DAX Index Forms Break and Retest as German Risks Remain

The German DAX 40 index has struggled in the past few days. The index has dropped by more than 0.15% in the futures market as investors reflect on the rising number of Covid-19 cases in Germany. Other indices like the FTSE 100, Dow Jones, CAC 40, and S&P 500 have dropped after Jerome Powell’s nomination. 

What happened? There are three main concerns about the DAX index. First, in the past few days, the number of Covid-19 cases in the country has been rising. Indeed, Angela Merkel and her health minister have warned that the surge will continue in the coming months. This could affect companies in the index like Daimler and BMW.

Second, the index has retreated as investors take profits. Besides, DAX has risen by more than 20% this year. Finally, the market is looking at the incoming government. According to CNBC, a coalition will likely be announced in the coming days. Olaf Scholtz will become the successor to Angela Merkel while Annalena Baerbock and Robert Habech will become senior officials.

The worst-performing DAX index constituents on Monday were Zalando, Delivery Hero, Sartorious, Vonovia, and Siemens Energy. On the other hand, the top performers were Deutsche Telecom, BMW, Daimler, and Continental.

DAX index forecast

The German DAX rose above the key resistance at 16,000 a few weeks ago. It then jumped to a year-to-date high of 16,290. Now, the index is forming a break and retest pattern. This happens when an asset moves to retest the previous support level. 

Therefore, the index will likely fall and retest 16,000 and then resume the bullish trend. Besides, it is still above the 25-period and 50-period moving averages. As such, a bullish breakout will be confirmed when it rises above 16,290.

DAX Index