KEY POINTS:
- DAX touches a new all-time high
- Breakout of the 2025 range in focus
- Positive risk sentiment is providing support amid Fed’s easing, neutral ECB
FUNDAMENTAL
OVERVIEW
The German DAX touched a
new all-time high today but couldn’t sustain the breakout of the 2025 range. There
was strong optimism in the first half of 2025 due to the German fiscal stimulus,
but the enthusiasm eventually faded and the index remained stuck in a big
range.
The German economy is
expected to gradually pick up in 2026 according to the German central bank, but
the real risk this year is going to be the ECB. In fact, despite the
expectations of the European Central Bank to keep interest rates steady
throughout 2026, there is a risk flagged by ECB’s Schnabel that we could see
rate hikes earlier than expected, although this might be a risk for the second
half of the year.
As long as the ECB keeps its
neutral stance and the Fed maintains its dovish reaction function, the positive
risk sentiment should continue to support the upside for the stock market.
DAX TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On
the daily chart, we can see that
the DAX (CFD contract) probed above the upper
bound of the range reaching a new all-time high but eventually gave back the
gains as the buyers couldn’t sustained the breakout. The sellers will likely
step in here with a defined risk above the resistance to position for a drop
back into the lower bound of the range. The buyers, on the other hand, will look
for a break higher to increase the bullish bets into new all-time highs.
DAX TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On
the 4 hour chart, we can see that
we have an upward trendline defining the bullish momentum. If we get a pullback
into the trendline, we can expect the buyers to lean on it with a defined risk
below it to position for a rally into new all-time highs with a better risk to
reward setup. The sellers, on the other hand, will look for a break lower to
increase the bearish bets into the lower bound of the range around the 23000
level.
DAX TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can
see that we have another minor trendline defining the bullish momentum on this timeframe.
The buyers might split their orders in half in case the minor trendline gets
breached and the price drops to the major one. The sellers, on the other hand,
will keep on piling in at every break lower to target the lower bound of the
range. Tomorrow, we get the inflation
reports for the major European economies. On Wednesday, we have the Eurozone
Flash CPI, the US ADP, the US ISM Services PMI and the US Job Openings data. On
Thursday, we get the latest US Jobless Claims figures
