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Title: The DAX Rises to New Highs, But Will Inflation Allow Further Gains?

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The German DAX again renews its all-time highs after rising a further 1.58% on Thursday. In the month of February, the GER40 has risen 3.33% so far.
The German DAX is being supported by the rise in the global market’s risk appetite as well as the expectations of a weaker monetary policy in Europe.
The ECB announces a plan to repay 50% of the interest families paid during the years 2021-2023.
French economic data beat expectations but the German economy continues to weaken and show signs of a possible recession.

GER40 – Investor Turn Their Attention To Next Week’s EU Inflation Release!

The price of the leading German Index is trading slightly lower during this morning’s Asian and European session, however, in the longer term, technical indicators continue to point to further upward price action. One of the main factors supporting the GER40 is the global investor sentiment which continues to grow as economies remain resilient to restrictive policies and analysts expect regulators to cut interest rates within a matter of months. The European Central Bank has already made public a new scheme which will compensate families on lower incomes whose mortgage payments have risen over the past two years.

Joachim Nagel, head of the German Federal Bank and one of the ECB’s most hawkish members, is due to speak later this afternoon. Investors will be scrutinizing all comments made. Previously, Mr Nagel has stated it is too early to consider interest rate cuts. However, will the ECB members take a more dovish tone after German inflation fell below 3.00% for the first time in years? Germany, France and Spain will release their inflation data next Thursday, and Italy on Friday. If the inflation reading is lower than expectations, the GER40 can again potentially rise.

Another reason why economists believe the ECB may opt to cut interest rates soon is the latest PMI data. Both German and UK data read lower than expectations which indicates weaker growth in the upcoming months. Only France was able to beat the PMI expectations but continues to remain below the critical 50.00 mark.

The day’s downward price movement is only forming a retracement in the medium-term price action. The downward price movement read 0.45% before slightly losing momentum. Regardless of the downward price movement, the 75-Bar EMA and RSI continue to point towards buyers maintaining control of the market. When monitoring order flow, the price is trading below the VWAP, but above previous significant levels of the volume profile. If the Delta statistics again rise, order flow is also likely to point towards a continued upward price movement. Investors will monitor how the price action changes once the US session opens.

Based on Fibonacci, if the price rises above 17,414, buy signals will again materialize. However, if the price declines below 17,367, the price can continue to retrace to 17,117 to 17,252. In the meantime, the main price driver will be comments from global central banks and Thursday’s inflation reading for Europe. Some analysts advise the key factor is for inflation to decline, not necessarily to read lower than expectations.

The 5 Individual Stocks Within the DAX With the Strongest Influence!

Siemens AG – +2.88% in 2024
SAP SE – +22.89% in 2024
Allianz SE – +0.65%
Airbus SE – +4.23%
Deutsche Telekom AG – (0.93%)

Michalis Efthymiou

Market Analyst

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