DAX Index Today: Inflation Expectations and Fed Decisions in Focus

The Overview of the DAX Performance

On Friday (June 7), the DAX declined by 0.51%. Reversing a 0.41% gain from Thursday (June 6), the DAX closed the session at 18,557.

German Trade Data Signaled an Improving Demand Environment

The German economy was in the spotlight on Friday. Imports increased by 2.0% in April after rising by 0.5% in March. Furthermore, exports rose by 1.6% after an increase of 1.1% in March. Upward trends in imports and exports suggested an improving demand environment.

However, industrial production unexpectedly declined in April, falling by 0.1% after a 0.4% drop in March.

Nevertheless, the upbeat trade data failed to drive buyer demand for DAX-listed stocks. Trade data from China tested market risk sentiment, with weaker-than-expected imports suggesting an uncertain demand environment.

US Jobs Report Sent Mixed Signals

On Friday, the US Jobs Report impacted investor expectations of a September Fed rate cut. Nonfarm payrolls surged by 272k in May after rising by 165k in April. Average hourly earnings were up 4.1% year-on-year after increasing 4.0% in April. However, the US unemployment rate increased from 3.9% to 4.0% despite a falling participation rate.

On Friday, the global financial markets reacted to the numbers. 10-year US Treasury yields jumped to 4.435%, while gold spot (XAU/USD) tumbled by 3.45%

The US equity markets saw relatively modest losses as investors considered the mixed US Jobs Report. On Friday, the S&P 500 slipped by 0.11%. The Dow and the Nasdaq Composite Index fell by 0.22% and 0.23%, respectively.

The Friday Market Movers

On Friday, Vonovia tumbled 7.23% as investors reacted to a Morgan Stanley downgrade.

Auto stocks also suffered heavy losses. Daimler Truck Holding slid by 4.21%. Porsche and Mercedes Benz Group saw losses of 1.28% and 1.02%, respectively. Volkswagen fell by 0.75%, with BMW declining by 0.35%.

However, Infineon Technologies rallied 3.68%, with bank stocks also bucking the broader market trend. Commerzbank and Deutsche Bank ended the session up 1.90% and 0.21%, respectively.

Eurozone Inflation Expectations in Focus

On Monday (June 10), consumer inflation expectation figures for the Eurozone will warrant investor attention. Recent inflation numbers for Germany and the Eurozone tested investor expectations of a July ECB rate cut.

An upward trend in consumer inflation expectations could further affect the ECB interest rate trajectory. Economists forecast consumer inflation expectations to decline from 3.0% to 2.8% in April.

Beyond the numbers, investors should monitor ECB chatter. Views on inflation, the economy, and interest rates could move the dial.

US CPI Report and the Fed Interest Rate Decision Loom

After the US Jobs Report, the market focus will shift to the US CPI Report and FOMC interest rate decision.

On Wednesday, a hotter-than-expected US CPI Report could sink investor bets on a September Fed rate cut. The CPI Report will precede the FOMC interest rate decision, FOMC economic projections, and the FOMC press conference.

A more hawkish Fed interest rate trajectory could also affect buyer demand for riskier assets.

There are no US economic indicators for investors to consider on Monday. The lack of stats will leave government bond yields to influence buyer appetite for DAX-listed stocks.

Near-Term Outlook

Near-term trends for the DAX will hinge on the inflation numbers and the Fed. Hotter-than-expected inflation figures and a hawkish Fed could impact buyer demand for DAX-listed stocks. A reversal would bring sub-18,000 into play.

On the Futures markets, the DAX and the Nasdaq mini were down by 49 and 1 point, respectively.

DAX Technical Indicators

Daily Chart

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

A DAX return to the 18,650 level would support a move toward the 18,800 handle.

Investors should consider Eurozone consumer inflation expectation numbers and ECB chatter.

Conversely, a DAX break below the 50-day EMA could signal a fall toward 18,000.

The 14-day RSI at 51.77 indicates a return to the all-time high, 18,893, before entering overbought territory.

4-Hourly Chart

The DAX held below the 50-day EMA while holding above the 200-day EMA, sending bearish near-term but bullish longer-term price signals.

A DAX break above the 50-day EMA could give the bulls a run at the 18,650 handle. A return to 18,650 could signal a move toward 18,800.

However, a DAX drop below the 18,500 handle could bring the 200-day EMA into play.

The 14-period 4-hour RSI at 48.90 indicates a DAX fall to the 200-day EMA before entering oversold territory.