DAX Forecast: The German DAX Continues to Look Positive

• The German DAX rally during the early hours on Wednesday, as we continue to see a lot of support for stocks in the European Union.
• This will be a particularly interesting area to pay close attention to due to the fact that the European Central Bank has an interest rate decision on Thursday, and that obviously will have a major influence on risk appetite on the continent.
• After all, the DAX is by far the biggest index that we trade in Europe, as Germany is the driver of the European Union economy.

Exports

Keep in mind that a lot of what drives the DAX will be the exports part of the German economy, and therefore if the ECB does end up cutting rates, it spurs growth by, at least in theory, driving down the value of the euro, and thereby making German exports cheaper for various countries around the world. Whether or not that’s the case remains to be seen, but it certainly looks like the market is trying to sniff this out.

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The market initially fell to reach the 50-Day EMA on Tuesday only to turn around and bounce, and the Wednesday session was simply a continuation of that recovery. Ultimately, this is a market that I think goes looking to the €19,000 level, which was the recent swing high. If we can break above there, then it’s likely that the market could go looking to the €20,000 level over the longer term. With this being the case, the market is likely going to continue to see a lot of volatility, but I certainly think it will see a lot of strength in general.

Because of this, I like the idea of buying dips in the DAX, and I do think that most traders look at it through the same prism. If we get some type of significantly negative knee-jerk reaction during the ECB meeting, that could be the value that you are looking for and could be your entry point. On the other hand, we could just shoot straight up the year, depending on what the ECB has to say. Prepare for volatility over the next 24 hours.

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