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DAX incredible rally eyes May high, but can the bulls hold on?

DAX Xetra (cash index)

After a remarkable rally during yesterday’s session, the DAX is suddenly eying a test of the key May high at 13,204.

Fundamental events can sometimes completely take over and the dovish take from the ECB monetary policy decision yesterday hit the euro and subsequently allowed the DAX to soar higher by 217 ticks on the day.

This move higher has shown little sign of reversing today either.

Momentum signals on the daily chart are swinging positively now with the RSI above 60, MACD lines bullishly crossing and Stochastics also decisively gaining.

Technically the market ideally needs to settle down before getting a true gauge of whether this move will be sustained.

Hourly momentum is stretched near term following the sharp gains and this could begin to limit the upside, or even drive a slight unwind.

  • There is breakout support near term on the hourly chart at 13,040 but for now, the bulls are still running, with 13,204 in sight.
  • With such stretched conditions, it would be difficult to say that a breakout above 13,204 would be another explicit buy signal to chase, so a much higher conviction move would be for the market to settle and then push higher.

With volatility elevated near term, it is difficult to trade the DAX with conviction for now.

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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.