The European indices continue to attempt a “basing pattern.” At this point though, there is still a lot of work to be done.
The German DAX has rallied quite nicely during the trading session on Tuesday as we are approaching the crucial 23,000 Euro level again. This is an area that’s been supported in the past, and of course, it’s a large, round, psychologically significant number, so I think that in and of itself, probably has people paying attention to it.
Keep in mind a lot of this comes down to the war or what’s the latest headline and that is something that you have to acknowledge at this point as being something that is out of your control and very difficult to plan for. That being said, I think you have a situation where traders are going to be looking for the latest headlines to get things moving and to determine where they should be positioned when it comes to not only the DAX but other indices and risk appetite in general.
The Parisian CAC looks like it is trying to rally quite nicely during the session as well, with the 7,900 level above being a major barrier. If we can break that, then it opens up the possibility of an attempt to get to the 8,000 Euro level. I still think you’re climbing an uphill move at the moment, and therefore I’m not excited. I do think eventually it turns around, but right now we need some type of good news coming out of the war and inflation to really get excited.
I think ultimately you have a scenario where you have to be very cautious, recognizing that perhaps this is a market that is still in the process of trying to form a basing pattern.
The MIB in Italy had been the leader for quite some time and I think that probably is how this plays out again. If Italy can break above the 50-day EMA at the 44,732 Euro level, then I’m probably going to be very interested in buying.
Quite frankly, Italy leads through financials more than anything else most of the time, and I’ll be watching that with the 43,000 Euro level thought of as a floor in the market, especially now that the 200-day EMA sits there. I’m in a wait-and-see pattern with most of the European indices anyway, but this is the one I’m watching the closest for a potential entry to the long side.
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Chris is a proprietary trader with more than 20 years of experience across various markets, including currencies, indices and commodities. As a senior analyst at FXEmpire since the website’s early days, he offers readers advanced market perspectives to navigate today’s financial landscape with confidence.