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

DAX 40 relief rally muted by technical resistance; German stocks remain resilient despite heightened geopolitics and will US NFP (Non-farm payrolls) data drive price action?

Source: Bloomberg

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

Source: TradingView

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.

Source: TradingView

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.

Source: DailyFX

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The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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