DAX/CAC Technical Highlights:
- DAX broke major support this week, but is set to bounce back to test
- CAC is already trading back into an entanglement of resistance
DAX & CAC Technical Analysis: Looking for Continued Snapback
The DAX broke major support to start the week via the 14816 level, a level that had been in play since May of last year. The threat of a Russian invasion was enough to help send the market through support, but now that Russia did actually invade the Ukraine the situation has turned even more interesting.
We are presented with a “buy the rumor sell the news” situation, or in this case “sell the rumor buy the news”. On that, we could see some more upside in the near-term, if not longer. It’s possible we hit a flash-point that will signify a more meaningful low looking out over the intermediate-term.
The DAX has room to run before it runs into resistance, and it would be a good thing to see. It will help clarify if the recent move lower is sustainable looking out a bit further, or if the recent low was the end of the down-move.
Initially, a retest will be viewed as a potentially low-risk opportunity for traders to establish fresh bearish wagers. If the DAX stays below the new level of resistance, then the outlook is at best neutral and likely bearish.
It would take a thorough push above 15k to turn things back to the upside with some conviction. Barring that we could see the DAX muddle around for now until we get some more clarity on the geopolitical front. Keeping things simple, going to focus on the short-term volatility and take it one day at a time.
DAX Daily Chart
The CAC has continued to remain more supported than its German counterpart. It broke through a number of support levels this week, but is already in attack mode. If the DAX continues higher until it runs into resistance we may see the stronger CAC push on through its own resistance.
Not an idea with a lot of conviction as it breaks a fundamental rule of not buying into resistance or shorting into support. But it is certainly a possibility to watch for. If the CAC stays capped by the trend-lines, horizontal lines, and 200-day moving average all from around 6670 up to 6800, then things could become interesting.
This would be especially noteworthy if it occurs while the DAX continues to rally. It could set the CAC up for a continuation trade lower.
CAC Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
