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DAX and CAC 40 Technical Outlook: Rally Viewed as Likely to Fail Soon

DAX and CAC 40 Technical Outlook: Rally Viewed as Likely to Fail Soon

DAX/CAC Technical Highlights:

  • DAX reclaimed broken support, but rally still not viewed as bullish
  • CAC 40 has trend-line resistance ahead to watch on further strength
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DAX and CAC 40 Technical Outlook: Rally Viewed as Likely to Fail Soon

The DAX has rallied strongly so far this week, taking back broken support from March and July. This doesn’t change the bias upward broadly speaking, but will perhaps help bring in more upside first before another round of selling hits.

The DAX is currently trading between the 12600 area and support in the mid-12400s. A break higher could get price into open space with no strong resistance to speak of, but that doesn’t mean we won’t see a sudden turn lower without first meeting resistance.

What will firm up a bearish bias is a drop back below support in the mid-12400s. If we do it on a weekly basis (i.e. this week), it could count as a failed attempt to reclaim support on a weekly basis. This would set the market up for weakness from there.

The first level of support clocks in at 11862. The next swing point on a continuation of the bear market is down at 11450. However, until we see a cascade in selling with buyers finally give up on hope the sell-off is viewed to continue with it difficult to say where a low may form. We may see some type of capitulation here in the coming weeks given the general structure and point in trend we are with global stocks.

DAX Daily Chart

Histogram  Description automatically generated with medium confidence

DAX Chart by TradingView

The CAC is trading around resistance in the 6k area, with a trend-line from the summer high lying not too far ahead. A turn down could find some initial support in the 5700s, but the low at 5628 is the big level to watch. Broad outlook is of course very similar to the DAX.

CAC Daily Chart

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CAC 40 Chart by TradingView

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.