DAX 30 Technical Forecast:
- The DAX 30 will look to continue its recent rally in the week ahead, now with an abundance of support beneath
- The final deadline for the Section 232 United States auto tariff investigation will pass next week, potentially bolstering risk appetite
- Still, consolidation could be a healthy development before the next leg higher
DAX 30 Technical Forecast: Record Highs are in Sight
The DAX 30 has staged an awe-inspiring rally since early October, adding to earlier gains established in early September. Taken together, the rallies have seen the German equity index surge more than 10% since September 1, compared to the S&P 500’s 7% gain in the same span. Consequently, the DAX and S&P 500 are neck-and-neck in the year to date, enjoying returns of approximately 25% each. The miraculous recovery was aided in part by an accommodative European Central Bank and more recently by improving US-China trade relations which have since been called into question.
DAX 30 Price Chart: Daily Time Frame (January – November) (Chart 1)
Chart created in TradingView.
Despite the deterioration in trade talks, it may still be presumptuous to call a top at this point. Still, after weeks of nearly unabated gains, consolidation could prove to be a healthy development in pursuit of a longer-term continuation higher. With that said, a series of important economic data releases due in the week ahead, could result in volatility with potential to send the DAX ricocheting between technical levels. Thus, it is important to take stock of the various technical levels the DAX will look to enjoy in the event of a continuation higher – or decline lower – while remaining cognizant that the longer-term trend looks to be higher at this time.
To that end, resistance is rather sparse. Aside from prior all-time highs around 13,500, most of the major technical barriers have been dispatched of – leaving the road higher relatively clear.
Dow Jones Price Chart: Daily Time Frame (October 2017 – November 2019) (Chart 2)
Conversely, the DAX’s recent rally has afforded it a bounty of support. First and foremost, a horizontal trendline from the high’s in April 2018 will look to buoy prices over the shorter-term, while subsequent support could come into play around 12870 if selling gains pace. A retracement to 12870 could pose as the first stint in a consolidating pattern, where a drop down to 12500 could look to stall a deeper retracement. As the market awaits upcoming price action, follow @PeterHanksFX on Twitter for further updates and analysis.
–Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX