Two trades to watch: DAX, EUR/USD
Fiona Cincotta June 23, 2022 8:18 AM
German DAX falls as Powell warns of recession & ahead of PMIs. EURUSD looks to PMI data, Powell's testimony.
DAX falls ahead of PMI data
The DAX along with other European indices is heading lower, extending the selloff from the previous session.
Federal Reserve Chair Powell warned that a recession was more likely, feeding into slowdown concerns that the market has been fretting about since the Fed meeting last week.
Today attention is turning to PMI data, with the German manufacturing PMI expected to show a slowdown in activity to 54, from 54.8. Service PMI is expected to fall from 55 to 54 in June.
Concerns over energy and supply security are also in focus. As Russia cuts gas supplies to Germany, industries are having to accelerate efforts to find alternatives to keep factories running and limit the economic impact.
Where next for the DAX?
The DAX ran into resistance at 14700 and rebounded lower, falling through its 20 & 50 sma and the falling trendline resistance.
The 20 sma is crossing below the 50 sma and the bearish RSI are keeping sellers optimistic of further losses.
Sellers need to break below 12950 to extend the bearish trend towards 12450 the 2022 low.
Buyers will look for a move over 13445, the weekly high, ahead of 13600 the falling trendline resistance. It would take a move over 13700 to create a high.
EUR/USD looks to PMIs, Powell in focus
The EUR/USD is rising for a fourth consecutive day. The pair pushed higher yesterday despite eurozone consumer confidence falling to an almost record low.
Instead, Fed Chair Powell’s warning of a recession dragged treasury yields and the USD lower.
Today the pair is rising as attention turns to Eurozone PMI data, which is expected to show a slight slowdown in activity. The composite PMI is expected to slip to 54 in June from 54.7.
Later in the day, US PMI data is expected to show a slight increase in the composite PMI to 53.7 up from 53.6 and Jobless are due to edge mildly lower to 226k, from 229k.
Federal Reserve Chair Powell will once again be testifying before congress. Whilst his comments will be watched closely he is unlikely to add much to yesterday’s or last week’s comments.
Where next for EUR/USD?
EURUSD rebounded off 1.0507 the June 15 low before running into resistance at 1.0610 the 50 sma and falling lower again.
Failure to break over the 50 sma and the bearish RSI keeps seller’s hopeful of further losses. Sellers will look for a move below 1.0470 the weekly low to open the door to 1.0350 the June low.
Buyers will look for a move over the 50 sma at 1.06 with a move over here at 1.0635 the June 10.
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