DAX Daily Fundamental Forecast – December 06, 2016

We did get a bearish opening in the DAX yesterday but what followed was something that was not expected. We had expected the DAX and the other European bourses to get a pounding during the course of the day due to the results in the Italian referendum over the weekend, which led to a No vote and the subsequent resignation of their PM Renzi, but just like how the markets stumped us when we were all expecting a pounding for the USD post the election of Trump as President, the markets did the total opposite yesterday as well.

The euro started weak for the day but as the day progressed, the euro recovered the entire loss and pushed through 1.07 and rose as high as 1.0795 and a similar price action was witnessed in the DAX as well. The DAX began the day threatening to break through 10400 but it continued to rise up during the course of the day and finished the day above 10700 very comfortably. This has brought the index back into its original range between 10600 and 10800 and we could well be in for another period of consolidation below 10800. As we have been repeatedly mentioning in our forecasts over the past couple of weeks, the clear break of 10800 is the key for further upside in the index and till that happens, traders should be ready for consolidation with a bearish bias as we saw last week.

Looking ahead to today, we do not have any major economic news from the euro region and so we can expect a day of consolidation that may challenge the highs around 10800. We need to watch the price action in this region very closely so that we can get an idea of the trend over the short and medium term. Those who like risk can try shorting the index when it approaches 10800 with a tight stop loss beyond the previous highs in this region. Bulls can wait for a clear break and retest of 10800 region before they load their longs.