RELATED/ORIGINAL POST: DAX30 vs. EURUSD (WATCH)
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) 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 year – break-out zone in numbers: 11’150 – 11’200.
The intermaket perspective supports this scenario: we have EURUSD just recently crossed below its 7-month trend-channel led by a momentum trendline breach and in combination 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).