CAC 40 Forecast: Continues to Test Support

• In my daily analysis of European indices, the CAC 40 stands out as particularly interesting.
• Currently, it is testing a major support level around the €7300 mark—an area that has held significance multiple times in the past.
• I believe this level will remain crucial. If the index breaks below €7300, it could pave the way for a further decline toward the €7200 level. 

Technical Analysis

The technical analysis for this pair is rather interesting, as the €7300 level is an area that has been important, so I would assume that there is a certain amount of “market memory” at this area. That being said, we have the 50 Day EMA just below the €7500 level dropping, offering a potential resistance barrier. Over the last 7 or 8 sessions, we have seen the market go back and forth as we tried to determine what the next move is. Moving below the €7300 level would be very negative, opening up the possibility of a significant drop.

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However, if we were to break above the €7500 level, then it’s very likely that the CAC will continue to go higher, perhaps reaching the €7750 level. This is an area that was a recent swing high, so I think it could offer quite a bit of a barrier if we do rally at this point in time. Whether or not we can break out remains to be seen, but it is worth noting that we have been consolidating and grinding back and forth quite recently.

In general, the CAC 40 tends to be highly influenced by the idea of exports, especially the luxury goods sector, and then of course it has a certain amount of influence put upon it by the currency markets in the form of the euro. The French goods become cheaper, in general that should help the stock market, but what we are seeing now is both the euro and European indices dropping, and that suggests that traders are worried about the European economy. Because of this, I think the CAC could bounce from here, but it is somewhat limited in its scope of possibilities to the upside.

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