Long DAX target remains intact

Price at time of writing – 8234

Little has changed on the DAX since my last update on 28 May, with the German index just 149 points lower. Although the index was affected by the recent global sell-off, the recommendation and target of 8972 remain intact.

Germany continues to be buffered by the aggressive, ongoing tactics of the Bank of Japann however. The Japanese terms of trade have improved dramatically following the huge devaluation in the yen. More than most other nations, Germany will feel this increased competition. It is not surprising to see that recent German economic releases have seen a fall in both exports and business confidence statistics. Nonetheless, Germany's world-beating manufacturers and exporters are masters at adjusting to changed and more challenging circumstances.

There is, however, a social downside to this recent rise in the EUR/JPY cross-rate. Those in the German corridors of power are not likely to be in any rush to assist in a rapid recovery for the struggling eurozone nations, because (the more they struggle, the weaker the euro will stay weaker as those nations continue to struggle. And Tthe weaker the euro, the more Germany will exports, improving . The more Germany exports, the better its economy and employment conditions). Overall, this is a winning formula for Angela Merkel ahead of looming German elections.

So long as the DAX can maintain the ground above the current support band (defined as 8026-8075), the index is in good health. Fulfillment of my minimum target at 8972 would complete a rise of 150% from the unique low of March 2009, providing a good opportunity to profit.

Recommendation: Stay long. Target  8972. Stop-losses can be activated on momentum below 7800.

German DAX chart

 

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