Dax Technical Analysis 26/09/2016

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Good morning traders!

Digesting the news from last week, the BoJ decided to raise its inflation target above the previous target of 2% which appears to be the first major central bank to do this in the current economic climate of low inflation (and growth). Analysts and traders are trying to speculate the detail, but at the moment the specifics on how this can be achieved is a little hazy.

The Fed decision (FOMC) was pretty much what people expected, the committee can’t agree on but Yellen wants to see more before raising rates. There is still a lot of US expectation that December will see a rate hike, but many analysts are doubting it, suggesting June 2017 at the earliest, some believe nothing until 2018.

It’s generally now expected that USD has peaked and there is a medium-term expectation of USD weakness. Analysts have suggested sell equities on rallies based on the impact of the softness in earnings cycle and weaker US economy.

This morning on the Dax I had a buy signal at 10520, I had marked that out as a retracement zone and there was rising trend line support on the short time frames, so as volume began to pick up, but I got stopped out pretty quickly as we sliced straight through support, perhaps pulled lower by the SPX breaking support, and bears are fully in control today. We have taken out the daily S3 (pivot point indicator) and actually, I have just spotted (as i type this) that even that level has now gone. Just another Monday for the Dax!

So I am watching a break below 10400 (trend defining level on the 5-minute chart) which can open up a move down to 10100. That’s based on the longer term trend from the 4 hour chart, as we are making lower lows and lower highs. 10400 is the daily S4, so it’s unusual for us to break below that today, not impossible, just unusual, it could provide an interesting bounce setup. The bullish bias becomes incredibly difficult to maintain in these situations.