The DAX index is in a consolidation phase over the past couple of days as the traders evaluate their positions and also adjust their positions in accordance with the changed times. The consolidation is taking place just below the broken support region of 12550 and there has been no attempt yet to break through the region and this is likely to continue for a day or two.
DAX Set to Continue Consolidation
The FOMC minutes was largely a disappointment for the market and this could be seen in the way that the dollar has been weakening since the release of the minutes yesterday evening. Hence, we do not expect that to have much of an impact on the DAX and we expect the DAX to consolidate in the short term. The break through the support region has forced many of the bulls to rethink their strategy and many of them might be looking for a good place to exit the index and this is likely to add to the pressure on the index.
This is also one of the reasons why we have been seeing the index in a tight range over the past couple of days as the bulls begin to exit slowly and the bears begin to take control and this will last as long as the position adjustment needs to be done and once this is complete, we believe that we are likely to see the next stage of the bearish run. We also have the elections in Germany approaching us within a couple of months and though Merkel is in pole position as of now, we have seen many times over the last couple of years that 2 months could be a very long time in politics.
This could also be a factor weighing on the minds of the investors who would want to ensure that they dont caught out by sudden changes in the political winds and hence they would want to play it safe in the medium term. Looking ahead to the rest of the day, we do not have any major economic news from Germany and so expect some more consolidation and ranging for today.
This article was originally posted on FX Empire