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US Markets Drop Amid Tariff Uncertainty
Despite solid data, US equity markets came under renewed selling pressure on Thursday, March 27. Trump’s tariff policies continued to fuel concerns about the economic outlook and the Fed’s policy stance. The Nasdaq Composite Index dropped 0.53%, while the Dow and the S&P 500 fell 0.37% and 0.33%, respectively.
Key Market Focus: US Personal Income and Outlays
Turning to the US session on Friday, March 28, the all-important Personal Income and Outlays Report will influence market risk sentiment.
Economists expect the Core PCE Price Index to rise 2.7% year-on-year in February, up from 2.6% in January.
A higher inflation print combined with tariff pressures could dampen bets on a June Fed rate cut. A more hawkish Fed stance may impact demand for risk assets. Higher borrowing costs may impact corporate earnings.
Conversely, a softer inflation reading could boost expectations of multiple Fed rate cuts, driving demand for rate-sensitive stocks.
While inflation trends are key, personal income and spending trends will give insights into the inflation outlook. Higher income and spending could suggest demand-driven inflation, another factor for traders to consider.
Traders should also closely monitor tariff-related headlines and FOMC commentary on inflation and monetary policy.
Near-Term Outlook: Key Drivers
The DAX’s direction will depend on several key drivers: German unemployment data, the US Personal Income and Outlays Report, tariff-related news, and central bank commentary.
Potential DAX Scenarios:
- Bullish Case: Easing trade tensions, softer US inflation, or dovish central bank forward guidance may drive the DAX toward its record high of 23,476.
- Bearish Case: An escalation in tariff rhetoric, higher US inflation, or more hawkish central bank stances could drag the DAX below 22,500.
As of Friday morning, the DAX futures were down 50 points, while the Nasdaq 100 mini dropped 22 points, pointing to a choppy session.
DAX Technical Indicators
Daily Chart:
Despite recent losses, the DAX remains above the 50-day and 200-day Exponential Moving Averages (EMAs), signaling strong bullish momentum. However, tariff-driven volatility remains a near-term downside risk.
- Upside Target: A return to 22,750 could support a breakout above 23,000 to target the record high of 23,476.
- Downside risk: A drop below 22,500 may signal a fall toward the 50-day EMA. A break below the 50-day EMA could enable the bears to target 22,000.
With the RSI at 49.64, the DAX remains above oversold levels (below 30), leaving room for a drop to 22,000.
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