Bottom line: In the long run, the bearish outlook remains intact until DAX stays below 13800. The recent counter trend rally should find resistance around 10550/750 region.
Fundamental Outlook:
DAX has continued its counter trend rally and managed to close higher by over 2% on Thursday. It would be interesting to see how markets open today, but the tone is still expected to be bullish. DAX is expected to follow through higher towards 10700/800 levels before facing resistance.
Most Global Indices have risen over 20% since their respective March lows as Central Banks have collectively made efforts to boost sentiment. However, the decline in major indices might be far from over as countries face extended lockdown due to COVID-19 pandemic.
Gold prices surge to new yearly highs as the metal hits $1725 on Monday. It is seen to be trading around $1714 at this point in writing and potential remains to test $1750.
Oil prices still remain under pressure and closed around 3.5% lower yesterday at 22.36. The fundamental effects over the OPEC meet and the end to price war between Russia and Saudi Arabia are yet to be seen. A production cut of over 10 million barrels per day was agreed upon last week.
Technical Analysis:
DAX might be inching closer towards a potential resistance zone around 10550/750 levels. The counter trend rally that had begun since March 16, 2020 might be close to terminating. A resumption of downtrend here, would drag DAX prices to fresh lows below 8000 levels.
The fibonacci 0.618 retracement of the recent drop between 12200 and 8250 is seen at 10738 levels. We can expect a bearish reaction there and the ongoing down trend could resume. Hourly chart support is around 10200 levels and a break lower would confirm.
Most traders might be willing to initiate short positions around 10730/50 with protective stop above 12300 and potential target below 8000 levels.
Prepared by
Harsh Japee, Technical Analyst.
DAX Chart
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