The German index dropped a bit during the day on Monday, but continues to follow the overall sending triangle that I have drawn on the chart. If we were to break above the €13,500 level, that should send this market much higher, perhaps reaching towards the €14,000 level given enough time. I think that pullbacks could be difficult to stomach, but I think that the gap below should continue to be massively supportive, meaning that we could see buyers extending all the way down to the €13,250 level.
The DAX of course has been benefiting from the EUR/USD pair falling, as it makes German exports cheap. In fact, it’s one of the strongest correlations, negatively speaking, the DAX and the EUR/USD currency pair. I believe that the EUR/USD pair has a bit further to go to the downside, and I think this will continue to drive the DAX to the upside in general. I recognize that the €13,500 level is significant resistance, but the pattern is playing itself out quite nicely, so we should get a breakout rather soon. If we don’t, then I simply look at this market is one I will pick up on value, and I will step away and let buyers underneath tell me when it’s time to get involved. I have no interest in shorting this market, so therefore it simply a matter of buying a breakout, or waiting for value to present itself yet again.
Equities in general are a bit extended though, so it would not surprise me to see corrections occasionally, but I think that overall stocks are going to continue to rally as monetary policy is easy around the world. The ECB has recently suggested that it was extending quantitative easing, although at a lower level. That should continue to lift the DAX as well.
DAX Video 07.11.17
This article was originally posted on FX Empire
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