DAX: Bouncing After Break, Turn Lower Anticipated

What’s inside:

• The DAX broke key support on Friday
• Bouncing back into old support now new resistance
• Key levels outlined

The break and daily close below 10320 on Friday put the DAX beneath last Monday’s low, and confirmed the lower high seen on the Thursday bounce. The area in the low to mid-10300s also represents a steadfast reaction zone of support (now resistance) based on peaks created from May through to the very early days of August.

This morning the multiple bottoms created last week (most visible on the intra-day chart) is acting as resistance. If the breakdown on Friday is to sustain itself, then the DAX should not climb much above and begin to turn lower very soon; at the highest the index should not rise above 10500.

Continued weakness from around this area will bring into play the 8/3 low at 10092 and retest of the 2015 downtrend line broken back in early August.

Should the DAX continue to lift from Friday’s low above recent lows, then we will look to the trend-line off the 9/8 high and then the upper parallel connecting the peaks of bounces last week as potential spots for the market to turn back lower.

On the news-front this week, there isn’t any 'high' impact data points slated to be released out of Germany or the EU, but we do have a pair of central bank meetings which could things up. On Wednesday, we have the BoJ and FOMC (RBNZ, too, but won’t be impactful). For the full calendar, you check it out here.

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

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