Two trades to watch: Dax hits fresh all time high, DXY ahead of NFP

The Dax hits a fresh record high, although it is starting to look overbought. DXY attempts to extend rebound, however meaningful break through 90 is needed.

Charts (3)

Where now for the Dax after hitting fresh record highs?

  • After a strong close on Wall Street and record highs in Asia overnight, the Dax is also extending gains to fresh record highs over 14,000 amid vaccine optimism and hopes of a strong economic recovery.
  • German industrial production +0.9% vs 0.7% exp.
Technical analysis Dax
The Dax trades above its 20, 50 & 100 sma on the daily chart a signal that the bulls are very much in control. Furthermore, we have seen the 50 sma cross above the 100 sma which is another strong bullish signal. 

However it is worth noting that the RSI is at 70 crossing into overbought territory so aggressive bullish trades should be made with caution. The RSI in overbought territory suggests that the price could ease back before continuing to advance higher.

Immediate resistance can be seen at 14120 today’s high and a fresh record high ahead of 14500 round number,

On the flip side, immediate support can be seen 13580 January low, a break through here will see the 50 sma come into play at 13220 before support at 13000 the 100 sma and psychological support.

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US Dollar Index Tests 90.00 ahead of US jobs report
  • US Dollar Index is pushing modestly higher ahead of the European open, extending gains from the previous session. 
  • The closely watched jobs report is expected to show a continued weakening in job creation with just 71k new jobs expected in December down from 245k in November.

Read my colleague Matt Weller’s NFP preview piece

The US Dollar Index has been trending lower since late March last year and whilst the trend on the daily chart is still bearish, the 4 hour chart is showing signs of a reversal at least in the near term.

DXY has picked up off its fresh multi year low of 89.20 and heading towards the key psychological level of 90.00.

DXY pushed above its 50 sma and its 100 sma on the 4 hour chart whilst the RSI is also in bullish territory above 50 but below 70 the over bought level. These signals suggest there could be some more upside on the cards.

However, that would depend on whether DXY price can push above immediate resistance at 90.00. A break above this key level could bring 90.44 into focus. A break above this level could negate the current bearish trend and bring 90.60 into play before 91.00.

On the flip side look out for 89.2 January low and multiyear low, prior to 89 a key level in 2018 and 88.6 a high from 2010.
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