DAX Trades Higher In line with Global Stock Markets

Talking Points

• The DAX is now trading above yesterday’s high, making the short-term trend bullish
• Biggest risk to this fragile uptrend is any upcoming action by the Chinese central bank

The DAX is now trading above yesterday’s high, which makes the short-term trend bullish and price may reach the January 5 high of 10,397 in the coming days ahead.

The DAX trend is supported by other stock markets, which all look very similar, and at this stage stock exchanges in the U.K., U.S. and Japan are also higher. This supports the idea of a multiday rally as stock markets claw back some of last week’s losses. From a technical perspective, the DAX needs to break the January 8 low of 9726 in order to turn bearish.

Losing Money Trading? This Might Be Why

The biggest risk to this fragile uptrend is any upcoming action taken by the Chinese central bank. For now it has left the fixing of the USDCNY near past levels, something that has lowered market stress. The Chinese stock market, the CSI 300, has not yet stabilised and isapproximately 4.3% from its August low. A break to this level would most likely increase losses to the Chinese stock market, something that should weigh on the DAX if it were to happen. However, this is not my main scenario, and I would instead expect some stabilisation as the index is currently 18.6% away from its December high. This tilts the risk reward ratio in favour of the Bulls.

There are no interesting data reports on tap until this evening when the Fed publishes its latest Beige Book. See our economic calendar.

DAX 30 | FXCM: GER30

Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com

Contact and follow Alejandro on Twitter: @AlexFX00

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