The DAX40 Futures (EUREX: FDAX) bulls marched forward with a purpose for the majority of the week. Riding on the back of risk-on sentiment, the DAX40 Futures nudged 3.33% higher week-to-date.

Today, traders will be glued to critical data from Europe and the U.S., with the release of inflation readings in both regions. High inflation led to the pumping up of interest rates in 2022 and weighed down on equity valuations as borrowing costs surged while growth prospects were hindered. The DAX40 Futures will likely point lower if inflationary pressures and interest rate trends persist.

Technical

The DAX40 Futures have sustained an uptrend for most of the fortnight, forming support and resistance at the 15005 and 15711 levels, respectively. The bullish momentum was confirmed with a breakout above a prior resistance level at the 15463 level. With price trading at the upper end, traders will be pivoting the 15711 level to define overall market sentiment.

If bullish traders plan to keep their foot on the pedal, a high volume breakout above the 15711 level could be a sign of further bullish momentum to come. Bulls will likely look to the 15821 level based on the 23.6% Fibonacci Extension if the index moves higher.

Alternatively, bearish traders could follow support and resistance dynamics with a probable reversal from the 15711 level. If bears outdo bulls and look to sell high, price action could reverse, with bears aiming for the next intermediate support level at the 15462 level.

Summary

The Euro Area inflation and U.S. PCE Index, the Federal Reserve preferred inflation gauge, will likely inject high volatility into the market. If inflation points up in the Euro Area, it could reinforce the European Central Bank’s aggressive stance, with markets pricing in another 50 basis point rate hike. Across the Atlantic, a higher PCE Index could stir up stronger expectations of further rate hikes by the Federal Reserve and instil downside risk for the DAX40 Futures.

Sources: Reuters, TradingView