Markets gaped on Sunday, particularly against the EUR after five ministers in Berlusconi’s party have resigned from the government coalition. Stocks futures are also lower, but based on German Dax wave structure and the USD Index price action remains in downtrend while stocks could form a bullish reversal.

Last week we posted the 4-hour bullish count for German DAX to our members and mentioned a possible retracement to open gap zone. Well, price is now lower and very close to that “reversal zone” so be aware of a move higher especially if we consider only a three wave pull-back from latest high which we think it was a wave four.

The German Dax and EUR. USD have a positive correlation as we can see on the chart below, so if European stocks will rally then the EUR/USD should find a bid based on latest data. Meanwhile of course USD is expected to fall further aagints other rivals as well, which is fine if we consider a bearish trend on USD Index.

Forex Analysis by Gregor Horvat at ForexPros. com