(Click to enlarge charts)
What happened earlier/yesterday
The Germany 30 Index (proxy for the DAX futures) has challenged the 10026/40 short-term pivotal resistance (bull trap) and shaped the expected sell-off towards the range bottom (support) at 9780/30.
Please click on this link for a recap on our previous daily short-term outlook/strategy.
Today key economic data release for EMU zone as follow:
1) Euro zone Consumer Price Index for Apr @0900GMT
Key elements
- The Index is now coming close to the minor range bottom at 9780/30 where it may see a risk of a minor rebound again.
- The hourly (short-term) RSI oscillator, a gauge of price momentum is now coming close to an extreme oversold level. This observation suggests limited potential downside price action at this juncture as short-term downside momentum is being “overstretched” where it may mean revert.
- The intermediate short-term resistance now stands at 9955 which is the descending trendline in place since 21 April 2016 high.
- The key short-term resistance (pivot) remains at 10026/40.
- The next short-term support after 9780/30 rests at 9620 which is defined by the 50% Fibonacci retracement of the rally from 11 February 2016 low to 21 April 2016 high.
Key levels (1 to 3 days)
Intermediate resistance: 9955
Pivot (key resistance): 10026/40
Support: 9780/30 & 9620
Next resistance: 10165 (weekly pivot).
Conclusion
Yesterday’s expected decline is now coming close to the target (minor range bottom/support) at 9780/30 where the Index may shape a minor rebound first towards 9955 with a maximum limit set at the 10026/40 daily short-term pivotal resistance before another potential downleg materialises to target the next support at 9620.
However, a clearance above the 10026/40 pivotal resistance may negate the bearish tone to see a squeeze up to test the 10165 weekly pivotal resistance
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