Two trades to watch: GBP/USD, DAX as dual talks stall & ECB in focus

Talks fail all around - no Brexit deal agreed over dinner & US stimulus talks stall. ECB in focus.

Brexit 7

  • Sentiment is weaker as European markets open on Thursday as Brexit talks, and US stimulus talks deadlock.
  • British Prime Minister Boris Johnson & EC President Ursula von der Leyen failed to bridge the existing gaps and extended the deadline for an agreement until Sunday. UK data dump, industrial production & manufacturing beat forecasts.
  • In the US Democrats & Republicans are at odds over an additional fiscal stimulus programme. US Covid daily deaths top 3000. Jobless claims are expected to rise to 725k vs 710k highlighting the need for a rescue package. CPI in focus.
  • The ECB is widely expected to ease monetary policy, adding €500 billion in PEPP and through more very generous loans to bank. 

GBP/USD tests 100 sma at 1.3350

GBP/USD trades -0.3% at $1.3350 having fallen through the 20 sma on the 4 hour chart, the pair is now testing the 100 sma on the 4 hour chart. A break-through here could see the pair approach the key band of 1.3295-1.33. This band has offered support to the pair since late November as GBP/USD consolidates after its November run up. A meaningful move below this key level would negate the current bullish trend and could see a sharper correction to test December lows at 1.3225 and the critical 200 sma at 1.32.

On the flip side, should 100 sma at 1.3350 hold then look for a move towards 1.3450 prior to 1.35.

Dax to hold uptrend?

Whilst the ECB are widely expected to ease policy, this is priced in. Any disappointment could see the Dax test support levels.

The German Dax futures trade -0.2% heading towards the European open. It continues to trade above the ascending trend line dating back to early November. The Dax has bounced off this trendline on several occasions over the past week indicating strength in the price, It also trades above its 50, 100 and 200 sma on the 4 hour chart, suggesting that more upside could be on the cards.

The Dax tested the 50 sma in early trade, lifting off the 13300 sma & round number support. A meaningful move below 13300 could pull 13275 into views, the confluence of the ascending trend line and the 100 sma. A break through here would negate the current uptrend with the bears set to target 13160 December’s low. 
The trend for now remains bullish with near term resistance seen at 13450 December high and a level which capped gains in September. Beyond, resistance and 9 month high of 13570 will become the bull’s target.


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