As the DAX index rises, I think it could slip to €15,000 soon

The German DAX index recovered on Monday even as European natural gas prices jumped and weak economic numbers. The index rose to €15,665 on Monday, higher than last week’s low of €15,482. Other European indices like the Dow Jones, FTSE MIB, and CAC 40 also rebounded.

Major concerns remain

The German DAX and other indices recovered on Monday as investors reacted to several important news. First, China’s central bank continued supporting the economy by implementing another interest rate cut. It slashed the one-year loan prime rate and left the 5-year rate unchanged. 

Analysts believe that these rate cuts will not have a positive impact on the Chinese economy. For one, most companies and individuals have embarked on a balance sheet improvement as they move to reduce their debt. This will impact key sectors of the economy like real estate and manufacturing.

China is an important country for German companies like BMW, Volkswagen, and BASF that do a lot of business in China. 

Meanwhile, European natural gas prices resumed their climb as concerns about LNG flows from Australia. The price of the Title Transfer Facility surged to €41 per megawatt hour, a few points below the highest level this month. It has jumped by more than 50% from this month’s low.

The soaring gas prices mean that European inflation is set to bounce back, putting pressure on the European Central Bank (ECB). Most analysts expect the ECB to either pause its rate hikes or implement one more this year.

Rising gas prices will also impact the country’s inflation, which has been slowing at a quick pace recently. Data by the statistics agency showed that the producer price index (PPI) dropped at the highest pace since 2009. The PPI dropped by 6%, bigger than the expected 5.1%.

The top movers in the DAX index were Adidas, Sartorius, Commerzbank, MTU Aero, Zalando, and Airbus Group. All these shares jumped by more than 1.50%. The top laggards in the index were Vonovia, Covestro, and Siemens Energy.

DAX index forecast

The DAX index formed a triple-top pattern at €16,347 between June and August. In price action analysis, this pattern is usually a bearish sign. Its neckline was at €15,426, close to its lowest level last week. 

The DAX index also retreated below the ascending trendline shown in green. This trendline connects the lowest levels since December last year. It has also crossed the 50-day moving average. 

Therefore, the index has more ingredients for continuing the bearish trend in the coming days. If this happens, the next level to watch will be at €15,000.