Bottom line: DAX long term structure remains bearish against 13800 levels. The indice has carved a lower high around 13300 and should ideally hold below that. Bears remain inclined to resume lower towards 8000 mark, going forward.

 Fundamental Outlook:

DAX had managed to rally over +2.25% yesterday, closing in at 13075 mark. Futures are trading higher towards 13160 mark, as we prepare to publish. The Q2 GDP for Germany clocked in better than expected at -11.3% today. The indice might be facing selling pressure around 13300 mark. The upcoming Jackson Hold Symposium would be a closely watched event as well.

WTI Crude has held below the $43.50 high registered on August 05, 2020. Price action has remained subdued since then, as the commodity remains vulnerable for a sell off. With the US Dollar set to gain, risk assets, global indices along with Oil might go the other way.

Gold prices consolidate after peaking at $2075 levels on August 07, 2020. A failure to push above all-time highs in the next few sessions may add to further selling pressure coupled with the expected US Dollar strength. The metal might trade in a range between $1930 and $2000 for a few more sessions.

Technical Analysis:

DAX might be looking to test 13300 interim resistance, before turning lower again. The structure continues to remain bearish until prices hold below 13800 resistance. Bears remain poised to turn lower towards 8000 mark going forward. Look lower from here.

DAX had dropped as an impulse wave from 13800 through 7950 in Feb-March. Ideally, an impulse is followed by a corrective wave in the opposite direction. DAX had produced a counter trend rally towards 13300 mark before turning lower again.

Also note that fibonacci 0.88 retracement of the above drop has been tested, around 13300 mark. The indice might stay below 13300 mark ideally but a push higher would not change the bearish structure. Only a break above 13800 would indicate a change or delay the proposed drop.

Most traders might have already initiated fresh short positions around 13150 mark with protective stops above 13800 mark respectively. Watch out for a break below 11577 for further acceleration towards 8000 levels.

Prepared by

Harsh Japee, Technical Analyst.

DAX Chart

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