DAX Forecast: Rallying on Optimism

The German index rallied significantly on Monday to gain roughly 2%. The market is likely to see a lot of resistance just above, so having said that it’s likely that we will eventually see sellers come back into this market. The market is likely to see a lot of noise just above, because there are a lot of concerns when it comes to the European Union.

Selling Pressure Ahead

Looking at this chart, you can see that the DAX broke above the 50-Day EMA, which is a bullish sign, but all things being equal this is a market that will eventually see plenty of selling pressure. The 200-Day EMA sits at the 14,000 level and is dropping. Ultimately, the quicker we get there, the more likely it is that we are going to see a massive turnaround. The market is likely to see a lot of pressure sooner rather than later. After all, one of the biggest reasons for the rally during the session on Friday with the fact that Ukraine has made gains against Russia on the battlefield.

While that of course is a good thing for the European Union, the reality is that there are a lot of bad things coming to the European Union rather quickly. During this winter, there will still be concerns about natural gas supply, and of course, the massive amount of inflation that is out there. I still think this is going to be seen as a relief rally, but it’s also worth noting that the 12,500 level has been a massive support. With that in mind, that could end up being a bit of a “floor in the market” when it comes to the DAX.

If we break above the 200-Day EMA, then it’s likely that we would see a significant rally at that point, as it is technically the beginning of an uptrend. Whether that’s going to be the case is completely unknown at this point, but it is certainly a real possibility.

  • If we take out the bottom of the candlestick for the Monday session, then I think we probably had back toward the lows again.
  • You cannot take risk appetite overall out of the equation.
  • This has been a little bit overdone, so the next couple of days could be noisy.

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Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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