dax minor pull back before another potential upleg 1819712016

Daily Outlook, Fri 01 July 2016

(Click to enlarge charts)

What happened earlier/yesterday

The Germany 30 Index (proxy for the DAX futures) has staged an initial decline to test the predefined short-term intermediate support of 9510 (as per highlighted in our short-term technical outlook/strategy published yesterday, 30 June) in yesterday’s early European session (printed a low of 9512).

Thereafter, the expected bullish reversal occurred to hit our first short-term upside target/resistance zone of 9780/820 (printed a high of 9795) jolted by Bank of England governor Mark Carney’s dovish press conference. Please click here to recap our prior short-term daily technical outlook/strategy.

Key fundamental events to highlight as follow:

• Yesterday, Bank of England governor Mark Carney has called for a press conference, the second since U.K. voted for Brexit on 24 June 2016 to state that BoE may need to implement more monetary stimulus in this summer to offset the economic shock/deterioration triggered by Brexit. This speech implies a potential interest cut from its current benchmark rate of 0.5% in the next monetary policy meeting in July or August.
• In addition, the European Central Bank (ECB) is considering relaxing the rules for its on-going bond purchases QE programme to ensure enough debt is available to purchase.

Today key Germany/Eurozone economic data releases as follow:

• Germany Markit Manufacturing PMI for Jun @0755GMT (54.4 estimate)

Key technical elements

• The 4 hour RSI oscillator remains bullish above its first ascending trendline support (depicted in blue) and the 50% level. In addition, it still has room to manoeuvre to the upside before reaching an extreme overbought level. These observations suggest that short-term upside momentum of price action remains intact.
• The key short-term pivotal support is now at 9510 as per defined by a confluence of elements (the former minor swing low areas of 14 June/16 June 2016 and the 50% Fibonacci retracement of the most recent rally from Monday, 27 June low of 9213 to yesterday’s high).
• The next significant short-term resistance remains at 10180 which is the upper limit of the “Expanding Wedge” (depicted in dotted purple) in place since 21 April 2016 high and a Fibonacci cluster.

Key levels (1 to 3 days)

Intermediate support: 9650

Pivot (key support): 9510

Resistances: 9780/820 & 10180

Next support: 9230

Conclusion

Maintain bullish bias for potential final short-term push up. The Index may now see a pull-back first towards the intermediate support at 9650 with a maximum limit set at the tightened 9510 short-term pivotal support before a potential final upleg (to complete the minor bullish cycle from 24 June 2016 low) to target the 10180 resistance (upper limit of the “Expanding Wedge”).

On the other hand, failure to hold above the 9510 short-term pivotal support may negate the preferred bullish tone for a deeper slide to retest the last Friday, 24 June swing low area at 9230.

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