DAX Trades Within Consolidation Range
23 May 2022
German DAX index traded firmly higher ahead of the US session on Monday, trying to stay above the critical 14,000 EUR level.
Sentiment in the markets turned optimistic, but primarily due to the absence of new bearish news over the weekend. As a result, equities jumped while the USD lost ground and weakened notably, pushing commodities higher.
"We are likely to be able to exit negative rates by the end of Q3," European Central Banks (ECB) President Christine Lagarde said on Monday. However, she also noted that it is premature at this stage to discuss the ECB's balance sheet policies.
German economy remains strong
According to the Ifo Institute's monthly poll released on Monday, the Business Climate Index climbed to 93 in May from 91.9 in April, above the market forecast of 91.4.
In addition, the Current Assessment Index increased from 97.3 to 99.5, while the Expectations Index rose from 86.8 to 86.9.
Ifo analyst Klaus Wohlrabe commented on the statistics, saying that there were no signs of a recession in Germany at the time and that the German economy remained robust.
Breaking from consolidation zone
It appears that the DAX index might break out from its two-month consolidation range as bulls are attacking the descending trend line of that range, currently near 14,150 EUR. Once the index closes above that channel, it could spur further bullish momentum.
The next resistance is expected near 14,280 EUR, followed by a likely drift higher toward 14,500 EUR.
Alternatively, if sentiment deteriorates again, we could see a drop to last week's lows near 13,675 EUR. However, as long as the index trades above May lows of 13,280 EUR, the outlook seems slightly optimistic.