Two trades to watch: DAX 40, USD/CAD

The DAX 30 expands to DAX 40 and comes under pressure along with European peers amid rising prices, energy crisis and concerns over central banks tapering. USD/CAD rises as oil prices fall and Canadian's head to the polls in Federal elections

Germany

DAX expands to 40

The DAX 30 which trades as the DAX 40 for the first time today is under pressure along with its European peers amid concerns over rising prices, the European energy crunch and more broadly the Fed tapering timetable which is in focus ahead of the FOMC later this week,. 

German PPI rose by more than expected 1.5% MoM versus 0.8% forecast but down slightly from 1.9% in July. Annually PPI rose 12% up from 10.4% in July and ahead of the 9.2% forecast. 

Looking ahead the German elections will be held on Sunday, the first without Angela Merkel. The polls will be in focus across the week.


Where next for the DAX 40? 

The Dax reached an all time high of 16,000 mid-August and has struggled since. However, the selling pressure ramped up last week taking out both the 50 sma and the 100 sma, key supports which have been important ads the Dax rallied across the year. 

The RSI is supportive of further losses whilst it remains out of oversold territory. 

Immediate support can be seen at 15300 the June low, 15045 the July low and 14800 the May low.  

Any recovery would need to retake the 100 sma & 50 sma at 15600 and 15750 respectively in order to alter the bearish bias and refocus on 16,000. 

 

A look at USD/CAD on Federal election day in Canada  

Canadian’s go to the polls today in Federal election after Justin Trudeau called an early election. Current Prime Minister Justin Trudeau could just cling to power but he is likely to lose his bid for parliamentary majority. The polls show both Prime Minister Justin Trudeau’s Liberals and Erin O’Toole’s Conservatives are likely to see a repeat performance of the 2019 result. 

The election is not expected to cause any large ripples in the currency market unless the results threaten to change economic policy or the government’s approach to the pandemic which has been to support high levels of vaccinations. This is unlikely. 

Separately oil prices are slipping lower on the strong US Dollar and rising rig count. 

The US Dollar trades at 3-week highs as attention turns to the Fed. US oil rigs rose by 9 to 512, its highest number since April 2020 dragging oil prices lower. 

Learn more about the Canadian Dollar

Where next for USD/CAD? 

USD/CAD hit a monthly high hitting 1.2800. The currency pair trades within an ascending channel dating back to early June. It trades above its 50 & 100 sma, whilst the RSI is also keeping bulls hopeful. 

A move above 1.28 the daily high and July high could open the door to 1.29040 the August high. 

Strong support can be seen at 1.26 round number, the 50 sma and the lower band of the rising channel. This could prove a tough nut to crack. 

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