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The DAX reacted to the data, dropping below 20,600 before a late rebound on ECB and Fed rate cut hopes. Wednesday’s US CPI Report and the ECB monetary policy meeting minutes resonated.
US Markets Retreat on Profit-Taking
US markets posted losses on Thursday, January 16, 2025, amid uncertainty about the Fed rate path. The Nasdaq Composite Index dropped by 0.89%, while the Dow and the S&P 500 fell 0.16% and 0.21%, respectively.
In the bond markets, 10-year US Treasury yields trended lower. However, the pullback failed to boost demand for riskier assets, highlighting market uncertainty. While US core inflation softened in December, concerns about Trump’s policies fueling inflation influenced risk sentiment.
US Housing Market in Focus
In Thursday’s US session, housing sector data could influence market sentiment. Economists consider the sector a barometer for the US economy.
Weaker-than-expected housing starts and building permits could indicate softening demand, potentially weighing on house prices. Falling house prices could affect consumer sentiment and spending. Conversely, upbeat figures could fuel bets on a more hawkish Fed rate path.
Traders should also track FOMC member commentary. Reactions to December’s US CPI Report and insights into the Fed rate path could impact market sentiment.
Near-Term Outlook
The DAX’s performance will hinge on inflation data, labor market trends, and central bank commentary. Persistent inflationary pressures could undermine rate cut optimism, pushing the index below 20,500. Conversely, softer economic data may drive the DAX toward 20,750.
External factors such as US tariff developments and potential stimulus measures from China also remain critical. Fresh policies from Beijing or reduced trade tensions could improve the outlook for German exporters.
As of Friday morning, futures pointed to a positive European open. DAX futures were up 31 points, while the Nasdaq 100 mini advanced by 48 points.
DAX Technical Indicators
Daily Chart
After three consecutive daily gains, the DAX sits well above the 50-day and 200-day Exponential Moving Averages (EMAs), affirming bullish price signals.
If the DAX returns to Thursday’s record high of 20,675, it could enable the bulls to target 20,750 next. A break above 20,750 may signal a move toward the 21,000 level.
Eurozone inflation data, tariff developments, and central bank commentary will influence DAX trends.
Conversely, a DAX drop below 20,500 may bring 20,000 and the 50-day EMA into sight.
With the 14-day Relative Strength Index (RSI) at 67.33, the DAX may climb to 20,675 before entering overbought territory (RSI higher than 70).
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