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DAX 30, CAC 40 Technical Outlook - Boxed In, Ready to Break Out

DAX 30, CAC 40 Technical Outlook - Boxed In, Ready to Break Out

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DAX 30 / CAC 40 Technical Highlights

  • DAX 30 nearing the point where a move looks imminent
  • CAC 40 nestling up into the apex of a wedge pattern

DAX 30 nearing the point where a move looks imminent

The sideways path in the DAX looks close to ending. The convergence in price over the summer months is setting up for a breakout scenario. Last week, the index attempted to fill the corona-gap, but the attempt was very short-lived as the gap-up into the gap was swatted back lower shortly after the open of trade of that day.

This brought an underside trend-line from June into play, a line that has several inflection points that make it a solid line of support. A break below it would likely lead to a sell-off towards the 200-day and July low at 12253.

But in recent sessions when the U.S. markets have worked off some their froth, Europe has held it together. This did not seem a likely scenario before as relative weakness in the DAX and CAC appeared to be sending a signal that they wanted to trade lower once the leading stock market took a break from rallying.

If the DAX can continue to show short-term relative strength in the face of further U.S. weakness, then this could set up for a sustained breakout into the corona-gap towards new record highs. In either event, up or down, time is running out for the DAX to continue to trade sideways.

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DAX Daily Chart (breakout nearing)

DAX daily chart

DAX Charts by TradingView

CAC 40 nestling up into the apex of a wedge pattern

The CAC continues to work on building a wedge formation that suggests, like the DAX, that it will move soon. It has been the laggard of the two major European indices, so a downside break may come first in the French benchmark if indeed markets are to sell off.

There is a good amount of resistance to overcome if the wedge is to be broken cleanly to the upside. The June/August 2019 lows that have kept price in check (most recently in June) are in near confluence with the falling 200-day MA at 5133. A climb into the 5200s is needed to provide some breathing room.

On the downside, a break of the underside trend-line of the wedge along with a drop below 4691 should have the CAC rolling downhill. For now, it is a game of wait-and-see, but that time may soon be over…

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CAC 40 Daily Chart (near apex of wedge)

CAC 40 daily chart

CAC Chart by TradingView

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

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