Pennant Formation on Dax Index Points to Higher Levels in December

Published by

Written By: Mircea Vasiu

Nov 30, 2020, 13:28 GMT 13:28

DAX index

Summary:

Dax index managed to break higher from a pennant formation and keeps pressuring at the highs. A new 2020 high may be in cards.

Dax index broke out of a pennant formation this Monday and the projected levels point to a new 2020 high. Considering that the ECB is expected to further ease the monetary policy in December, the chances are that the Dax will continue its bullish move.

The strong Euro, however, weighs on the Dax. This is one of the main reasons why Dax lags the price action seen in the United States stock market. While the Dow Jones, the S&P500, and Nasdaq reached new all-time highs during the pandemic, the Dax had a difficult time doing so. Part of the explanation is the strong Euro that does not support higher equities.

While the US stock indices benefited from a lower USD, we cannot say the same about the Euro. The EURUSD trades now close to 1.20 when compared to 1.07 in March.

Dax Index Technical Analysis

The next leg higher in the Dax may diverge from the US equities. For instance, it could be triggered by a lower EUR, not necessarily a stronger USD.

Bears believing the ECB will be successful in keeping the EURUSD below 1.20 in December may want to say long on the Dax index, targeting a new high for the year. On the flip side, a move blow 13,000 would invalidate the pennant formation.

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.