Talking Points
- The DAX 30 maintains a bearish bias below the April 3 afternoon intraday high of 9972.
- Price is also trading around critical levels, where the short-term downtrend meets the longer-term bullish trend, in place since February.
- A potential trigger for either a continuation of the short-term bearish trend or the end to it is today’s publication of the U.S. labor report.
Yesterday’s price bounce to the DAX 30 (CFD: GER30), induced by bargain hunters, did not hold. Instead this morning, the trend was still bearish below the April 3 afternoon intraday high of 9972.
The DAX 30 trend has been bearish following price reaching a high of 10,488 on April 2 and the April 3 afternoon intraday high of 9972 is one of the stronger swing highs of this downtrend.
According to classic technical analysis, when the trend is bearish, like it was at the time of writing, we should expect the formation of even lower highs and lower lows right up until the sequence of lower highs ends.
However, when a short-term trend like the one outlined above approaches the critical levels of a longer-term trend it should tend to weaken and the likelihood of even lower lows diminishes according to the fundamental principles of technical analysis.
Following the principle that the longer-term trend tends to hold better than the short-term trend, the DAX 30 finds itself in such a position today given that price was trading relativity near to its April monthly low of 9437.
The April 7 low is the most recent swing low of the bullish trend in place since the February 11 low of 5705 and for this trend to remain bullish price must not breach the April 7 low. On a failure of the low to hold, the bullish trend may end following the ending of the sequence of higher lows.
A potential trigger for either a continuation of the short-term bearish trend or the start of the end to it is today’s publication of the U.S. labor report. The markets expect an outcome of 200k from 215k as per a Bloomberg News survey. It is hard to know exactly how the market will react, but in general, a higher than expected outcome may support share prices, while a lower than expected outcome may lower the price of shares. For more on the U.S. labor report, please read Strong Non-Farm Payrolls (NFP) Report to Fuel EUR/USD Weakness.
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DAX 30 | CFD: 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
