The DAX 30 did not pullback as expected and instead it took out the November 11 high of 10,996. This is a classic breakout signal and the short-term trend is now bullish above Tuesday’s low of 10,864 with traders who had bought the break probably having stops just below this level.
As long as Tuesday’s low of 10,864 holds, the DAX may reach the August 13 high of 11,154. In the case that the 10,864 does not hold as a support then bullish traders will be trapped at the high and it would be natural to get a decline to the support zone of 10,677-10,750 (see chart below).
ECB On Autopilot, Jobless Claims And A Dovish Fed
Potential market moving data on tap in today’s session will be U.S. data in the afternoon. In the morning I would expect the ECB rate meeting minutes to confirm what we already know, namely that the ECB is ultra-dovish and more QE or cuts to the deposit rate are on tap. This makes U.S. jobless claims, the Philadelphia Fed. index and the leading indicator more interesting and potential market movers. We would expect that as long as the data sets printed are in line or better than what economists expect, then the bullish trend on the stock market will remain intact.
The FOMC minutes struck a slightly dovish tone in regards to rate hikes beyond the first one. The Fed is expected to be data reliant on and rates to be gradual. This means that data needs to develop as the Fed projects a rate hike justification.
Focusing on the latest Fed projections, the key variable to keep an eye on accordingly is headline PCE inflation, as it’s the only variable which the Fed expects to change a great deal over the next year. I would imagine that the Fed funds rate will be altered in line with higher inflation readings.
Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano
--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com
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