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DAX Technical Highlights:

  • Price action volatile but leaving few clues
  • Lower-high, ‘bear-flag’ or gaining its footing?
  • ECB tomorrow to spark volatility opposite the euro

For a broader fundamental and technical outlook on major markets, and to see how our Top Trading Opportunities for 2018 are performing, check out the DailyFX Trading Guides.

Lately, the DAX has been displaying messy price action, see-sawing back-and-forth with few clues as to what all the chop may mean. There is, however, one possibly bearish sequence developing should a lower-high maintain and continue along the path of building of a bear-flag.

The bear-flag, if that is the eventual outcome, is arriving at an interesting spot given the underside parallel of the pattern is also the trend-line rising up from the March low. A break of the pattern would then have trend support violated in addition to pattern validation – a solid combination.

In this situation a lower-low would need to develop below 12547 for momentum to pick up in a meaningful way. Given the choppiness of the bear-flag, this isn’t the easiest scenario and could lead to further horizontal price action. But we’ll run with what is presented to us and adjust accordingly.

For the market to position itself for further strength, the grind higher at some point soon will need to pick up momentum and clear through the 12900s, but then also the trend-line off the record high and the May high at 13204. If it can do that, then a test of the old record high could be in order.

Choppy trading conditions shaking your confidence? Check out this guide for 4 ideas on how to Build Confidence in Trading.

DAX Daily Chart (‘Bear-flag’ potential)

DAX daily chart, possible bear-flag on trend support

For now, respecting trend support and staying sidelined looks like the most prudent play (‘bearish scenario needs validation first). Perhaps once we have the FOMC today, and more importantly, the ECB out of the way tomorrow we’ll have a better handle.

It’s likely the euro and DAX will move opposite one another if the outcome of tomorrow’s ECB meeting has any meaningful impact, given that what’s good for one is not so much for the other and vice versa.

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX