Overhead Resistance Looms as Index Melts Higher

DAX 30 Forecast:

DAX 30 Price Outlook: Overhead Resistance Looms as Index Melts Higher

The DAX 30 is nearing resistance once again after a brief jog lower last week even as crude oil plummets beneath $5 a barrel, suggesting investors are extremely pessimistic about economic activity in the weeks ahead. Since it seems traders are willing to discard concerning developments elsewhere, the DAX 30 may look to continue higher this week if risk trends remain consistent. As a result, chartists might take aim at the nearby Fibonacci level around 10,900.

DAX 30 Price Chart: 4 – Hour Time Frame (February 2020 – April 2020)

The area in focus exists slightly beyond the index’s April high of 10,825 – which may provide a modicum of resistance itself – and marks a potential speedbump standing in the way of subsequent resistance around 11,025. Together, the two technical barriers will look to keep price contained if risk appetite continues, but recent price action may suggest the German equity index has slipped into a range from 10,200 to 11,825 and larger fundamental developments will be required to break above or below.

That being said, IG Client Sentiment Data reveals retail traders are overwhelmingly short the DAX 30, a sign it may soon bleed lower. Since the index is trading near the middle of its projected range, risk sensitive assets are becoming disjointed and retail data offers a bearish signal, bullish entry points do not appear particularly attractive at this stage. On the other hand, traders looking to capitalize on the potential trading range might consider bearish opportunities while the index remains comfortably above Fibonacci support around 10,200.

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX