DAX Forecast: Gets Waxed on Tuesday

Now that we are focusing on fundamentals again, it looks as if the market is going to continue to see a lot of negativities. 

  • The DAX initially tried to reach above the €13,600 level before rolling over and selling off quite drastically.
  • Part of this may have been due to the CPI numbers coming out of the United States, showing that inflation is picking up, and therefore the Federal Reserve is going to continue to tighten monetary policy.
  • While at first blush, this does not look like it would affect Germany, the reality is that it keeps money tightened around the world as most international transactions are US dollar-denominated.

Keep in mind that Germany is a major exporter, therefore these things matter. Beyond that, we also must worry about the European situation overall, since there had been a little over-exuberance based on Russians losing some ground in Ukraine. This was not the end of the war, and it was ridiculous how the markets behaved over the last couple of days. Now that we are focusing on fundamentals again, it looks as if the market is going to continue to see a lot of negativities. After all, the market is unlikely to see European growth anytime soon, and this of course has a certain amount of negativity attached to it.

Looking to Fade Rallies

If we somehow broke above the €13,600 level, then it’s possible that we could see this market go higher, but I just would not hold my breath with that in mind. The market will more likely than not continue to see a lot of bad news coming out, so therefore I think every time this market starts to rally, you should be looking for signs of exhaustion that you can take advantage of to start shorting again. The €12,500 level underneath is a major support level, so I think you need to pay close attention to that as well. If we were to somehow break down below there, things could get ugly rather quickly. Either way, I think that it is difficult to imagine a scenario where we suddenly take off to the upside. The ECB may loosen monetary policy much quicker than the Fed, but I think that is still a bit of an open question at this point, and it certainly looks as if we have a while to go before that happens. Fading rallies continue to be the way I trade.

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Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.