DAX 40 index sits and waits ahead of the ECB and Fed decisions

The DAX index has been flat this month as concerns about the Chinese and European economies continue. The index was trading at €16,000, where it has been in the past few days. It remains about 2.37% below the highest level this year. This performance mirrors that of other European stocks like the CAC 40 and the IBEX.

Fed and ECB decisions ahead

The German DAX 40 index has done well this year, helped by the ongoing recovery of the European and Chinese economies. Most importantly, the significant contraction of the European economy that analysts were expecting did not materialise.

This recovery has been helped by the relatively low natural gas prices. After peaking in 2022, European natural gas prices have plunged to the lowest level in about two years. This trend is supporting both European consumers and companies.

Recently, however, the DAX index has wavered as signs emerge that the Chinese economy is not doing well. As I wrote here, data published this month showed that the Chinese exports and imports plunged in May. 

Chinese numbers are important for the German DAX and other European markets because of the vast amount of goods that the country buys. For example, companies like BMW, VW, and Daimler counts China as their biggest markets.

There will be three important catalysts for the DAX 40 index this week. First, the US will publish its inflation data on Tuesday. These are crucial numbers because they have an impact on the Federal Reserve.

Second, the Fed will deliver its interest rate decision on Wednesday. A dovish tone will be a good thing for German stocks because of the close correlation with American peers. 

Third, the European Central Bank (ECB) will deliver its decision on Thursday. Economists expect that the bank will decide to hike rates by another 0.25%.

Finally, China will deliver its industrial production, retail sales, and jobs numbers later this week. These numbers will provide more information about the state of the Chinese economy.

DAX index forecast

DAX chart by TradingView

The German DAX index moved sideways recently. This could change this week depending on the important monetary policy news. On the 4H chart, the index is consolidating at the 25-period and 50-period exponential moving averages (EMA).

The price is above the important support level at €15,701, the highest point on March 7th. Therefore, the outlook of the index is neutral with a bullish bias. This rebound will be confirmed if the Fed decides to pause its rate hikes.