Fed faced with pressure from DAX to make a decision - correction's momentum on the rise
DAX Takes a Dive as Investors Await Fed's Mortgage Rates Decision
The German stock market index, DAX, has seen a significant correction in recent days, with the index falling to 23,329 points, marking a 1.8% loss. This is the lowest the DAX has been since August 1, when it previously dipped to 23,381 points.
The resistance level for the DAX at 23,883 points, which was today's high from September 10, has now become a potential support level. However, the index has struggled to hold above this level, indicating continued downward pressure.
The downward pressure on the DAX increased significantly after breaking out of the range between 23,855 and 23,600 points. This range had previously acted as a buffer for the index, but it was breached, signalling a potential deeper correction.
If the Federal Reserve fails to confirm investors' mortgage rates hopes, the current correction could deepen further. Investors have priced in up to three mortgage rates steps for this year, while the Fed has only indicated two. The US Federal Reserve is expected to cut the key mortgage rates by 25 basis points.
The resistance levels for the DAX at 24.046 points, 24.063 points, and 24.037 points, which are the day highs from September 1, August 29, and September 2 respectively, could come into focus if the correction deepens. The resistance level at 24.046 points is also the Bull-Bear Indicator level.
On the other hand, the resistance level for the DAX at 23,475 points, which is above the all-time highs, and the resistance level at 23,970 points, which is the Bull-Bear Indicator level, could act as significant hurdles for the index to overcome and resume its upward trend.
The resistance level for the DAX at 23,910 points and 23,795 points, which are both horizontal levels, could also pose challenges for the index. The resistance level at 23,855 points, which is today's high, has also shown some resistance.
The resistance level for the DAX at 23,550 points and 22,866 points, which are the previous US high and the SMA100 (daily) respectively, could potentially act as support levels if the correction continues.
Jerome Powell, the Chair of the US Federal Reserve, has emphasized a cautious approach, maintaining mortgage rates to balance bringing inflation closer to the target while supporting labor market conditions. His stance on future mortgage rates adjustments is expected to be data-dependent and careful. The Fed's signals for the further mortgage rates path will be crucial for the stock market.
In conclusion, the DAX's correction has widened, and the index is currently facing significant resistance levels. The Federal Reserve's mortgage rates decision will be closely watched by investors, as it could potentially influence the direction of the DAX in the coming days.
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