DAX Edges Higher on Tuesday: Just the Quiet Before the Fed Storm?
Tuesday at the German stock exchange was a classic rollercoaster ride. Following a "sharp" dip right at the opening bell, the bulls showed their staying power and developed a strong upward trend, which received additional momentum from the U.S. markets in the afternoon. Ultimately, the DAX rescued itself with a slight gain of 0.71%, closing at 23,730.92 points. However, the true test of fire arrives today: the Federal Reserve meeting on Wednesday evening is casting a long shadow.
Rate Decision & Dot Plot: Will the Rate Cut Fantasy Shatter Today?
The situation is particularly tense from two perspectives: until recently, the market firmly expected further interest rate cuts—an assumption that was abruptly halted by the escalation of the war in Iran and the subsequent oil price shock. According to the FedWatch tool, there is a 97.9% probability that rates will remain unchanged today in the 3.50% to 3.75% range.
Far more decisive, however, will be the release of the updated "Dot Plot." If central bankers revise their previous expectation of three rate cuts in 2026 downward, it would be a highly conservative and thus bearish signal. Such a restrictive tone could push the U.S. Dollar Index back above the 100 mark and promptly force the newly stabilized DAX back into its downward trend.
ZEW Shock: Pros See Dark Clouds on the Horizon
Confirmation that the air is getting thinner for the German economy came on Tuesday via the ZEW Index. With a dramatic plunge to -0.5 points (down from 58.3 in February), the indicator pulverized all forecasts. Even more concerning, the expectations for the Eurozone plummeted to -8.5 points. Institutional investors and analysts clearly view the energy price explosion and the uncertain situation in the Gulf as massive threats to the global economy. The message from the professionals is clear: the economic recovery is on a knife-edge.
Technical Summary: Watch Out for the "Slide"
Despite two positive days, the technical picture remains fragile. The DAX has yet to sustainably overcome last Friday's high. If the Fed disappoints this evening, a retest of the psychological 23,000 mark is a real threat. While the area around 23,350 points provided support recently, this level was "softened" by Monday's panic candle, meaning the price could simply slide through if buying volume fails to materialize.
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