What’s next? – DAX 07.06.17

DAX

The DAX index retreated in early hours on Wednesday, falling more than one percent to trade around the 12,670 level as market participants take a cautious positioning ahead of key economic events later this week.

In the previous session, the German index extended gains and hovered above the 12,850 at first hours of the session, although it began a downward correction.

Despite the recent drawdown, momentum remains in the bullish side on daily basis, while the hourly chart shows some moderate oversold levels. This drop can be related to the upcoming monetary meeting of the European Central Bank on Thursday.

While the EU regulator is not expected to change its current interest rates or quantitative easing program, expectations for a new pro-normalization rhetoric have been building up in markets. Analysts have suggested that a break above 12,881 could renew the upside trend.

The DAX index gives access to top-tier German companies. Among those, Bayer, Siemens, and SAP are top holdings, with 9.58%, 9.56%, and 8.71% allocation respectively.

In recent days, the index has been supported by upbeat data such as the German manufacturing and services PMI, which grew to 59.5 and 55.4 in May, beating analysts forecasts.

Traders will also keep an eye on Britain’s parliamentary elections, which could provide some extra gains for the German stock index.