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Bearish divergence in the DAX30 CFD – test of 12,450 ahead?

July 08, 2019 10:00

Source: Economic Events July 8, 2019 - Admiral Markets' Forex Calendar

Since the economic calendar is very thin for the start of the week, we want to focus on the technical side and have a look at the DAX30 CFD.

After Friday's NFPs came in at 224k and significantly above expectation, the German index nevertheless kept on sharpening a bearish divergence on H1 in the RSI.

In general, such a divergence is only an indication that the latest bullish momentum is about to diminish and Long engagements should be carefully considered from a risk-reward perspective.

Still, we see short-term bearish potential at least as low as 12,440/450 points, going hand in hand with the close of the gap which occurred after the announced truce between the US and China in their trade war at the G20 summit at the June 29.

If we get to see such a bearish push, traders should carefully watch the price action against 12,440/450: usually this region should act as a potential long-trigger, but if bulls fail to regain momentum and the DAX30 CFD keeps on dropping and falls below 12,400 points, the bearish divergence could be considered confirmed and further losses are a serious option.

On the other hand: if no bearish momentum is taken on and the DAX30 CFD takes out 12,650 points, further gains up to 12,850/900 are very likely:

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Hourly chart (between June 17, 2019, to July 5, 2019). Accessed: July 5, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the DAX30 CFD increased by 2.65%, in 2015, it increased by 9.56%, in 2016 it increased by 6.87%, in 2017 it increased by 12.51%, in 2018 it fell by 18.26%, meaning that after five years, it was up by 10.5%.

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD daily chart (between 23 March 2018 to 05 July 2019). Accessed: 05 July 2019 at 10:00 PM GMT

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