German Dax Outlook:
- Dax 40 dips as bullish momentum fades – can bulls overcome the next technical barrier of resistance and drive prices back towards 15000?
- Equity indices adapt to changes in the fundamental backdrop ahead of US CPI while Dollar remains mixed.
- German Dax bullish above 14700.
Equity futures have taken a breather ahead of Thursday's US CPI data as investors awaited Fed Chair Jerome Powell’s speech. With Friday’s equity rally driving Dax futures back above 14000, an extension of the upside move allowed bulls to drive prices higher before peaking at 14894.
Despite central banks reaffirming their intentions to continue to hike rates despite rising risks of a global recession, technical levels have provided an additional catalyst for price action.
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After rebounding off the October low of 11829, the performance-based Dax enjoyed nine-weeks of gains before stalling at the November high of 14618. With the formation of a doji candle on the weekly chart suggestive of indecision, the zone between 14618 and the December high of 14682 remains key for the imminent move.
Dax Futures Weekly Chart
Chart prepared by Tammy Da Costa using TradingView
With the 14829 - 14833 zone providing support for Dax futures on numerous occasions throughout 2021 came into play in January and February last year. As the onset of the war in Ukraine and shift in sentiment fueled bearish momentum, the technically significant zone continues to provide a firm barrier of resistance that could limit the upside move.
If buyers are able to hold above this zone, a retest of the current monthly high and a move hold above 14900 is necessary to drive prices back towards the March 2022 high of 14945. From there, the 15000 psychological level looms with the 88% Fibonacci of the 2020 - 2021 move holding at 15296.
Dax 40 Daily Chart
Chart prepared by Tammy Da Costa using TradingView
On the contrary, if prices fall below 14618, a break of 14500 and below 13980 could see the next level of support forming at the December low of 13795.
Dax Positioning Reaches Extremes – Bullish Sentiment Persists
| Change in | Longs | Shorts | OI |
| Daily | 8% | -10% | -5% |
| Weekly | -8% | -2% | -4% |
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Germany 40 prices may continue to rise.
Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Germany 40-bullish contrarian trading bias.
--- Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
