Dax Technical Analysis 07/03/2016

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Good morning traders!

We are still trading inside a holding pattern at the moment after momentarily threatening to break the range to the upside on Friday. We did reach a new high on Friday, but were rejected and thrown back inside the range in the early afternoon of trading.

This week we have a number of pieces of event risk which can be interesting to watch out for if you are looking for a catalyst to the recent price action. Watch out for EUR GDP tomorrow morning at 10am GMT, GBP GDP estimate, on Wednesday, and the big one on Thursday, the ECB interest rate decision and press conference. ECB Thursday.

There are many theories out there to discuss the possibilities for the ECB, but I am keen to see if they continue to lower rates into negative territory. Markets have certainly been hoping for new easing measures and in some respects have already priced in the expected easing, so even if they do cut rates, it’s possible that the market has already accounted for it with the recent equity rally we have seen. Therefore unless ECB come out with something unusual, surprising investors, I am wondering is there more downside risk for the Dax, based on the higher probability of a disappointment?

Many analysts are expecting a bit of a dollar tumble as the Fed hiking policy looks set to slow, they believe EUR has room to move into unless ECB surprises allowing the EURUSD to continue climbing. If the big events disappoint, then there can be a lot of opportunity as a bearish trader.

On the daily chart, we have been struggling to progress beyond too much past 9800 and the cluster of recent dojis could be seen as bearish given the recent rally. The 4-hour chart allows bears a short setup with stop losses above 9927 looking to short targeting 9600. A break below 9600 can open up a move towards 9350. A break above 9927 can open the door to test the 10000 handle again. You could argue that there is bearish divergence on the Stochastic indicator on the H4. The 30-minute chart is at the bottom of the pitchfork and either looking to bounce from current levels, creating a perfect long entry for bulls, or break lower and allow bears the chance to target the 9600. The 5 minute chart is still a strong range.