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The DAX May Stall At Current Levels

The DAX May Stall At Current Levels

Alejandro Zambrano, Market Analyst

Talking Points

  • The DAX 30 (FXCM: GER30) is approaching the strong resistance level and bullish target of 9931, and a break to this level is needed to keep the bullish momentum at current levels.
  • A lower than expected U.S. ISM Non-Manufacturing reading may cause traders to exit their bullish positions and could be the start of the end to the bullish trend. While a stronger than expected reading may trigger a break to the important January 27 high of 9931.

Stay informed - download the DailyFX Analysts' 1Q forecasts for the Dollar, Euro, Pound, Equities and Gold

The DAX 30 (FXCM: GER30) is approaching the strong resistance level and bullish target of 9931. Strong support can be found at last Friday’s low of 9336. With the index being relativity close to resistance and far away from support, the risk/reward ratio is bad and this may cause the DAX 30 to halt its gains.

If this occurs, the DAX may return to Tuesday’s breakout of 9597, some traders will see this as a buying opportunity given that the trend is bullish above Friday’s low of 9336.

The alternative bullish scenario is a break to the important 9931 high, which may open the door for gains to the next swing-high in line, which is the January 13 high of 10,164.

Bearish Traders Waiting For A Break To Friday’s Low.

With momentum being bullish, traders who expect a decline in the weeks ahead will probably wait for the momentum to soften. For now the trend-defining level is Friday’s low of 9336, but if the DAX consolidates at current levels over the next few days, the trend-defining level may be raised, providing an entry at higher levels.

Today’s main event is the U.S. ISM Non-Manufacturing index and this proves important as it gives us hints about the vigor of the U.S. service sector. A Bloomberg news poll survey anticipates an outcome of 53.1 from 53.5 in January.

A lower than expected reading may cause traders to exit their bullish positions and could be the start of the end to the bullish trend, while a stronger than expected reading may trigger a break to the important January 27 high of 9931.

DAX 30 | FXCM: GER30

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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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