DAX, Oil Forecast: Two trades to watch

DAX looks to German GDP data 

• DAX rises despite manufacturing prices falling 
• German GDP 2023 is expected to fall -0.3% vs 1.9% prev. 
• Commerzbank & Deutsche bank M&A chatter 
• DAX  consolidates below 16800 

Dax is starting the week on the front foot, extending gains from Friday amid an quietly upbeat mood in the market. 

Investors are shrugging off data which shows that German wholesale prices fell sharply again in December dropping -2.6% after falling -3.6% in November. The data points to a weakening demand environment. 

Attention is shifting to German GDP data for 2023, which is expected to show the economy contracted by 0.3% after growing 1.9% in 2022. Weaker than forecast data could raise concerns of a prolonged recession in the eurozone's largest economy, which could hurt demand for riskier assets such as stocks. 

Banks are expected to be in focus with M&A chatter intensifying. Deutsche Bank and Commerzbank, which aborted an attempt to merge five years ago, could be prepared to give the move another attempt, rekindling speculation over another deal. 

Trading volumes could be slightly lower than normal, given the bank holiday in the US. 

DAX forecast – technical analysis 

The DAX continues to trade within a familiar range, consolidating below 16800. A rise above here is needed to reinforce the bullish view and bring 17000 into focus. 

A fall below 16445 is needed for sellers to gain control and create a lower low and bring 16000 into the picture. 

Oil steadies after last week’s gains

 

• Oil jumped 2% as the risk premium rose last week 
• Volumes could be low due to the US public holiday 
• Oil tests support at 72.50 

Oil prices were holding steady after strong gains last week as traders remained focused on supply concerns in the Middle East following strikes by allied forces on Houthi targets in Yemen last week. 

Oil jumped 2% last week to the highest level this year as the risk premium on oil rose amid escalating geopolitical tensions. 

So far, there has been no direct impact on oil supply, and the situation would need to deteriorate significantly for supply to be hit. However, attention is likely to remain on the Middle East after the Houthi threatened a strong and effective response to the US strikes. 

Meanwhile, in Libya, protests over corruption threatened to shut down two more oil and gas facilities. 

In the US, power and natural gas companies are expecting extreme cold weather over the Martin Luther King Day holiday weekend to cause record gaff demand.  

Trading volumes could be low owing to the US public holiday. 

Oil forecast – technical analysis 

Oil attempted to break out above the multi-month falling trendline. However, the long upper wick suggests that there was little demand at the higher levels. 

The price is testing support at 72.50, the November low, and the falling trendline support. A break below here opens the door to 69.30, the January low, ahead of 67.00, a level hit three times in June. 

Should the falling trendline support hold, buyers could look to retake 75.00, last week’s high, to bring 76.20, the December high, into play.