The German index shot higher initially on Monday, reaching towards the €13,100 level, but turned around to test the €13,000 level for support again. There is plenty of support underneath, extending down to the €12,900 level, so I think that these pullbacks should be buying opportunities. Given enough time, I fully anticipate that the DAX will continue to go to the upside, and therefore pullbacks should be thought of as value. Once we break above the €13,100 level, it’s likely that we continue to go much higher, perhaps reaching towards the €13,250 level. I don’t have any interest in shorting this market, least not until we break down below the €12,900 level underneath. If we did, at that point I think we would probably drop significantly, perhaps down to the €12,800 level first, and then down to the €12,500 level over the longer term.
Looking at the EUR/USD pair, it’s likely that we could go lower. If we do, that should help the DAX, as it makes exports cheap out of Germany. That is essentially one of the biggest movers of the DAX, and as a result it’s likely that buyers will be attracted. If we can get the currency markets moving in favor the US dollar, that should continue to push the DAX higher. Alternately, if the EUR/USD pair rallied significantly, it’s likely that the market would roll over at that point. I believe that a lot of this is due to weather there will be currency headwinds or not, so pay attention to the currency market as it gives us an idea as to how cheap or expensive the DAX exports are going to be, and therefore the negative correlation should continue in both of these markets over the next several sessions.
DAX Video 24.10.17
This article was originally posted on FX Empire