European Indices traded lower on Monday as the latest partial US-China trade deal is in doubt following reports that China is reluctant to sign on the agreements made and is seeking to hold further talks. Once again trade uncertainty returns which would limit the upside potential on the DAX as it has exhibited a strong rally last week and is near previous highs. Moreover, lack of progress in Brexit negotiations dimmed hopes of a breakthrough ahead of the EU summit on Thursday. Today, the Eurozone and Germany publish ZEW economic sentiment figures which will impact price action during the day however the key driver will remain to geopolitical headlines. In addition, The DAX may take directional cues from Wall Street as a slew of US corporate banks are set to release earnings reports today.
The DAX scored a modest loss of 25 points to end at 12486. The price briefly dropped below the 12450 level and reached an intra-low of 12387 before edging back above the mentioned level. Bullish momentum has stalled and the index is seen consolidating Friday’s hefty gains as the 4H RSI reading remains in the overbought territory. We have yet to see the RSI reading exit the overbought territory coupled with a sustained move below 12450 to signal selling pressure and a short-term reversal. Unless we see a break below the low at 12387 or a break above the high at 12561 , the DAX would continue its range-bound price action.
Resistance: 12560 /12600