The German DAX index is trading towards all-time highs as the ongoing breakout above the 15,000 level remains in full swing. The notion that the ECB and the FED will continue to offer massive amounts of QE despite rising inflation is fuelling the latest weekly advance.
This week the German Economy Ministry sounded increasingly bullish towards the German economy and inflation. This, alongside a dovish sounding Jerome Powell is propelling the GER30 towards the 16,000 level.
The German Economy Ministry said “The German economy is recovering strongly and is expected to return to its pre-crisis level in the third quarter. The supply bottlenecks for intermediate products have a dampening effect; however, they do not impair the positive underlying dynamic of the overall economy.”
It should also be noted that the German central bank expects that the German economy could grow 3.7% this year and reach pre-pandemic levels before the third quarter, further underscoring why DAX traders are so optimistic.
Of course the new COVID-19 Delta variant could provide some headwinds if new lockdowns are in forced in top eurozone nations, such as Germany, France, and Italy take place. Additionally, the DAX30 remains vulnerable is global economic growth dwindles, particularly China and UK, who buys significant amount of goods from Germany.
With the GER30 making gains above the 15,700 level the index could be set to test the 16,000 level and potentially much higher. I actually believe the GER30 could trade as high as 17,000 or 18,000 over the coming months.
Sentiment is also supporting further gains in the GER30 index. The ActivTrades Market Sentiment tool is currently showing that 75 percent of traders are bearish towards the index. Watch out for further gains in the GER30 while retail traders remain on the wrong side of the recovery and the overall price trend.
German DAX Short-Term Technical Analysis
The four-hour time frame shows that a bullish inverted head and shoulders pattern has been activated and the DAX is quickly moving towards the patterns key upside targets which are 16,000 to the 16,050-resistance level.
According to technical analysis buyers need to maintain the price above the 15,500 level to keep the bullish pattern activated. GER30 bulls should continue to buy into pullbacks towards the 15,500.
German DAX Medium-Term Technical Analysis
Looking at the higher time frames the daily chart shows plenty of scope for upside potential, due to the fact that the index is over half to the target of a massive, inverted head and shoulders price pattern.
This would ultimately imply that the long-term target for the German DAX is around 18,000, meaning that the index still has further and substantial upside potential.