DAX Index Today: 18,350 Hinges on Consumer Confidence and the ECB

Overview of the DAX Performance on Monday

The DAX advanced by 0.30% on Monday. Following a 0.15% gain on Friday, the DAX ended the Monday session at 18,261. Significantly, the DAX climbed to an all-time high of 18,286.

ECB Signals Deliver an All-Time High

ECB Chief Economist Philip Lane gave investors more reason to cheer on Monday. The ECB Chief Economist said the ECB was growing in confidence that wage growth was returning to appropriate levels, paving the way to interest rate cuts. Summarizing the ECB view on wage growth and inflation trends, Lane reportedly said,

“If this assessment is confirmed, then we will start looking more closely at reversing some of the rate increases we’ve made.”

There was no economic data for Germany or the Eurozone for investors to consider on Monday. However, German Institutes cut 2024 growth forecast for Germany. The revision had a limited impact on the DAX, with ECB rate cuts the focal point.

US Economic Indicators Support an H1 2024 Fed Rate Cut

On Monday, US economic data and Fed speeches aligned with expectations of an H1 2024 Fed rate cut.

The Chicago Fed National Activity Index increased from -0.54 to 0.05 in February. Meanwhile, the Dallas Fed Manufacturing Index fell from -11.3 to -14.4 in March. Significantly, new home sales unexpectedly slipped by 0.3% in February. Economists expected new home sales to increase by 3.0% after rising by 1.5% in January.

FOMC members Lisa Cook and Austan Goolsbee delivered speeches focusing on housing inflation. Austan Goolsbee highlighted the significance of persistent housing inflation but believed rental price pressures were abating. Lisa Cook called for caution on easing monetary policy, with house prices and rental leases needing attention.

The weaker-than-expected Dallas Fed Manufacturing Index and house price numbers influenced the appetite for riskier assets.

On Monday, the Nasdaq Composite Index and the S&P 500 declined by 0.27% and 0.21%, respectively. The Dow ended the session down 0.41%.

The Monday Market Movers

Despite a mixed session, auto stocks were among the front-runners. BMW rallied 2.04%, with Volkswagen and Mercedes Benz Group seeing gains of 1.10% and 0.30%, respectively. Porsche bucked the trend, declining by 0.65%.

Online retailer Zalando SE gained 1.87%, with Adidas rising by 1.85% on the prospects of a June ECB rate cut.

However, tech stocks extended losses from the Friday session. Infineon Technologies declined by 1.07%, with Sartorius AG sliding by 2.96%.

German Consumer Confidence and the ECB

On Tuesday, German consumer confidence numbers for April will garner investor interest. Economists forecast the GfK Consumer Confidence Indicator to increase from -29.0 to -27.8 for April.

Improving consumer confidence trends could signal a pickup in private consumption. Investors must consider the sub-components, including income expectations and spending intentions.

Beyond the numbers, ECB chatter also needs consideration. ECB Chief Economist Philip Lane is on the calendar to speak after giving a favorable view on wages on Monday.

US Economic Calendar: Core Durable Goods and Consumer Confidence

Later in the session, US core durable goods orders and consumer confidence numbers will draw investor interest. Unless there is an unexpected slide in core durable goods orders, the US consumer confidence numbers will likely have more impact.

Economists forecast the CB Consumer Confidence Index to hold steady at 106.7 in March. An unexpected rise in consumer confidence could signal a pickup in consumer spending. Upward trends in consumer spending could fuel demand-driven inflation and influence the Fed rate path.

Other stats include house price numbers. However, the numbers will likely play second fiddle to the core durable goods orders and consumer confidence figures.

Beyond the numbers, investors must monitor FOMC member commentary. Support for an H1 2024 Fed rate cut would drive buyer demand for DAX-listed stocks.

Short-term Forecast

Near-term trends for the DAX will hinge on inflation figures and central bank commentary. Increased support for H1 2024 ECB and Fed rate cuts remain tailwinds. However, a pickup in inflationary pressures could impact the respective rate paths and the appetite for riskier assets.

In the futures, the DAX was down 2 points, while the Nasdaq mini was up by 14 points.

DAX Technical Indicators

Daily Chart

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

A DAX break above the March 25 all-time high of 18,286 could give the bulls a run at the 18,350 handle.

German and US consumer confidence and central bank chatter need consideration.

Conversely, a drop below the 18,200 handle could signal a fall through the 18,100 handle.

The 14-day RSI at 82.96 shows the DAX in overbought territory. Selling pressure could intensify at the March 25 high of 18,286.

4-Hourly Chart

The DAX held above its 50-day and 200-day EMAs, affirming the bullish price signals.

A DAX break above the March 25 all-time high of 18,286 would support a move to the 18,350 handle.

However, a fall through the 18,200 handle could give the bears a run at the 50-day EMA.

The 14-period 4-hour RSI at 76.60 shows the DAX in overbought territory. Selling pressure could intensify at the all-time high of 18,286.