DAX Index Hits 3-Day Losing Streak As Eurozone Concerns Mount

Summary:

Concerns over the health of the Eurozone economy and Barclays' negative outlook for the EU send the DAX Index lower for a third day.

The DAX Index made it three straight days of losses after dropping 0.55% this Thursday on continuing negative sentiment around Eurozone fundamentals. With evidence of slowing economic growth amid a jumbo rate hike by the European Central Bank in the first week of the month, investors are getting warier of the stock market as EU policymakers battle soaring inflation from sky-high energy costs.

UK investment bank Barclays has predicted a recession in Europe for H1 2023, with a contraction in the GDP by 1% in 2023. Earlier in the session, a fall in trade balance from -25.4 billion euros to -34.0 billion euros (consensus of -20.0 billion) was one of the triggers for a continuation of the selloff on the DAX index. The DAX index has now lost the week’s earlier gains and now trails 1.01% after the three-day losing streak.

On Friday, the DAX Index will face a test from a slew of EU inflation reports. The monthly/annual consumer price indices and the Harmonized Index of Consumer Prices (HICP) will all be released tomorrow, providing what could be a volatile end to the week for the DAX index.

DAX Index Forecast

The decline looks set to make the 12903 support level the next target for the bears. If the downtrending move breaks down this support, 12625 (1 July and 1 September 2022 lows) becomes the next available downside target.

Additional targets to the south are found at the 12398 price mark (5 July low) and the 12033 support, the site of the 27 October 2020 low. 11713 (29 October 2020 high) only becomes available if the two prior supports before then are degraded by further price deterioration.

Conversely, a break of 13091 (28 July and 9 September highs) clears the route toward 13383 (26 August high). Above this level, 13652 (13 June and 19 August 2022 highs) forms an additional northbound target.

If the bulls uncap this barrier, they will have clear skies to aim for 14128 (18 March low and 10 June high). 14401 and 14600 (21 April and 8 June highs) are additional targets to the north that become viable if the advance continues.