Wall Street Falls as US Deploys Fighter Jets
US markets retreated on June 17 amid increasing chances of US involvement in the Iran-Israel war. The Dow fell 0.70%, while the Nasdaq Composite Index and the S&P 500 declined 0.91% and 0.84%, respectively.
Weaker-than-expected US retail sales added to the gloomy mood. Retail sales fell 0.9% month-on-month in May, following a 0.1% drop in April. Given private consumption contributes over 60% to US GDP, a sharp drop in consumer spending could revive recessionary fears.
US Jobless Claims and the Fed in Focus
Later in the European session on Wednesday, June 18, initial jobless claims will give insights into labor market conditions. Economists forecast initial jobless claims to fall from 248k (week ending June 7) to 245k (week ending June 14).
A sharper drop may dampen bets on a 2025 Fed rate cut, pressuring risk assets. However, a higher reading could boost Fed rate cut expectations, potentially lifting risk sentiment.
While the data will require consideration, the looming FOMC interest rate decision, economic projections, and press conference may limit major market moves. Economists expect the Fed to keep rates at 4.5% after the European market close. However, the economic projections and press conference will be crucial for near-term market trends.
A steady or lower unemployment outlook and upward revisions to GDP, inflation, and Fed Funds Rate projections may affect demand for risk assets. Conversely, more dovish projections could lift sentiment. The European markets will react to the Fed’s guidance on Thursday, June 19.
While Wednesday’s economic data and Fed guidance require consideration, the Iran-Israel conflict and trade developments may have a greater impact on market trends.
Outlook: Key Catalysts for the DAX
The DAX’s near-term price outlook depends on reports from the Middle East, trade developments, the Fed, and ECB signals.
Bullish Case: Easing EU-US trade tensions, de-escalation in the Middle East, and dovish FOMC projections could drive the DAX toward 24,000.
Bearish Case: US strikes on Iran, US tariff threats, or hawkish Fed guidance may drag the DAX toward 23,000.
At the time of writing on June 18, the DAX futures dropped 129 points, while the Nasdaq 100 mini gained 24 points, signaling a choppy mid-week session.
According to Polymarket, the chances of US military action against Iran by July stood at 73%, down from 90% on June 16.
Technical Setup Suggests Cautious Optimism
Despite Tuesday’s sell-off, the DAX remains above the 50-day and the 200-day Exponential Moving Averages (EMA), signaling underlying bullish momentum.
Upside Target: A breakout above 23,500 could support a move toward 23,750. A sustained move through 23,750 may pave the way to retesting 24,000.
Downside risk: A drop below the 50-day EMA exposes sub-23,000 levels.
The 14-day Relative Strength Index (RSI), at 44.24, suggests the DAX has room to drop below 23,000 without entering oversold territory (RSI< 30).
