DAX Technical Outlook – Soft Bounce, Another Leg Lower May Be in Store
- DAX hasn’t seen much of a bounce so far, a lower low may be in store
- If so, support arrives in the area of 11935/86
- As long as risk in general doesn’t unravel a test of support may be best for a tradable low
So far, the DAX hasn’t responded well to oversold conditions, with more selling looking increasingly likely to be on the way. The thinking heading into the week was that with the U.S. showing a strong turnaround on Friday (S&P 500 from the 200-day) that it would have more of a carry-over effect on global markets. But it hasn’t yet.
Yesterday, we discussed the idea of seeing the U.S. hold up, or at least relatively well and not take out the Friday low, along with another lower low developing in the DAX – it could mark the end of the decline as residual selling pushes it into support.
Support clocks in at levels from August in the area of 11935/868, which might be enough to put a bid into the market as long as we don’t see full-on global selling in stocks like we have the past couple of weeks.
The key will be to watch how price action unfolds should we see trade take shape around the aforementioned support zone. A swift intra-day reversal similar to what we saw in the S&P 500 would be ideal, but not necessary. Just as long as we see a forceful amount of buying come in around support, then it will be enough to consider the possibility of a tradeable low.
Of course, the market could start working its way higher from here, but confidence is low at the moment due to a lack of momentum. The next few days should be telling as to how things want to progress.
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DAX Daily Chart
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---Written by Paul Robinson, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.