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Meanwhile, expectations of fiscal reforms boosted sentiment toward the German economy. Germany’s ZEW Economic Sentiment Index surged from 26 in February to 51.6 in March, reflecting improving market confidence.
US Housing Data Signals Long-Term Demand Weakness
On Tuesday, March 18, US Housing Starts rebounded 11.2% month-on-month in February, recovering from an 11.5% slide in January. However, Building Permits fell 1.2% in February, marking a continued downward trend that suggests weaker long-term demand.
Housing market trends are important as economists consider the sector a barometer for the US economy. A cooling housing market may affect consumer sentiment, spending, and GDP growth.
US Markets Dip as Focus Shifts to the Fed
US equity markets posted losses on Tuesday, March 18, snapping a two-day winning streak. Concerns over the economic outlook and uncertainty surrounding the Fed’s policy stance weighed on risk assets.
The Nasdaq Composite Index and the S&P 500 declined by 1.71% and 1.07%, respectively, while the Dow dropped 0.62%.
A CNBC Fed Survey highlighted the growing risk of a US recession on Tuesday. According to the March survey, the chances of a recession rose to 36%, up from 23% in January. Respondents attributed the gloomier outlook to US tariffs.
Fed Rate Decision and Economic Projections in Focus
While fiscal reforms and trade developments remain key market drivers, the Fed’s policy outlook also needs consideration.
On Wednesday, March 19, investors will monitor:
- FOMC Interest Rate Decision – The Fed is expected to hold rates at 4.5%.
- Economic Projections – Revisions to GDP growth, inflation, and rate expectations.
- Powell’s Press Conference – Insights into the Fed’s stance on inflation and recession risks.
A dovish Fed could boost demand for risk assets, while a hawkish stance may pressure rate-sensitive stocks.
Near-Term Outlook: Key Drivers
The DAX’s near-term outlook hinges on:
- German fiscal policy: Friday’s Upper House vote will be crucial for DAX trends.
- Tariff developments: US-EU and US-China tariff disputes remain in focus.
- Fed policy outlook: Economic projections and rate decisions will drive volatility.
Potential DAX Scenarios:
- Bullish Case: Easing trade tensions, fiscal stimulus, and dovish central bank policies could drive the DAX toward 24,000.
- Bearish Case: Fiscal stimulus resistance, escalating trade disputes, or a hawkish Fed could drag the DAX toward 22,750.
As of Wednesday morning, the DAX futures were down 10 points, while the Nasdaq 100 mini gained 39 points, signaling a choppy mid-week session.
DAX Technical Indicators
Daily Chart:
The DAX remains well above the 50-day and 200-day Exponential Moving Averages (EMAs), suggesting strong bullish momentum. However, tariff and fiscal-driven volatility pose potential short-term downside risks.
A breakout above Tuesday’s record high of 23,476 would support a move toward 23,750. A move to 23,750 may enable the bulls to target 24,000.
Conversely, if the DAX breaks below 23,350, it may test support at 23,000. A fall through 23,000 would bring 22,500 into sight.
With the RSI at 61.50, the DAX remains below overbought levels (above 70), signaling room for a climb above its all-time high of 23,476 toward 23,750.
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