DAX Index: GER30 Bottoming Signs Emerge Ahead of ECB Decision

Summary:
• The DAX index has bounced back in the past few days as investors buy the dip ahead of the upcoming interest rate decision by the ECB

The DAX index has bounced back in the past few days as investors buy the dip ahead of the upcoming interest rate decision by the European Central Bank (ECB). As a result, the blue-chip index of the biggest companies in Germany rose to €13,308, which was the highest level since June 28th of this year. It has risen by more than 7.26% from its lowest level this year.

GER30 bounces back

The DAX index has joined other global indices in staging a strong rally even as American companies continue warning about the soaring inflation. Companies like JP Morgan, Johnson & Johnson, and Lockheed Martin reported weak results and warned that inflation was a major challenge. In addition, Apple warned that it will slow its hiring.

The next key catalyst for the DAX 40 index is the upcoming interest rate decision by the ECB. While Europe is facing significant challenges, analysts believe that the bank will decide to deliver its first interest rate hike in more than a decade. Indeed, analysts believe the bank will hike rates by about 50 basis points. 

The ongoing energy crisis will also hit German stocks in the region. The European Commission has asked its members to dramatically reduce their energy consumption. In addition, there are worries that Vladimir Putin will completely end his gas supplies to the region. This week, the EU and Azerbaijan reached a deal that will see the latter double the amount of gas it sends to Europe.

The past week’s top performing DAX index constituents are firms like Zalando, Siemens, Volkswagen, Daimler, and Adidas. All these shares have jumped by more than 10% in the past week. On the other hand, the top laggards in the index are Merck, Deutsche Boerse, Fresenius, and Sartorius, among others.

DAX index forecast

The four-hour chart shows that the DAX index has made a strong recovery in the past few days. This recovery happened after the index moved to the YTD low of €12,450. In addition, it has managed to move above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) is approaching the overbought level at 70. 

Therefore, the index will likely keep rising as buyers target the next key resistance at €14,000. A drop below the support at €12,900 will invalidate the bullish view. This view is in line with the highly accurate Investing Cube’s S&R Indicator.