DAX technical analysis: bullish signal ahead of French elections

DAX Technical Analysis: The German DAX index is showing a bullish signal, setting the stage for potential gains on Friday and possibly in early next week once the French elections are out of the way. European markets have been supported so far today, with the US out celebrating Independence Day. Dip-buying continues to dominate, and the recent consolidation suggests a fresh rally is imminent.

Key Market Drivers

French Elections: Concerns have eased, and investors are more confident. Prominent political figures are urging voters to prevent Marine Le Pen's far-right National Rally from gaining power, which is positively impacting the euro and stock markets.
US Federal Reserve: Expectations are growing that the Fed will cut rates in September, especially after disappointing US macroeconomic data released throughout this week.
UK General Elections: Labour is expected to win decisively tonight, but a hung parliament could undermine investor confidence. Here’s my FTSE 100 analysis from earlier.

DAX Technical Analysis

Source: TradingView.com

Breakout from Descending Triangle

Breakout: The DAX broke out of a descending triangle pattern, surpassing key levels such as Tuesday’s high of 18333 and resistance around 18350 area.
Key Support Zone: The now broken 18333-18350 range is critical, where several technical indicators converge, including the 21-day exponential moving average.

Upside Targets

Target 1: 18653 – The most recent high before the latest drop.
Target 2: 18900 – Liquidity resting above the all-time high.

Trading Strategy

Dip-Buying: Despite macro concerns, buying on dips has been effective in 2024 for both the DAX and major US indices like the Nasdaq 100. That said, past performance in is not always a reliable indicator of future, so never forget your risk management.
Long-Term Outlook: The DAX is holding comfortably above its 200-day average and around its short-term 21-day exponential. The minimal pullback from the May all-time high and subsequent consolidation indicates readiness for another upward move.

Alternative Scenario

Support Failure: If support around 18333-18350 fails, the DAX may dip to the 18000-18050 area. However, given the bullish breakout this week, this is not the primary expectation.

Conclusion

The DAX index is poised for a potential rally, supported by easing concerns over the French elections and expectations of a US Federal Reserve rate cut. Key technical levels and trading strategies suggest that buying on dips remains a favourable approach.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.