E German DAX Sets Eyes On Another Merkel Victory

The price action set up in the German DAX over the last week suggests that the markets are preparing for another Merkel victory. Political developments in Germany so far show that there is no strong opposition to the incumbent candidate.

Although the Social Democratic Party of Germany (SPD) led by Martin Schultz did manage to emerge a contender to the election race, it is quite clear that Angela Merkel has managed to lead by a significant distance.

Opinion polls show support for SPD is falling

Latest opinion polls from the DeutschlandTrend polls showed the CDU/CSU leading at 37% while the SPD was seen lagging behind at 21%. While support for the CDU/CSU was largely unchanged, the SPD fell by 2 percent since the previous poll.

Data from DW showed over the weekend that support for the SPD dropped especially after the recently held election debate that was telecast live on TV.

Despite the CDU/CSU lead, some other pollsters cautioned that only half the electorate had already decided and the remainder could potentially alter the outcome. As far as leadership goes, Angela Merkel is clearly in the lead although she was seen faring poorly when it came to the question of being in touch with the electorate's problems.

ECB remains on the sideline

After last week's ECB monetary policy meeting, the decision to put off the question on tapering was pushed into October. This was somewhat expected as the ECB prefers to wait for the outcome of the German elections before making any important policy decisions.

Considering that Germany has a strong influence and the fact that German officials have expressed their views that the ECB take a more normalized view on monetary policy, the ECB has managed to play that card very well.

Last week's ECB monetary policy meeting has helped to bring some clarity to the German DAX index. The main benchmark index will be the most vulnerable to the German elections.

German DAX aims for 12669

As previously forecast, the German DAX fell to the technical support level at 11962 - 11895. The DAX pushed lower on August 29 to test the support zone slightly below 11926 before reversing strongly off this level.

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