This looked somewhat better at first: until shortly before the start of trading on the X-Dax, the DAX was tipped to 13280 points, but then the U. S. futures fell slightly and the Euro, which had risen above the 1,22 level, clearly dampened the mood further.
And the problem of the DAX with the euro is not getting any smaller, but rather bigger! The ECB’s protocol, which stated that it would revise monetary policy early 2018 (called “guidance” by the central bank), set the course for the foreign exchange market to react. Now the market will test the ECB and try to push the single currency higher – and the question is what Draghi & Co can do about it, since it is clear that the ECB is running out of ammunition so slowly, because although there will be no interest rate hike in the foreseeable future, it is precisely the ultra-axial monetary policy that will be increasingly scaled back in the future.
The market knows what one member of the ECB, who was not named by name, made clear at the last meeting: the Eurozone is in a full economic upswing, while monetary policy is still pretending to be in the crisis mode of the financial crisis. Fundamentally, recovery in France after Macron’s election is an extremely important factor, and the recovery in countries such as Spain and Portugal cannot be ignored by the ECB any longer. On Friday, the designated successor of Draghi, Bundesbank chief Weidmann, tried to catch the horses again – but after a short dip, the euro continued to rise.
This shows that verbal interventions by ECB central bankers no longer seem to be enough! And then there is the weakness of the dollar, because markets expect the US debt to rise – and until Friday midnight Washington local time, the US debt ceiling has to be raised, and there are some signs of a government shutdown!
Without the US markets, the Dax must now find a direction – and the momentum on the top is difficult to see if the euro should not fall – which does not seem very likely at the moment!
(Click to enlarge the chart!)
On the upper side, the Dax would have to overcome the 13300 mark, then the 13340 zone, finally the very hard resistance 13425. On the other hand, a break of 13140 points would be clearly negative.
Today’s trading day without Wall Street’s constant euphoria will therefore become an important litmus test for the Dax!