- The French CAC has been all over the place during the trading session on Monday, but the one thing that I think you can take away from the chart is the fact that even though we sold off after the initial gap higher, the reality is that buyers were more than willing to step in and pick up the equity market in France.
- The resulting candlestick is a bit of a hammer, and it does suggest that perhaps we are getting closer to the end of the pullback at this point.
- The 50-Day EMA has recently offered significant support, and I think it’s probably only a matter of time before we continue to go higher.
Technical Analysis
The 50-Day EMA is only one of the things I’m paying attention to. Quite frankly, you could make an argument for a longer-term bullish flag here as well. Beyond that, the hammer shaped candlestick of course suggest that buyers are coming to pick this market up. The €8200 level above could be the target, with a little bit of attention paid to the €8133 level above the short-term resistance. Underneath, I see the €7900 level as offering a bit of a floor. As long as we can say above there, I have to believe that this remains a “buy on the dips” type of scenario.
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Keep in mind that the CAC 40 index is full of luxury brands, so a lot of this comes down to cheap money in the European Union. The CAC continues to be one of the major indices that traders will follow in the region, but it does play second fiddle to the DAX in Germany, so look to Germany to see where the CAC may end up going. As a general, they do move in the same direction, and it must be said that the DAX looks fairly strong as well. With this being the case, I have no interest in shorting this market and it would not surprise me at all to see the CAC reach the €8250 level before it is all said and done, which happens to be where we pull back from originally.
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