Bottom line: DAX long term outlook remains bearish against 13800 resistance. The indice is approaching resistance around 11500/600 levels and a bearish bounce is expected as counter trend seems to be close to completing.
Fundamental Outlook:
DAX including most other markets rallied yesterday as if the escalating tensions between US-China has already been priced in last week. DAX futures managed to rally close to +2.5%, closing around 11400 mark. We expect risk-sentiment to continue its trend over the week as SPX500 and Dow Jones futures also hit 3000 and 25000 levels. The opening of economies post COVID-19 lock down, hopes of potential drug/vaccine development are some factors driving equities higher.
WTI Crude prices continued its rising streak and closed above $34.00 mark yesterday. On the other side Brent Crude prices also rallied and closed around $36.00. The production cut announced last month by the OPEC+ members and rising demand over the re-opening of economies remain major factors for the rise in Oil prices.
Gold prices continue to consolidate after hitting $1765 levels over the last week. The FOMC is expected to continue its Dovish Tone in the upcoming monetary policy meeting on June 10, and it remains to be seen how Gold prices react to the low interest rate regime by the Fed.
Technical Analysis:
DAX is soon approaching a major resistance zone around 11500/600 levels. DAX futures are trading just above 11500 mark as we write this article and is expected to rally towards 10600 before facing resistance. The indice is extremely close to resuming lower below 8000 mark, going forward. Immediate price resistance is seen around 12300 levels.
DAX counter trend rally that had begun since 7950 lows in March 2020 is approaching fibonacci 0.618 retracement of the entire previous drop (13800 to 7950) around 11600. High probability remains for a bearish reaction and for the down trend to resume. Bears are expected to remain in control until DAX stay below 13800, going forward.
Traders might be preparing to initiate fresh short positions around 11500/600 mark with a protective stop above 12500 levels. The projected targets are pointing below 8000 levels. It is just a matter of time for a bearish reversal to materialize.
Prepared by
Harsh Japee, Technical Analyst.
DAX Chart
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