By: Fawad Razaqzada, Market Analyst
The DAX has broken below its 21-day exponential moving average, a short-term trend measure traders use to gauge whether buying pressure is still in control. DAX momentum can weaken well before the headline index does, and that break is the first visible evidence of it. The index itself has held up better than most of its peers through a stretch of rising energy costs and higher bond yields, which is exactly what makes the shift underneath worth watching. What follows is how that weakening shows up in the chart structure, and what sits beneath the index once the first tier of support gives way.
Fawad Razaqzada is a StoneX Media Market Analyst who covers foreign exchange, equity indices, and commodities with more than 12 years of trading and analysis experience across those markets. He works across macroeconomics, technical analysis, and price action together, which is the combination the DAX presents when energy-driven inflation, bond yields, and moving average structure all move at once.
"Now turning to the DAX index, it remains remarkably resilient from a technical analysis point of view", Razaqzada says, before setting out where that reading is starting to change. The DAX has broken below its 21-day exponential moving average, and the significance sits in the sequence, since momentum measures react before the index level does. As he puts it, the picture is becoming "a little bit weaker now with the DAX breaking below its 21-day exponential moving average recently, which is suggesting that momentum is perhaps starting to fade just a little". For a trader, the practical consequence is that a resilient headline index no longer confirms a resilient trend, and the burden of evidence shifts to the tiers of support below.
What sits underneath the DAX matters more once the short-term average has given way, and the pressures acting on it are arriving from outside the chart. Climbing crude oil prices feed into headline inflation, and rising U.S. bond yields have been moving higher on the same inflation concern, which together weigh on risk assets across Europe. According to Razaqzada, the European Central Bank adds a further layer, because if it "adopts a more hawkish tone that could support the euro, but it could put pressure on European equity markets". That combination is what thins the support structure, leaving successive tiers to absorb selling, and a decisive break through them "could open the way towards the 200-day moving average", the longer-term trend measure traders watch when short-term structure fails.
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Fawad Razaqzada, StoneX Media Market Analyst
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