Dax Index Breaks Higher on the Back of Strong European PMIs

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Written By: Mircea Vasiu

Dec 16, 2020, 09:33 GMT 09:33

DAX index

Summary:

Dax index prepares to break higher and the only thing that stands in the way is the strong Euro. Should the Euro ease, the Dax has more upside potential.

Eurozone PMIs surprised to the upside today, led by the German ones, and the Dax index jumped higher. A mere consolation after the worse day in the number of fatalities of the COVID-19 pandemic in Germany – almost 1,000 deaths registered yesterday.

Germany enters a full lockdown today as the virus spreads without control, putting pressure on future economic perspectives. However, that was pretty much priced in as the economy enters lockdown mode in a better shape than many expected.

The Dax looks to form an inversed head and shoulders, a pattern that points to much higher values. If that is the case, the only thing that keeps the index down is the strong Euro. Should the Euro ease some, that would add to the Dax bullish case.

Dax Index Inversed Head and Shoulders

An inversed head and shoulders pattern usually forms at the end of a bearish trend. However, sometimes it signals continuation, especially when it forms after a meaningful bounce as the Dax did.

Bulls may want to stay on the long side and closely watch the EURUSD exchange rate. On any weakness on the Euro side, should fuel the Dax index rally towards the measured move of the pattern. A break below 13,000 invalidates any bullish scenario.

Dax Index Price Forecast

Written By: Mircea Vasiu

Mircea, MBA in International Business graduating Magna Cum Laudae, trades for a living and contributes to various financial publications for more than six years. He writes about macroeconomics, stock indices, currencies, and most recently ETFs and individual stocks. For the past decade, he’s involved in everything trading related, mostly in the currency market, both with manual and algorithmic trading.