It was clearly a bearish week for the DAX index as it was with most of the stock markets around the world. The prime driver of this move was the geopolitical tension between North Korea and the US which dominated the headlines through the course of last week. The tension has still not abated and this means that the market is likely to continue to react to any escalation in the tension and the traders must be wary of that in the coming week.
DAX Index Crashes Lower
For the DAX index, the writing was clearly on the wall as the index had been looking bearish for quite sometime now and we had also been mentioning the same in our forecasts as well. The continued good economic data from the Eurozone and the statements from the ECB over the last month or so made it clear that tapering of the QE was just around the corner and that the tapering talk could being as early as October. This had led to the belief that there would not be any more pumping of funds into the stock markets in the future and this has led to a correction in all major stock indices in Europe, with the DAX being no exception.
This had kept the DAX pretty weak and it only needed a small driver to push it off the cliff which came in the form of threats and counter threats from North Korea and the US over the last week. This pushed the DAX lower through 12200 and then through 12000 and it closed the week just below this mark. It should encourage the bulls that they managed to have a bullish day on Friday on the back of stabilisation in the markets and also due to the weak CPI data which was liked by the stock indices in the US.
Looking ahead to the coming week, it is likely to be a weak of choppy action in the stock markets as the geopolitics and the economic data are likely to push and pull the markets in different directions. As far as Germany is concerned, we have the GDP and PPI data that will be released in the coming week but as we have noticed, the economic data does not seem to have much of an effect on the DAX nowadays as it is driven more by global factors.
This article was originally posted on FX Empire
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