The DAX index posted great gains yesterday as the bulls have made a stand and fought to regain control of the index and by the way things have moved over the last 24 hours, it seems to be a battle that has been won by the bulls as they managed to push the index through the crucial 12550 region and now begin to look higher. The gains in the technology sector shares helped to give it the boost that it needed and it now trades comfortably above 12600 and looks good for more.
DAX Bursts Higher
It has been a difficult time to trade the stock markets especially in Europe as they have been rocked by a lot of news and events which would normally have been very positive for the markets. But the market dynamics have changed over the last few months and that is the reason why we are seeing a different reaction from the markets to the same data. This is the reason why we are seeing gold prices fall when the dollar is strong and when it is weak as well.
This is the same reason why we are seeing the stock markets fall when the Eurozone presents good economic data when actually the markets should be rising. But with increased talk of tapering and with the ECB moving towards tapering on every piece of economic data that is positive for the Eurozone, it generates fears of pullout of funds from the markets and that has made the investors baulk at the idea of buying and investing more in the stock markets.
Over the last couple of days, we are hearing reports that say that there is still a long way before the ECB starts tapering and that has helped the DAX to recover during this period. At the same time, this move up should be taken with a pinch of salt as any talk of tapering is likely to bring the market under pressure again.
Looking ahead to the rest of the day, we have the Final CPI data from Germany which is likely to be watched very closely to see if the economy continues to be strong and robust, as it has been for quite some time. If the data comes in strong, we could see some choppy action as strong data is good for the economy but that would also mean that the Eurozone would move towards its inflation target in a quick manner which would mean that tapering would begin sooner. Interesting times !
This article was originally posted on FX Empire