Potential signal:
- I am a buyer on a DAILY CLOSE above 18,650 level.
- I would have a 300 EUR stop loss, but would be aiming for a move to the 19,050 EUR level.
It's easy to see that the German index continues to have plenty of buyers on each and every dip. We have a trend line that we've been following, and perhaps even more importantly, it looks like we are just simply digesting some of the overall noisy upward volatility that we had seen until the last couple of months, as traders are trying to understand where the European Union is heading overall.
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If we can break above the 18,650 euro level, then I think the market is likely to go looking to the 19,000 euro level. Short-term pullbacks will, of course, deal with a major trend line. And underneath there you have the 18,000 euros level, an area that of course will attract a lot of attention as it is a large round, psychologically important number. Breaking down below there then opens up the possibility of a reach towards the 200 day EMA underneath, which is a trend-defining indicator that a lot of people will be cognizant of.
Germany Continues to Lead the Rest of Europe
Looking at the DAX, you have to keep in mind, this is where a lot of money goes to first in the European Union. So, it's a great leading indicator for other indices, such as the IBEX in Spain and the MIB in Italy and the CAC in France. This is the strongest economy in the European Union in general. So, a lot of times, Germany just leads the way for everybody else. If this market starts to rally, the trade isn't only to buy the DAX, but it might be to look towards other countries to try to generate even more alpha. That being said, I am positive as the European Central Bank is loosening its monetary policy, but I also recognize we have a lot of noise ahead of us.
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