The GER 40 Futures (EUREX: FDAX) are riding a wave of optimism, mirroring the buoyant performance of the underlying DAX 40 index. Frankfurt stocks recently reached a new all-time high of 18,633 points, fuelled by positive German economic data and investor anticipation of crucial inflation figures from Europe and the US.
This positive sentiment is further bolstered by a GfK survey revealing an improvement in German consumer sentiment heading into April. Fewer households feel compelled to save, suggesting a potential increase in consumer spending, which could further accelerate economic growth.
Technical Analysis
The 4-hour technical picture for the GER 40 Futures paints a bullish outlook. The index is currently trading at 18,615, comfortably above the upward-sloping 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line). This confluence of moving averages acting as support highlights the strong underlying bullish momentum.
Adding credence to the bullish case is the RSI (Relative Strength Index), currently hovering at overbought levels (75.77). While this suggests a potential short-term pullback, the overall trend remains positive.
Short-term trading opportunities could exist towards the 23.60% Fibonacci extension level at the 18,814 price level should the price action sustain its push above the recently reached all-time high. A confirmed breakout above this resistance level could open the door to further gains at the 38.20% (18,926) and 50.00% (19,017) Fibonacci extension levels.
However, caution is advised as the RSI reaching overbought territory might trigger profit-taking, and a retracement could see the price action break below the 20-SMA and leave the 18,168 price level firmly in play. A confirmed break below this initial support level could see the price target at the 17,867 and 17,640 support levels.
Summary
The current market sentiment leans towards optimism, fuelled by positive economic data and a potential dovish pivot from central banks. This positive sentiment translates into increased buying pressure in the futures market, pushing prices higher. However, the overbought RSI reading suggests a potential correction if bullish momentum weakens.
Sources: TradingView, Trading Economics, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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