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Analysis

DAX Technical Analysis | EU CPI is expected to ease further

BY Janne Muta, M.Sc in Finance

|November 30, 2023

Dax technical analysis - Equities in general have continued to rally with the US bond market. As Dax is highly correlated with the S&P 500 it has rallied approximately 11% since the October low. The rally is driven by easing inflation and increased expectations that the Fed will cut rates several times next year.

With the bond market moving higher WSJ notes how the 10-year Treasury note yield continued its downward trend for the third straight day, settling at 4.27%, marking its lowest point since September. This decline represents a sharp drop from roughly a month ago when the yield on government bonds reached 5%, a peak not seen in 16 years.

With recent optimistic signals from Federal Reserve officials, 10-year Treasury notes are, as reported by Reuters, on track to have their most successful month since the 2008 global financial crisis. So far in November, yields have decreased by 61 basis points.

Today's release of Euro area inflation numbers is keenly anticipated by equity traders. The Core CPI Flash Estimate (y/y) is expected to show a slight deceleration, coming in at 3.9%, a drop from the previous 4.2%.

Similarly, the headline inflation CPI Flash Estimate y/y is projected to be at 2.7%, again lower than the prior 2.9%. These figures follow a trend of softening inflation in key Eurozone economies, with Germany and Spain already reporting milder inflation numbers.

Summary of This Dax Technical Analysis Report:

  • The 11% rally in the DAX has taken the market above a critical market structure area at 15,562 - 16,045. If the market remains above this area, we could see it targeting 16,400, and then perhaps the July high at 16,531. Alternatively, if we see a decisive move below this week's low at 15,913, the DAX could trade down to around 15,640.
  • After yesterday's strong rally, the DAX is trading above a key support level at 16,045. As the market is trending higher, this is likely to be an important reference point for traders and therefore a potential level for renewed buying should there be a retracement back to this level.
  • Equities in general have continued to rally with the US bond market. As Dax is highly correlated with the S&P 500 it has rallied approximately 11% since the October low. The rally is driven by easing inflation and increased expectations that the Fed will cut rates several times next year.

Read the full Dax Technical Analysis report below.

Dax Technical Analysis

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Weekly Dax Technical Analysis

The 11% rally in the DAX has taken the market above a critical market structure area at 15,562 - 16,045. If the market remains above this area, we could see it targeting 16,400, and then perhaps the July high at 16,531. Alternatively, if we see a decisive move below this week's low at 15,913, the DAX could trade down to around 15,640.

Indicator-oriented DAX technical analysis suggests that the market is still in a long-term uptrend, with the 50-period moving average pointing higher and the 20-period SMA above it.

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Daily Dax Technical Analysis

After yesterday's strong rally, the DAX is trading above a key support level at 16,045. As the market is trending higher, this is likely to be an important reference point for traders and therefore a potential level for renewed buying should there be a retracement back to this level.

If the market doesn't attract buying at 16,045, we could see a deeper retracement back to around 15,920. The market remains bullish above 15,913 and could be targeting 16,400 if the momentum stays strong.

Indicator-based DAX technical analysis supports the bullish view, with the SMA(20) pointing higher and the market trading well above the average.

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Dax Technical Analysis, 2h

At the time of writing, the DAX is trading in a narrow range on the two-hour chart. This indicates that traders are being cautious ahead of the Euro area CPI release. It is certain, however, that the market will break out of this range formation, in which case moves to targets at 16,260 and 16,116 could come into play.

These targets are derived from the width of the sideways range and are relatively close to the range, so given the recent volatility and the volatility often associated with CPI releases, the probability of the market reaching either target is relatively high.

Indicator-driven DAX technical analysis suggests that the market is bullish in this timeframe. As this is the case in all the timeframes discussed above, we could see the market continuing the trend even if there is a retracement lower. Alternatively, it is possible that the CPI comes in at higher levels than expected, which could lead to the market correcting further than otherwise anticipated.

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Client sentiment analysis

TIOmarkets' clientele are bearish on Dax, with 70% of clients holding short positions and only 30% long the market.

Please remember that the retail trader client sentiment is a contrarian indicator as most of the retail traders are on average betting against the market trends. This is why, experienced traders tend to trade against the retail client sentiment. You can follow the TIOmarkets client sentiment live on our Forex dashboard.

The next key risk events impacting this market

  • EUR - Core CPI Flash Estimate y/y
  • EUR - CPI Flash Estimate y/y
  • All - OPEC-JMMC Meetings
  • EUR - ECB President Lagarde Speaks
  • USD - Core PCE Price Index m/m
  • USD - Unemployment Claims
  • USD - Chicago PMI
  • USD - Pending Home Sales m/m
  • EUR - ECB President Lagarde Speaks
  • USD - ISM Manufacturing PMI
  • USD - ISM Manufacturing Prices
  • USD - Fed Chair Powell Speaks
  • USD - Fed Chair Powell Speaks

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Potential Dax Market Moves

If the market doesn't attract buying at 16,045, we could see a deeper retracement back to around 15,920. The market remains bullish above 15,913 and could be targeting 16,400 if the momentum stays strong.

How would you trade the Dax today?

I hope this Dax technical analysis helps you to make better informed trading decisions. Check the latest market analysis for other instruments and subscribe to receive them in your inbox as soon as they are published

While research has been undertaken to compile the above content, it remains an informational and educational piece only. None of the content provided constitutes any form of investment advice.

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Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

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Janne Muta, M.Sc in FinanceChief Market Analyst

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.