DAX Index Spikes 1.50% Ahead of Key Earnings

Summary:

The DAX index has jumped by more than 1.50% as traders wait for key earnings from Vonovia, Linde, and Munich Re. Can these gains hold?

The DAX index is up by more than 1.50%, continuing the rally that started on Monday. It is trading at €12,435, which is the highest it has been since October, 26.

German stocks are rallying as investors look forward to normalised relations between Germany and the United States. With Joe Biden close to the presidency, there is a high probability that the two countries will avoid tariffs that Trump had promised.

The DAX index is also rallying because of the gridlock in Washington as Republicans lead the senate. The implication is that most of what Trump has implemented in terms of low interest rates will remain.

At the same time, with the Supreme Court having a majority, investors hope that some of Biden’s executive orders will be successful if challenged. All these will be beneficial to companies in the DAX, which have large businesses in the United States.

Meanwhile, investors are also focused on earnings from key companies in the German DAX. Among the key companies that will release their earnings are Munich Re, Linde, and Vonovia. Indeed, Munich Re’s share price is the biggest laggard in the DAX, having fallen by more than 2.30%. Linde has also fallen by more than 0.30%.

On the other hand, the best-performing companies in the DAX are Infineon, SAP, Deutsche Boerse, and Volkswagen. All these shares are up by more than 1.50%.

DAX index technical outlook

On the four-hour chart, we see that the German DAX have been rising since October 30 when it fell to €11,315. The index has moved above the 25-day and 50-day exponential moving averages. Also, it has moved above the 50% Fibonacci retracement level. (This retracement connects the highest level on September 3 and the lowest level this month.)

This price action sends a signal that bulls have prevailed, which will see the index continue rallying as they aim for the next resistance at €12,600. For this trade, the support will be at the 38.2% Fibonacci retracement level at €12,135.