DAX 30 Price Outlook:
- The DAX 30 is encountering initial resistance around 13,470, but the true test may lie around 13,575
- Fiscal and monetary policy changes are potential catalysts that could boost the index over the long term
- In the meantime, the DAX will look to trade in conjunction with broader risk appetite which has recently been contingent on the coronavirus
DAX 30 Price Forecast: Can the Index Escape its Range?
A recent spike in volatility has seen the DAX 30 fluctuate wildly between support and resistance. Largely due to coronavirus fears and its impact on economic growth, investors sought to reassess equity valuations. Initially, the reassessment saw the DAX 30 fall to longstanding support but a quick reversal in risk appetite sparked a recovery rally which has allowed the index to reclaim various technical levels and once again threaten a range break out. Can the DAX 30 surmount resistance that has kept it in check over the last three months?
DAX 30 Price Chart: Daily Time Frame (August 2019 – February 2020)
To be sure, coronavirus concerns should persist for some time, but the initial shock appears to be over. Should investors continue to shrug off the adverse economic implications of the viral outbreak, the DAX could look to press higher at this stage. Furthermore, an upcoming speech from Christine Lagarde, head of the ECB, could provide the required spark if she alludes to accommodative fiscal or monetary policy changes.
Regardless, the German equity index will have to surpass a flurry of technical barriers that have stalled previous rallies in pursuit of a continuation higher. Two parallel trendlines at 13,530 and 13,580 will conjoin to form the first hurdle, followed by an ascending trendline that exists around 13,665. Together, the three technical levels may pose a significant challenge for the DAX.
DAX 30 Price Chart: 4 – Hour Time Frame (October 2019 – February 2020)
On the other hand, a reemergence of risk aversion – which is certainly a possibility given the depressed valuations of growth-sensitive commodities – could weigh on the DAX. Such weight would work to keep the index trapped within its recent range and would leave it grasping for support at the various technical levels underneath.
To that end, initial support may be offered by the horizontal band around 13,300 which coincides with the 200-period simple moving average and an ascending trendline. Together, they should make a formidable stand, but have been shown to break down in the past. Consequently, subsequent support at the 13,200 mark may be required.
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In the event of an abrupt reversal, like the one witnessed last week, the DAX 30 will once again look to 12,880 for assistance. While the technical and fundamental landscape remain in flux IG Client Sentiment Data reveals retail traders are confident the DAX can break higher.
( 16:02 GMT )
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Since we typically view sentiment data as a contrarian indicator, this could suggest the DAX 30 is due for more weakness. To learn more about IG Client sentiment Data, sign up for my webinar above. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.
–Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX