The DAX recovered a bit, in line with the rest of the stock markets in Europe, but it did not provide too many opportunities for the day traders and the range traders as the market opened up with a gap over the weekend and then stayed within a tight range all through the day, giving very little opportunities for trading. As we have been mentioning over the last few forecasts, we expect this consolidation and ranging to continue in the short term.
DAX Tries But Fails to Rally
The markets in Europe were generally stronger as there were reports that said that the ECB would not be discussing anything on tapering in the July meeting. This has led to a belief that the ECB would not be working on tapering during the summer and any action in this regard is likely to come about only after a few months. This was a slight relief to the stock markets and this was the main reason for them to be strong for the day yesterday. But this effect is likely to wear off quite soon and we should see the DAX coming under pressure.
The break through the 12550 has been crucial and as we have mentioned, it only means that the control has passed on from the bulls to the bears and that is the reason why we are seeing some shallow bounces and larger corrections in the DAX. This is likely to be the trend in the short and medium term as Germany has its own set of risks and uncertainties to deal with, in the coming weeks, not least being the Germany elections that are to be held in September. With this risk looming, we believe that not many investors would like to commit themselves in a large manner in the DAX index and so we should see the consolidation continue.
Looking ahead to the rest of the day, we do not have any major economic data from Germany today and so we expect consolidation to happen with a bearish bias as the index would continue to be under pressure with the region between 12500-12550 acting as a ceiling for now.
This article was originally posted on FX Empire