Dax Index – Weakness Suggests A Possible 500 Points Drop

The Dax index’s four-hour chart is quite a mess. It reflects the uncertainty surrounding financial markets in the month of May. In this particular case, the uncertainty is two-month-long, as the Dax index trades around the same levels for the past two months.

Curiously enough, at the same time, the EUR/USD exchange rate rallied several hundred pips. It rose from 1.17 at the start of April to over 1.2250 this week. Yet, the move higher had no impact on the Dax index.

If anything, we may say that the euro’s strength is weighing on the Dax index. Also, the upcoming German elections in a few months from now play a certain role in the Dax’s inability to move.

However, the index remains very close to its all-time high, so the bullish sentiment prevails. Yet, bears may have a chance to grab several points lower as an attractive risk-reward ratio appears on the horizon.

Dax Index Technical Analysis

Aggressive bears may want to go short at the market with a stop at the highs and to target the previous support area in the 14,800. Conservative bears, on the other hand, may want to wait for the market to break the lower edge of a triangle that acts as a reversal pattern, as a confirmation of the bearish reversal. On such a move, bears may want to short with a stop at the highs and a target set by using a risk-reward ratio bigger than 1:2.

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Dax Index Price Forecast

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