Two trades to watch: DAX, GBP/USD

DAX falls as Russia-Ukraine tensions hurt risk sentiment. German PMIs due. GBP/USD rises from two week low, PMIs and politics in focus.

Charts (1)

DAX falls as Russia-Ukraine tensions hurt risk sentiment

The DAX along with its European peers is falling amid escalating tensions between Russia and Ukraine.

Russia -US talks last week failed, prompting the US to order diplomatic families out of Ukraine. Expectations are rising that Russia could send troops into Ukraine imminently.

Russia is the EU’s 5th largest trading partner and top energy supplier, complicating the situation for the EU should sanctions need to be applied to Russia.

Separately, German PMI data is expected to show that activity in the service sector contracted further in January to 48, from 48.7 in December. Omicron restrictions, supply chain disruptions and rising prices have played a part in dampening activity.

Learn more about the DAX

Where next for the DAX?

The DAX trades within a descending channel dating back to January 5. The price also trades below the 50 & 200 sma on the 4-hour chart, which, in addition to the bearish RSI are keeping sellers hopeful of further losses.

Sellers will be looking for a move below 15400 last week’s low, December 22 low and the lower band of the falling channel. This could open the door to 15060 the December low.

On the flip side, buyers could look for a move over 15750 January 20 high and the 200 sma at 15785 to negate he near term down trend. A move above 15930 could see the bulls gain traction.

DAX chart

GBP/USD rises from two week low, PMIs in focus

The pound is wavering around 1.3550 after picking up from a two week low hit last week. UK PMI data is in focus. After business activity growth, as measured by the composite pmi, slowed in December on Omicron restrictions to 53.6, activity is expected to pick up again in January to 55.

Uncertainty over PM Boris Johnson’s future could build as the enquiry into party gate is due to be released at some point this week

Fed jitters ahead of the FOMC which kicks off tomorrow and geopolitical fears on Russia – Ukraine tensions are boosting the safe haven USD.

Looking ahead US PMIs are due to show manufacturing and services activity slowed slightly in January to 56.7 and 55 respectively, down from 57.7 and 57.6.

Learn more about the pound

Where next for GBP/USD?

GBP/USD rallied from late December, running into resistance at the 200 sna. The price rebounded lower off this kep resistance level at 1.3750 but has since found support from the 100 sma at 1.3540.

Should the 100 sma hold, bulls will be looking for a move over 1.3620, a key level last week, to build back towards 1.3750.

Should the price break below the 100 sma, 1.35 round number and 1.2450 the 2022 low could offer some support.

 gbpusd chart

gbpusd chart

 

 

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account