Dax Forecast Today 10/02: DAX Struggles After Rally (Chart)

(MENAFN- Daily Forex)

• The German DAX initially tried to rally during the trading session on Friday but turned around to show signs of weakness before it was all said and done.
• This is the same thing that we had seen in the United States, where indices initially look like they were ready to rally, but then gave back gains as it appears that the federal Reserve may have to deal with more hawkish data than anticipated.

What's interesting is that the top line number for employment came in cooler than anticipated, but the participation number in the United States came out hotter than anticipated, and then again, we also have the internals such as the Average Hourly Earnings coming out hotter than anticipated. In other words, the Federal Reserve probably will stay fairly tight with its monetary policy, and while that could help weaken the euro over the longer term, the reality is that despite the fact that Germany is heading out of a recession, it still has to worry about whether or not it can export to weaker countries.

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I would not read too much into this pullback other than it might end up offering a buying opportunity. I still see the €21,500 level is an area of potential support, followed by the €21,100 level. The fact that we pull back on Friday isn't necessarily concerning mainly due to the fact that we had been so strong all week that it makes a certain amount of sense that traders will have wanted to keep some of the gains. After all, who knows when it's going to be that Donald Trump analysis tariffs on the European Union, but one would have to assume that's coming sooner rather than later.

If we do turn around a break above the highs of the Friday session, then we will make a serious attempt to break above the €22,000 level. Anything above there has more of a“buy-and-hold” field to it, but I think at this point in time we had rallied so much of the last couple of months that a little bit of digestion and sideways action probably makes quite a bit of sense.

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