With the recent development in the German DAX Index and its inverse correlation to EURUSD, technicals look promising for some further upside until year end.
After the double-bottom formation built during Q3/2015, DAX30 was able to strongly rebound to (almost)Â 11’000 levels. The measured price target given by that double-bottom formation suggests of upside to 11’650 (+6%). Nevertheless, the momentum is still very strong but slightly overbought, suggesting of not chasing the upside to heavily and instead wait for a breach of the resistance line (blue) starting off April this yearÂ – break-out zone in numbers: 11’150 – 11’200.
The intermaket perspectiveÂ supports this scenario: we have EURUSD just recently crossed below its 7-month trend-channel led by a momentum trendline breach and in combinationÂ suggests of further downside in the next couple of weeks / till year end. First support could be found at 1.08 with further downside and a test of the 12-year low at 1.0462.
Conclusion: do not chase upside in DAX30 too aggressively, rather wait for break-out confirmation! Slowly short EURUSD at current levels (Risk Stop: 1.1150).