German Chancellor Angela Merkel has been one of Russian President Vladimir Putin’s toughest adversaries in the current standoff between EU and US on one side and Russia on the other. She has issued some of the harshest warnings and ultimatums to Russia. Russian stock market is tanking but German DAX is poised precariously too.

The Ukrainian crisis started to gather momentum in late February and about the same time, DAX failed to make a new high. Since then it has steadily fallen and is in the process to complete an un-even head-&-shoulder pattern on the daily chart. If the index does not close above the March 13th high of 9226 soon then there is good possibility that it may fall to the measured downside target of the pattern in 8400 range. If that happens then there are potential supports at 8500 and then 8100 levels.

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Since September 2011, DAX has been rising up in a narrow channel. The last two highs made in January and February show RSI divergences on weekly chart. The current price action does not show a clear risk of the channel line break. However, DAX also had formed a similar upward channel from the lows of 2009. That channel broke in August of 2011 – during another Euro crisis, the sovereign debt one. That break took DAX to 61.8% Fibonacci retracement level with couple of months.

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If the Ukrainian crisis begins to rival the Euro sovereign debt one and DA breaks the channel line then the 38.2% Fibonacci level retracement will take it to 7900 level and 61.8% to 6800 level. Above these levels is a strong support in mid-8100 formed by the highs reached in 2000 and 2007.