Marshall Gittler
Trading Analysis
DAX futures
The dollar traded unchanged or lower against its G10 peers during the European morning Wednesday. It was lower against EUR, GBP, NOK and CHF, in that order, while it was stable vs AUD, SEK, JPY, CAD and NZD.
The German Ifo Business climate index rose for the fifth consecutive month in March, driven most likely by the low energy prices. The expectations index also rose, in line with the strong ZEW survey released last week. All three indices were above or in line with their expectations and suggested that the gradual improvement in German business confidence continues. It also suggests that business investment picked up in Q1 and fuels optimism about an economic recovery. The positive developments from low oil prices and a weaker euro will slowly feed through the real economy going forward and will provide further support to domestic sentiment.
Despite the strong data, the bulls were unable to push EUR/USD above 1.10. A clear break of that area is needed for the corrective wave to continue, perhaps towards our 1.1160 resistance line.
DAX futures moved somewhat higher during the European morning Wednesday, but hit resistance at the upper bound of a possible descending triangle formation and pulled back. Given that the price failed to overcome that boundary and remained within the pattern, I would expect the forthcoming wave to be negative and challenge once again the 11800 (S1) key support line, which happens to be the lower line of the aforementioned triangle. However, although I would expect the forthcoming wave to head south, the overall trend remains positive. DAX is trading above both the 50- and the 200-period moving averages, and above the uptrend line taken from the low of the 21st of January. I would get confident on the overall upside path though if, after the pullback, buyers seize control again and force the price to break above the upper bound of the triangle.
Support: 11800 (S1), 11630 (S2), 11410 (S3).
Resistance: 12060 (R1), 12200 (R2) (key resistance near the all-time high).
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