The DAX index continues to trade within a tight range which points to a breakout sometime in the near future. The German elections are also on the horizon
The DAX index continues to trade within a tight range which points to a breakout sometime in the near future. The German elections are also on the horizon and so it is understandable that the index wants to take some rest and watch the situation and so we can expect the consolidation and the ranging to continue for the short term.
Last Monday, the index made a breakout through the important 12350 resistance region on the back of improved risk sentiment across the globe. But since then, the index has been trading within a tight range and any kind of news from any part of the world has not seemed to affect the index in any manner. This should in fact make the bulls happy as they would like to see the breakout hold as long as it can. The resistance at 12350 should now serve as the support and this is likely to hold for the short term as the bulls await further direction.
That direction could come in the form of the German election results which comes in towards the end of the month. Merkel is clearly in the lead in the opinion polls and it is probably a foregone conclusion that she would win but based on the experiences in other parts of the world, the traders would like to wait and see and confirm that she has won before they start entering into the DAX in a bullish manner. Till that time, we can expect the pair to continue its consolidation and tight ranging.
Looking ahead to the rest of the day, we do not have any major news from Germany but we have the final CPI data from the Eurozone which is likely to affect the DAX a little. But we do not expect that to help it break out of its consolidation phase just yet. The index should open in a steady manner and continue to trade that way for the rest of the day.
Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.