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The German DAX index is back in recovery mode towards the best levels of the year, due to the release of much better-than-expected retail sales figures and factory orders data this week from Europe’s largest economy.
German retail sales more than doubled market expectations this week, with a 7.0 percent print, while German factory orders increased much more than economists expected, at 3 percent during the month of March.
On an annualized basis, Germany’s industrial orders jumped by 27.8 percent versus 5.8 percent during the same period. The strong data sets lifted the German DAX back above the 15,000 level, and also gave the euro currency a shot in the arm above the 1.2000 level as markets factor in more German economic growth.
Earlier this week, traders and investors used a price dip towards the 14,850 level to aggressively buy the German DAX. Global equity markets acted in tandem, after US Treasury Secretary Janet Yellen said that the US may need to raise rates.
Now that the drop has all but been reversed Ger30 traders are focusing on more gains ahead, and a potential breakout above the yearly high, around the 15,550 level. The 15,360 level was a key sticking point last month and an area of technical importance that bulls need to break in the near-term.
In terms of bullish targets, lower time frame analysis points towards the 16,000 level, while higher time frame analysis suggests that the German DAX could even trade as high as 18,000 over the medium-term horizon.
Sentiment is also supporting further gains in the GER30 index. The ActivTrades Market Sentiment tool is currently showing that 63 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 recently formed and is projecting an upcoming move towards the 16,000-resistance level.
According to technical analysis buyers need to maintain the price above the 15,500 level to activate the bullish pattern. Key downside spots to buy into pullbacks in the index are located around the 15,150 and 15,000 levels.
Sustained weakness under the 14,850 level would invalidate the bullish pattern and would likely cause a sharp decline towards the 14,100 area.
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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 in the midst of an ongoing bullish breakout from an ascending triangle pattern.
As long as the price trades above the 13,780 level the pattern is in play, meaning the index has huger upside potential. This would imply that the long-term target for the German DAX is around 18,000, meaning that the index could gain more than 3,000 points.
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