to 96.7.

The softer-than-expected numbers supported investor bets on an April ECB rate cut.

ECB speakers delivered mixed signals on cutting interest rates. However, ECB Vice President Luis de Guindos said the ECB needs more data before deciding whether to cut rates, saying,

“If the data confirm what I was saying earlier, then the Governing Council of the European Central Bank will change the level of interest rates.”

US GDP and Fed Speakers Deliver Late Support

On Wednesday, US GDP numbers for Q4 were in focus. According to 2d estimates, the US economy expanded by 3.2% in Q4, down from a first estimate of 3.3%. The Q4 numbers continued to signal a soft landing, with the downward revision equity market-friendly. An upward revision may have further reduced bets on an H1 2024 Fed rate cut.

On Wednesday, the Nasdaq Composite Index fell by 0.55%. The Dow and the S&P 500 declined by 0.06% and 0.17%, respectively. Overnight Fed speeches contributed to the pullback, with FOMC members Bostic and Collins and Fed VP Chair John Williams uncommitted to an H1 2024 Fed rate cut.

The Wednesday Market Movers

On Wednesday, Airbus Group rallied 3.88%, with the auto stocks ending the session in positive territory.

Mercedes-Benz Group and Volkswagen saw gains of 1.72% and 1.45%, respectively. BMW and Porsche rose by 1.37% and 0.10%, respectively.

However, tech stocks struggled as investors fretted about upcoming inflation data from the euro area and the US.

Infineon Technologies and SAP ended the session down 4.04% and 1.53%, respectively.

German Retail Sales, Unemployment, and Inflation in Focus

On Thursday, the German economy will be in the spotlight. Retail sales and unemployment figures will draw investor interest early in the European session.

Economists forecast retail sales to increase by 0.5% month-on-month in January. In December, retail sales slid by 1.6%. Economists expect the German unemployment rate to remain at 5.8% in February despite forecasting unemployment to increase by 7k.

A rebound in retail sales could fuel demand-driven inflation. However, a deteriorating German labor market could impact consumer spending plans, the economy, and ECB plans to keep rates higher for longer.

Later in the European session, German inflation figures for February will likely have more impact. A higher German annual inflation rate could reduce bets on an April ECB rate cut. A higher-for-longer ECB rate path may pressure DAX-listed stocks. Economists forecast the German inflation rate to fall from 2.9% to 2.6%.

Beyond the data, investors must consider ECB member commentary and corporate earnings. MTU Aero and Air France are among the big names to release earnings on Thursday.

US Economic Calendar: US Personal Income and Outlays Report in Focus

Later in the Thursday session, US inflation figures for January warrant investor attention. Hotter-than-expected inflation numbers could curb bets on an H1 2024 Fed rate cut. A higher-for-longer Fed rate path may impact buyer demand for DAX-listed stocks.

Economists forecast the Core PCE Price Index to increase by 2.8% year-on-year in January. In February, the Core PCE Price Index rose by 2.9% year-on-year.

However, investors must also consider US personal income and spending that form part of the Personal Income and Outlays Report. Upward personal income and spending trends could fuel demand-driven inflation.

Other stats include weekly jobless claims, Chicago PMI, and pending home sales. The market focus will likely be on the Personal Income and Outlays Report.

With US inflation in focus, FOMC member speeches also need consideration. FOMC members Raphael Bostic and Austan Goolsbee are on the calendar to speak. Reaction to the inflation figures and views on interest rate cuts would influence market risk sentiment.

Short-term Forecast

Near-term trends for the DAX will likely hinge on the German and US inflation reports. Persistent inflationary pressures could reduce bets on ECB and Fed rate cuts and impact the DAX. Fed and ECB reactions to the reports also need consideration.

On Thursday, the DAX futures and the Nasdaq mini were up 5 and 21 points, respectively.

DAX Technical Indicators

Daily Chart

The DAX remained well above the 50-day and 200-day EMAs, confirming the bullish price signals.

A DAX break above the Wednesday all-time high of 17,606 would support a move toward the 17,800 handle.

German and US inflation numbers and central bank speeches need investor consideration.

A break below the 17,600 handle would give the bears a run at the 17,400 handle.

The 14-day RSI at 75.85 shows the DAX in overbought territory. Selling pressure could intensify at the ATH of 17,606.

4-Hourly Chart

The DAX sat well above the 50-day and 200-day EMAs, affirming the bullish price trends.

A DAX return to the 17,606 all-time high would give the bulls a run at the 17,800 handle.

However, a DAX drop below the 17,600 handle could bring the 17,400 handle into play.

The 14-period 4-hour RSI at 82.06 shows the DAX sitting in overbought territory. Selling pressure could intensify at the all-time high of 17,606.