DAX bounce softens after testing big resistance – US NFP’s ahead

DAX price action – resistance levels remain at prior support

A rebound in risk trends on Tuesday allowed Germany 40 (DAX) to climb higher, driving prices back towards another big zone of psychological resistance currently holding at 12,700.

With a strong downtrend persisting since the start of the year, a break of 12,133 (the 50% Fibonacci level of the 2020 – 2021) allowed bears to push through 12,000 before finding support at a 21-month low of 11,829.

But after failing to gain traction below 11,800, a temporary relief rally and a hold above the above-mentioned levels eased selling pressure, pushing Dax through prior resistance turned support at 12,443 (the 23.6% Fibonacci of the 2020 move).

DAX (Germany 40) daily chart

Following a rebound off the recent low, a mild correction has resulted in a potential formation of a bullish engulf on the weekly chart providing a glimmer of hope for bulls.

In technical analysis, this reversal pattern usually occurs at the bottom of a downtrend providing some reprieve for buyers. However, with oil cuts and inflation still in the spotlight, all eyes have turned to tomorrow’s US job data (the NFP report) which may set the stage for the Fed’s (Federal Reserve’s) next move.

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