Dax index evolves in a relatively tight range for the entire summer. The 13,000 level proves to be a key area moving forward, and the recent consolidation resembles an irregular triangle that should act as a continuation pattern.
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Dax Advancing Despite a Stronger Euro
One of the most interesting market events during the coronavirus pandemic was the rise in the stock market prices worldwide. Let by the United States, other stock market indices from around the world bounced from the March move lower and got back at the highs.
There is a strong belief among technicians that the stock market is a leading indicator of economic growth. More precisely, it signals an economic turnaround about six months before it actually becomes evident to everyone. Therefore, the bias is that the economic growth will return and that the stock market prices signal the turnaround earlier.
In the case of the Dax index, it followed closely on the U.S. stock market’s footsteps. However, ahead of today’s ECB meeting, the Dax index stands more chances to advance some more.
ECB Dovish Tone to Prop the Stock Market Higher
The thing is that the Dax index rose from the lows, but at the same time, the Euro strengthened across the FX dashboard. If in the United States, we can find an excuse in a lower USD triggering higher equity prices, that is not the case for the Dax index.
Therefore, if the ECB delivers a dovish message today, the chances are that the Dax index will bounce in response.
Dax Index Technical Analysis
From a technical point of view, the index forms an irregular triangular pattern. In such a pattern, the longest wave is the b-wave, and the measured move equals its length.
If we project the measured move from the breakout point, we find much higher levels for the Dax index for the period ahead. As such, bulls may want to wait for a break of the 2-4 trendline before going long with a stop-loss at the previous higher low and a take-profit given by the triangle’s measured move.