DAX recovers after Powell speech

Asian stocks rose on Wednesday following Fed Chair Powell's comments suggesting upcoming US rate cuts. The yen remained near 38-year lows against the dollar, raising intervention concerns. Powell's remarks about disinflation and the need for more data before rate cuts sent Treasury yields lower and weakened the dollar.

Traders now anticipate a 69% chance of a Fed rate cut in September. Chinese stocks fell slightly, while Hong Kong's Hang Seng rose, following an eight-month low for the Caixin services PMI. Today sees a huge volume of US data, including the ADP payroll report and Fed minutes, while initial jobless claims are released today due to tomorrow's holiday.

The S&P 500 closed above 5500 and the Nasdaq 100 finished above 20,000 on Tuesday, hitting new record highs.

Let’s look at the German leading index DAX:

Gain from last 3 trading days have vanished on Tuesday due to too much risk for investors. However, after Powel’s speech, giving hints of rate cuts in this year, the Index recovered to where it left off.

Still inflation in the eurozone is strong but with a slight decline in June to 2.5% from 2.6% in May.

General volatility persists due to geopolitical uncertainty especially in France where the Parliamentary vote will be held on Sunday.

Chart technical Analysis

The previous high of the running consolidation pattern is around the 18,460 level.

The price broke through yesterday’s resistance around the 18,260 level and so closed the gap to yesterdays afternoon selloff, with yesterday’s high also falling in line with the 20EMA Bollinger band which is in line with the last 20 trading days of consolidation.

The DAX now needs to break through and remain the 50EMA level around the 18,400 level to make sure the price stays afloat. If this is not possible then a testing to the downside up to the June lows with a bottom of 17,950 might be in the cards.

Events to watch in the afternoon are US Initial Jobless Claims as well as the US ISM Non-Manufacturing PMI (Jun) and at 16:15 the ECB President Lagarde will give comments about the current interest situation.

Also note that today’s US trading session will close early at 1:00PM Eastern Time and for eligible options at 1:15 pm Eastern Time. Tomorrows Thursday, July 4, 2024, the US banking, and trading sessions will also remain closed due to celebrating the Independence Day and will resume to normal hours on Friday.

I wish you a continual successful trading day