- The German index was fairly quiet during the trading session on Friday, as the market waited for the Non-Foreign Payroll announcement in the United States.
- This obviously has a major influence on risk appetite, and not to mention the fact that it has a major influence on the currency markets, which of course has a major influence on indices.
- After all, none of these markets operate in a vacuum, so one should not expect the DAX to be any different.
- Ultimately, DAX has been overbought for some time, so the fact that we are stretching out makes a certain amount of sense.
Technical Analysis
The technical analysis for this market is obviously very bullish, but I also think that the market is a little overstretched at this point. The €23,600 level is an area that should offer a significant amount of support, especially with the 50 Day EMA racing toward it. This should offer even more support, as a lot of technical traders will pay close attention to it. As it converges on that region, I think it only solidifies what people will be looking at, not only due to the fact that just a couple of weeks ago we seen a lot of support there, but we had seen resistance there previously as well. In other words, there is a significant amount of “market memory” in that neighborhood.
On the upside, if we were to break above the €24,500 level, then the market could go much higher, perhaps reaching the €25,000 level. The €25,000 level of course is a large, round, psychologically significant figure, and an area that a lot of people would be watching closely. Because of this, I am looking at pullbacks in the text as a potential buying opportunity to join a longer term uptrend that has been intact quite nicely over the last several weeks. A little bit of sideways action makes a certain amount of sense, because at that point, you could entice new buyers.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.