DAX/CAC Technical Highlights:
DAX & CAC 40 Technical Outlook: Weak Bounce So Far
The DAX recently declined from a wedge formation after an initial fake-out breakdown from the same pattern. The recent bout of weakness has brought into play the March 2020 trend-line, a threshold that is thus far holding but not in a highly meaningful manner.
The bounce the past couple of days has been unable to register much power and if this continues, given the DAX is sitting on a big line of support, then risk will very quickly rise towards seeing another round of selling. Weak reactions at key thresholds often indicate it will be broken.
In the event this the case, the next decent level of support shows up around the May low at 14816. From there should things deteriorate further we will have to start thinking about the rising 200-day MA at 14283.
But before thinking about a decline of that size, we must first continue to respect the March trend-line as support. From a tactical standpoint, even though buyers have yet to show up in earnest, support offers would-be longs an opportunity to enter with a line-in-the-sand from which to asses risk.
DAX Daily Chart
The CAC has undergone a bit of a larger bounce, but it doesn’t have support at its feet the same way that the DAX does. The downward trend off the highs remains intact and leaves room for further weakness.
It is unlikely a new low from Monday develops if the DAX holds the March 2020 trend-line, but if it does break down then the next level of support to watch clocks in at May low at 6150.
CAC Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
