The DAX has crashed lower over the last 24 hours despite some strong data from Germany in the form of trade balance. The Germany economy, being based on manufacturing, has been strog historically and it continues to be so and that is the reason why we continue to believe that the current move lower is more like a correction of the move higher than a change of trend as yet.
DAX Moves Lower on Risk Increase
The DAX moved as low as the 13100 region where it found a bit of buying support and since that time, it has bounced off that region and now trading above 13200 as of this writing. This is likely to be a correction and with the move lower towards the 13200 region, the correction is likely to have got completed and we are now likely to see the DAX move higher in the short and medium term.
Caution should be exercised by the traders to make sure that they enter at the right level as the index moving lower on improved news and data from Germany is not a great thing. The likely fall may be due to the fact that the stock indices in the US have been moving lower as they were placed under pressure by reports that the tax reform implementation is delayed by a year for the corporates. This has affected the stock markets as the corporates would be disappointed and this is likely to last for the long term.
Looking ahead to the rest of the day, we can see some recovery and consolidation in the DAX for today as the bulls try to end the week on a high. The pressure on the US stock indices is also likely to weigh on the DAX and this can lead to some choppy trading.
This article was originally posted on FX Empire