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DAX and CAC 40 Technical Outlook: Relative Weakness is Glaring

DAX and CAC 40 Technical Outlook: Relative Weakness is Glaring

Paul Robinson, Strategist

DAX/CAC Technical Highlights:

  • DAX is trading below major support, showing major relative weakness
  • CAC 40 not set up any more favorably, rally could offer entry
  • Watch to see if the lagging performance continues should US recovery a bit here

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DAX and CAC 40 Technical Outlook: Relative Weakness is Glaring

The DAX has been a global leader lower as it recently broke major support. Yesterday, we saw the S&P flush the June lows and on that likely set up for a recovery bounce from around the prior bear market lows. This is a common feature of bear markets.

The bounce in general risk appetite on a weakening dollar isn’t see as having a lasting impact until we see some real capitulation out of stocks, which we haven’t yet. The selling pressure has been heavy but hardly that demonstrating and real levels of fear.

What I will be watching for here, is a continue rebound in the U.S. stocks with the DAX (&CAC) lagging behind. This could lead to a retest for the DAX of the area around 12400 as the U.S. market recovery runs out of gas. For would-be shorts this could offer up a good risk/reward spot.

The next level of big support is seen as a low created in late 2020 at 11450.

DAX Daily Chart

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DAX Chart by TradingView

The CAC is only sitting a short distance below old support / new resistance via the 5756/90 zone. We could see the CAC recovery that level before turning back lower given how nearby it sits. The outlook is the same overall though as is for the DAX – bounce then lower.

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CAC Daily Chart

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CAC 40 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.

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