European markets traded higher across the board on Monday as hopes for a US-China trade-deal heightened following positive headlines indicating that the two nations intend on signing their phase 1 agreement and that the US would grant its companies license to do business with Huawei. The DAX traded 1.35% higher to reach a 17-month high. Moreover, economic data was in favor of the bullish moves as manufacturing PMI figures out of Germany and the Eurozone came in above expectations yet remain in contraction territory. Today there are no major economic releases out of the Eurozone to provide direction which will leave influence to US economic data and mainly trade sentiment to determine direction.
The DAX scored a hefty gain of 175 points to close at 13136 on Monday. The price sustained its move above the 13000 resistance level and neared towards the 13200 resistance level. With the daily and 4H RSI readings indicating overbought conditions, we should see the DAX eventually retrace to meet lower support levels while the uptrend remains intact. However, the DAX’s strong momentum may see intra-day pullbacks find buying pressure to maintain its rally. Look to the 13070 level to provide support in case price dips below its closing. Below 13070, price would drift lower to find support at 13000 near the 20-period MA. On the other hand, a trade above the resistance zone of 13180/13200 would signal a bullish continuation and bring the January 2018 high of 12600 into play.
Resistance: 13200 /13338