Two trades to watch: DAX, Oil

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Fiona Cincotta
By :  ,  Market Analyst

Dax falls ahead of IFO business sentiment data.

After gaining 3% last week, the DAX is set for a weaker start on Monday, extending the selloff on Friday.

PMI data in Europe and the US showed that business activity contracted in July. The German composite PMI fell to 48, its lowest level in more than two years.

Recession and growth fears weigh on sentiment today as attention turns to the German IFO business sentiment data, which is expected to continue falling, painting a gloomy picture. The business climate index is expected to fall to 90.5 in July, down from 92.3. The expectations element of the survey is expected to fall to 83 from 85.8.

Where next for the DAX?

The rebound from the 2022 low of 12385 ran into resistance last week at 13450 and has edged lower. The prices remain above the 20 sma and the falling trendline support but below the 50sma. The RSI is giving away few clues at neutral.

Sellers will look for a move below the falling trendline at 13040 and a move below the 20 sna at 12025 to negate the near-term uptrend. A move below 12385 is needed to extend the bearish trend towards 12000.

Buyers need to retake resistance at 13450, last week’s high, and 13500, the 50 sma, in order to create a higher high and bring 14000 round number into target.

 

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Oil extends declines with the FOMC in focus

Oil prices are falling at the start of the week, extending losses from last week, when the commodity dropped 2.5%, its third week of losses.

Recession fears have hurt the demand outlook. Investors are fretting that aggressive interest rate hikes from the Fed will slow growth in the US, the world’s largest oil consumer. The Fed’s two-day meeting starts tomorrow.

In addition to recession fears, worries of a slow recovery from COVID lockdowns in China are also hurting the demand outlook.

Oil prices have been volatile in recent weeks as investors weigh up demand concerns against tight supply as Western sanctions restrict Russian oil supplies.

Where next for oil prices?

WTI crude oil has been trending lower since mid-June, forming a series of lower lows and lower highs.

The price trades below its falling trendline, its 50 sma, and is testing support of the 200 sma. This, combined with the bearish RSI, suggests that there could be more downside to come.

Sellers will look for a move below 88.90, the July low, to create a lower low, bringing 84.50, the October high, into play.

On the flip side, buyers will look for a move over 100.00 the psychological level. A move over 101.00 could create a higher high, opening the door to 103.40, the July 8 high, and 108.66, the 50 sma.

 

 

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