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DAX Short-term Look: On the Edge of a Wedge

DAX Short-term Look: On the Edge of a Wedge

2016-07-29 08:39:00
Paul Robinson, Strategist
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What’s inside:

  • Confluence of resistance looms
  • Rising wedge visible on short-term chart
  • BoJ disappoints, but fails to spark significant market volatility

Yesterday, we went over a confluence of resistance levels which lie in the 10300/400 vicinity, as trend-lines and horizontal price levels collide. But we also noted, we need to see the market reverse from these levels before we become interested from the short-side, preferably taking out the prior day low and snapping the short-term uptrend. Price levels only matter if the market responds to them, that has not been the case as the DAX has managed to rise through a couple of zones of resistance we had penciled in before.

DAX (Ger30) Daily

DAX Short-term Look: On the Edge of a Wedge

However, we could have something meaningful to sink our teeth into. Looking at the hourly chart, we can see price action is narrowing into a rising wedge. The bottom-side trend-line is the key to the pattern breaking, which the DAX is currently sitting just above. The resistance levels are there on the daily, now price action is aligning itself on the shorter-term time-frame. A break below the rising trend-line will also soon call for a break of the prior day low of 10265 (which has acted as both resistance and support in recent days).

The initial target if we get a trigger is support right around the 10100 mark; from there we would look to 10k and ~9900. The wedge could breakout to the upside, so it is important to wait for a confirmed break before looking to the shorts...

Hourly:

DAX Short-term Look: On the Edge of a Wedge

On another note: The Bank of Japan expanded its stimulus program in the early hours this morning, but did so in underwhelming fashion. The BoJ is doubling down on its ETF purchases, however, it left its policy rate unchanged at -0.1%. In total, the outcome is labeled, ‘disappointing’. But even so, markets aren’t responding very violently given all the hype and expectations going into the meeting. Central banks losing their impact…

Start improving your trading today with one of our many free trading guides designed to help traders of all experience levels. Also, check out, “Traits of Successful Traders” and find out what the #1 mistake trader make.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

He can be emailed at instructor@dailyfx.com with any questions or comments.

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

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