The German index dropped to open the Friday session, as we continue to see a lot of external concerns when it comes to German companies. This is a market that continues to see volatile but supported moves.
DAX
The German index fell initially during the trading session, only to turn around and show signs of life. The hammer, of course, is a bullish sign of support, and now we find the market sitting just below the 50-day EMA. If the market were to break above the 50-day EMA, then it opens up the possibility of an attempt to overcome the 25,000 euro level. Breaking above the 25,000 euro level opens up the possibility of a move to the 25,200 euro level. Anything above there opens up a huge move to the upside, just waiting to happen. Short-term pullbacks continue to show signs of life on these dips as traders look to Germany to put money to work in the European Union first, most of the time.
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Industrials will, of course, be a major driver, and we will have to watch what's going on with the energy markets and the situation in the Middle East because that has such an outsized influence on German industrials, as Germany imports massive amounts of liquefied natural gas from the region. At this point, it looks like we have fought hard to stay within the range that we've been in for about 6 or 7 trading days, and it shows a real resiliency in this market. I do not have any interest in shorting this pair, but if we broke down below the lows of the Friday session, you could see the euro drop towards the 200-day EMA near the 24,374 euro level. It is not until we break down below 24,000 euros that I would be concerned.
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