DAX: BoJ Lifts Markets, FOMC Later Today; Double-top Reexamined
- DAX breaks back above broken support, running into resistance
- Classic double-top suggests the index should turn lower again soon, but waiting on momentum
- BoJ helps give global markets a lift, FOMC up next
Despite the DAX breaking down and closing below 10320, the index has managed to find its way back above broken support, but now faces a hurdle of resistance around the 10500 level.
Giving global stock markets a boost today is a positive response to the Bank of Japan’s new direction for monetary policy, which is aimed at controlling the yield curve in order to help boost inflation. The Nikkei finished higher by 1.91% to 16,807, while the DAX is up nearly 1% at this time.
Looking at the technical landscape at hand in the DAX; was the recent decline prior to this week’s bounce the beginning of something which will continue, or was it the ‘buy-the-dip’ opportunity?
Classic technical analysis may provide the answer to that.
The double-top created from the middle of August to early September was confirmed with the recent weakness when a lower low was carved out. The current bounce could be a retest of the ‘neck-line’ region near 10500 (retests are not uncommon following a pattern break). A turn lower soon from here would mark a lower high and thus a lower higher/lower low scenario would be unfolding.
If this is to be the case, then we want to soon see a rejection around current levels to strengthen the case for lower prices. If the DAX continues to push higher with no waning of upward momentum, then we will need to begin looking at bullish alternatives.
Later today, at 14:00 GMT, the FOMC will release its decision on interest rates, policy statement, and rate outlook via the Fed’s ‘dot-plot’. There are no expectations for a rate increase at today’s meeting, but the Fed may begin to pave the way for an increase in December, the second increase since it raised rates last December. No predictions on the outcome of today’s meeting, and as per usual we will be focused on the market’s reactions. The DAX cash session will be closed, but the futures/CFD markets will be open and responding to US markets.
---Written by Paul Robinson, Market Analyst
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