DAX Index Recovery Meets Massive Headwinds – Time to Buy?

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  • DAX index has encountered massive resistance over the last few days.
  • ECB hiked rates last week.
  • Russia slashed Europe gas supplies this week.

The DAX index retraced on Tuesday as market players continued to ponder corporate earnings, hawkishness by the European Central Bank and Federal Reserve, and the gas crisis in Europe. The index plummeted towards the 13,200-pound lows, slightly beneath this week’s high at 13,368 pounds.

Germany Stocks See Pressure

The DAX index experiences massive pressure as market participants contemplate the prevailing Europe turmoil. The renowned Italian Prime Minister Mario Draghi resigned last week, meaning the nation will conduct a new election soon.

Moreover, there are worries about the future of energy in Europe. That comes after Gazprom of Russia revealed reducing gas supplies through its Nord Stream pipeline. It trimmed deliveries to around 20%, and there’s a probability it will suspend shipments in the upcoming months.

Germany stares at a crisis as the nation relies on energy from Russia. Therefore, the country might introduce gas rationing during the up-and-coming months, impacting companies’ profitability. Will Germany firms be competitive without Russia’s cheap gas?

Moreover, DAX reacted to the European Central Bank’s decision last week. ECB hiked rates after refraining from the move for over a decade. Also, the bank confirmed continued rate hikes in the upcoming months. German stocks have historically underperformed when ECB adopts a hawkish stance.

The index awaits the coming Fed Reserve rate decision. Experts anticipate a 0.75% rate increase, citing surging inflation. DAX’s top performers on Tuesday were Deutsche Boerse, MTU Aero, Beirsdorf, Symrise, and Siemens Healthineers. These share increased by over 1%. Meanwhile, the worst performance came from Zalando, Daimler, Adidas, and HelloFresh.

DAX Index Prediction

The 4hr chart indicated that the DAX index created a double-bottom setup at 12,451 pounds. That is a bullish signal in the price analysis. Meanwhile, the index met resistance at 13,368 pounds, 29 June’s highest mark.

The Relative Strength Index moved beneath the overbought region as the DAX climbed past 25 and 50 MAs. Moreover, it has created a bullish flag setup. Thus, the index can record an upside break, with bulls targeting the crucial zone at 14,000 pounds.

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