The DAX index is barely hanging on to gains this Tuesday after some midday selling erased some of these as sentiment around EU assets starts to sour. The DAX index is 0.22% higher after hitting two-month highs and covering the 13 June downside gap on the back of three straight winning sessions.
The pause in the rally on the DAX comes as the Eurozone and German ZEW Economic Sentiment data worsened in the current survey. According to the ZEW – Leibniz Centre for European Economic Research’s survey of economic sentiment in the Eurozone and Germany, the index for Germany registered at -55.3, worse than the expected number of -52.7. The Eurozone’s figure fell from -51.1 to -54.9, coming in below the consensus figure of -52.0.
The decline in economic sentiment in Germany and the Eurozone is in tandem with recent economic data out of that region, which was dismal for the most part. It also reflects the sentiment of investment banks such as Rabobank, who also see the Euro’s value being eroded by the worsening economic outlook in a 1-3 month period.
From the standpoint of technical analysis, the evolving rising wedge pattern could give traders a pointer as to how to direct their positions if the outlook plays out on the charts.
The rising wedge on the daily chart indicates a potential for a resumption of the downward trend. This outlook stems from the formation of a second pinbar candle as the upside move starts to contract with each daily candle. A breakdown of the wedge’s lower border and the underlying 13652 support mark (3 March low, 13 June high) creates a pathway towards a resumption of the downtrend, targeting 13383 initially (9 May and 13 June lows) before 13091 (prior low of 27/28 June) comes into the picture. 12903 (23 June low) and 12625 (1/13 July 2022 lows) are additional targets to the south. A breakdown of this support and the underlying 12398 price mark (5 July low) restores the bearish structure of the asset.
On the other hand, a break above the 14128 resistance (26 April and 10 June highs) restores the recovery move, targeting 14401 initially (25 March and 9 June highs) before the 14600 resistance level (21 April and 8 June highs) form additional resistance targets. A further advance brings 29 March 2022 high at 14935 into the picture.
This post was last modified on Aug 16, 2022, 16:09 BST 16:09