- The German DAX fell significantly during the trading session on Monday, dropping toward the €23,950 level.
- In post market trading, it looks like we are going to continue to go a little bit lower, but quite frankly that’s good news, because this is a market that might be offering value in the next several sessions.
- Because of this, I’ll be watching to see how we behave on any break below the 50 Day EMA, which is at the €23,806 region.
Technical Analysis
The technical analysis for the market is obviously bullish over the longer term, but over the last couple of months, we have seen Germany do very little. This could be just a simple consolidation going sideways in order to work off some of the excess froth from the previous rally. The market was absolutely launched after that selloff heading into April, and much like many other financial markets at the moment, it probably has a certain amount of exhaustion coming into the picture.
I would also pay close attention to that 50 Day EMA, because while it may not be the “be all end all of support”, at least it’s something that you can watch from a technical analysis standpoint. Ultimately, even if we break down below there, I see a massive floor in the market closer to the €23,000 level, which is an area that has proven itself a couple of times in the past. The €23,000 level has been tested multiple times on both the up and down sides, so keep that in mind.
If we break down below the €23,000 level, then I think you’ve got some type of major issue. At that point in time, we probably see the DAX fall apart, but we might see other indices follow suit. The reaction to the trade deal between the United States and the European Union wasn’t exactly 1 of strength, but I do believe that ultimately the fact that the uncertainty is gone will attract people into the equity markets in the European Union. In other words, I am looking for dips to start buying again as soon as they bounce.
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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.