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The Market Movers
It was a bearish Tuesday session for the auto sector. Continental AG slid by 3.24%, with Volkswagen and Porsche seeing losses of 1.47% and 1.98%, respectively. BMW and Mercedes-Benz Group also struggled, falling by 0.45% and 0.65%, respectively.
It was also a bearish session for the banks. Commerzbank and Deutsche Bank ended the day down 0.39% and 0.84%, respectively.
The Day Ahead for the DAX
There are no economic indicators from the euro area to draw interest today. The lack of economic indicators will leave central banks in the spotlight.
A non-committal ECB Chief Economist Philip Lane vis-a-vis a September move leaves ECB Executive Board members to move the dial. On Monday, Lane acknowledged the ECB would likely raise rates in July while saying it was too early to talk about a September move that will be data-dependent.
While ECB Executive Board members have lined up behind ECB President Lagarde to deliver a likely hike in July, the jury is out on what to expect in September, with cracks in the euro area economy likely to test the doves.
With no economic indicators to consider, investors should track ECB commentary throughout the day. ECB Executive Board member Isabel Schnabel is on the calendar to speak today. Hawkish September policy chatter would influence.
Looking ahead to the US session, it is another quiet day on the US economic calendar. There are no US economic indicators to influence. The lack of economic indicators will leave Fed Chair Powell and FOMC member commentary to move the dial.
Fed Chair Powell will give the first day of testimony. While the FOMC press conference was only last week, investors should look for any deviation from the FOMC press conference script.
The anticipation of Fed Chair Powell’s testimony on interest rate expectations was telling. According to the CME FedWatch Tool, the probability of a 25-basis point July rate hike stood at 76.9% on Tuesday, up from 74.4% on Friday. The chances of the Fed lifting the Fed Funds Rate to 5.75% in September increased from 8.9% to 12.3%.
DAX Technical Indicators
Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The DAX sat above the 50-day EMA (16,104). The 50-day EMA pulled further away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.
A hold above the 50-day EMA (16,104) would support a breakout from R1 (16,174) to give the bulls a run at R2 (16,236) and 16,250. However, a fall through the 50-day EMA (16,104) would signal a fall through S1 ($16,059) to bring S2 (16,006) into view. A fall through the 50-day EMA (16,104) would send a bearish signal.
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