With Germany being at the heart of the European economy and a large part of it’s prospects dependent on exports, a weaker Euro is required to received the maximum benefit of it’s goods produced. Today I will have a brief look at the current technical setup for the Euro which may provide a potential trading opportunity on the DAX Index.
After making lower highs since February, the pair has broken it’s year-to-date support level of 1.2184, with the RSI confirming the price weakness. At current levels the price is nearing the 200-day simple moving average at 1.2010, a level which was last tested 12 months ago and which is often a major buying level and could see support for the pair.
With the Euro having weakened versus the US Dollar, the DAX has found support, rising from 11800 to 12650, which is just below the 200-day simple moving average. Should we see the Euro come under further pressure, this would help the DAX make further gains (potentially a move just above the 200dma). Over the medium term, the price is potentially developing a head and shoulder top pattern with the next move most likely the bear leg of the right shoulder. This is where traders could potentially have an opportunity to short/sell the index.