DAX Bouncing Off Lows

The DAX is attempting to recover today after gapping lower at the open, extending losses from yesterday. Following a move to fresh 2023 highs late last week, the index has since slipped lower. A more hawkish outlook from the ECB next week has turned sentiment bearish with traders eyeing further rate hikes near-term. The ECB hiked rates by a further .25% last week along with signalling that further rate increases would likely be needed, including as early as next month. In line with warnings over potential further tightening from the Fed, higher yields have been hurting stock prices recently and look likely to continue to do so while the central bank backdrop remains on the hawkish side.

Mixed News for DAX

Looking ahead today, the market is awaiting speeches from key ECB policymakers which hold the potential to drive further downside should comments fall on the hawkish side. The DAX has also come under pressure after shares in German chemical maker Lanxess tanked following the lowering of the group’s profit outlook for Q2. However, there is some good news today with German PPI seen falling to its lowest level since early 2021, in a sign that inflation is moderating further.

Technical Views

DAX

The latest failure around the 16278.35 level holds the potential to create a double top scenario. With bearish divergence seen in momentum studies into the second peak, we might see a deeper mover lower here from the index. To the downside, the bull channel lows and the 15642.76 level support are the key demand areas to watch. A break of this area will be firmly bearish, opening the way for a move down to 15163.41 next.