Two trades to watch: EUR/GBP, Dax

EUR/GBP rises after disappointing UK CPI, PMIs. Dax under pressure in risk off trade.

Charts (5)

EUR/GBP rises after disappointing UK CPI, PMIs up next 

UK CPI disappointed increasing 0.1% MoM in February, whilst this is up from January’s -0.2%, it was well below the 0.5% expected. On an annual basis CPI came in at 0.4%, down from the previous month’s 0.7% and well short of 0.8% expected. 

Eurozone & UK manufacturing  and service sector PMIs due shortly. 

More broadly the UK’s covid vaccine programme has been significantly faster than the EU’s favouring sterling across the past few months. 

Where next for EUR/GBP? 

After trending lower since the start of the year EUR/GBP found a floor last week at 0.8540. 

The price rebounded off this level, crossing above the descending trend line dating back to mid December and also crossing above the 20 sma on the daily chart. 

The price is encountering strong resistance at 0.8650 a level which has capped gains over the past 2 weeks. A move beyond this level is needed  in order for the buyers to attack 0.8700/10 round number and the 50 sma. Beyond here the buyers could gain momentum. 

On the flip side, failure to push over resistance at 0.8650 could see the price retest the 20 sma at 0.86 before re-targeting 0.8530 the yearly low. 

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Dax trends lower in risk off trade 

The Dax, along with its European peers are heading for a lower start in risk off trade. 

Covid concerns are back after Germany extended lockdown restrictions at the start of the week. 

German & Eurozone manufacturing and service sector PMIs coming up.  

Manufacturing has been a bright spot across the pandemic. Data expected to show the contraction in the service sector easing. 

Where next for the Dax? 

The Dax trades above its ascending trend line dating back to early November, it also trades above its 50 & 100 sma on the daily chart confirming an establish uptrend. After hitting an all time high of 145800 last week, the bulls have lost momentum. 

However, the shooting star candle points to a bearish reversal. The sellers are currently testing support at 14595, last week’s high a break through here could negate the near term uptrend. A move below this level could then see last week’s low 14400 come into play. It would take a move below 14250 which is a strong support level of the ascending triangle’s upper band and its confluence with the lower band for sellers to gain momentum and set the Dax up for a deeper selloff towards 13640 the 100 sma and February lows. 

On the flip side, should 14600 hold the bearish reversal would be unconfirmed and considered a false signal, a rebound back towards the all time high could be on the cards before the bulls take aim at 15000 round number.  

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