Two trades to watch: DAX, GBP/USD

DAX rises ahead of German inflation data, GBP/USD hovers around 1.17 ahead of US data.


DAX rises ahead of German inflation data


The DAX  is rebounding after losses yesterday. The DAX  closed 0.6% lower, extending 4.5% losses from the previous week. Concerns over an aggressive Fed, keeping rates higher for longer weighed on sentiment, as did the temporary shutdown of gas flows from Russia.

Today the index, along with its European peers, is heading higher, lifted by news that Germany and Europe have reached their gas storage target some two months ahead of target. The news sent European gas prices sharply lower. The EU plannedto fill 80% of its gas reserves  by November.

Attention now shifts to German inflation and Eurozone consumer confidence data. German inflation is expected to rise again to 8.8% YoY in August. With PPI at 37.2%, consumer prices are likely to keep rising.

Meanwhile, consumer confidence is expected to rise to -24.9 up from -27 in July. Hot inflation and improving consumer morale are likely to boost bets that the ECB will hike rates by 75 basis points in September.

Where next for the DAX?


The DAX fell to a 6-week low of 12705 yesterday and is rebounding higher today. The long lower wick on the candle suggests that there was little acceptance at the lower price.

Still the chart remains bearish as the price trades below the falling 50 & 100 sma and the RSI trades firmly below 50 but still not in oversold territory.

Sellers will need to break below 12700 to extend the bearish trend.

Meanwhile, buyers will be looking for a move over 13000 to expose the 50 sma at 13250 and then the 100 sma at 13620. It would take a move over 14000 will create a higher high.



GBP/USD hovers around 1.17 ahead of US data


GBP/USD is edging higher as it continues its recovery from new 2022 lows reached yesterday. Mounting recession concerns after Ofgem raised the energy price cap by 80% hit demand for the pound. The move will see household disposable income fall significantly, which is bad news for an economy dependent on the service sector.

Meanwhile, the USD is easing slightly after the USD index rose to a fresh 20-year high yesterday following Fed Chair Powell’s hawkish comments at Jackson Hole.

Attention is now turning to US consumer confidence which is expected to rise off the record low of 95.7 in July to 97.9 in August.

US JOLTS job openings are expected to show a slight slowdown in vacancies to 10.4 million, although this is still indicative of a very tight jobs market.

Improving consumer confidence and a tight jobs market will encourage the Fed to continue to act aggressively raising rates.

Where next for GBP/USD?


GBP/USD has risen off the 2022 low of 1.1650 and trades around 1.17. The chart remains bearish trading below the multi-month falling trendline. The RSI supports more losses while it stays out of oversold territory.

Sellers will look to break below 1.1650 to extend the bearish trend towards 1.1412 the 2020 low.

On the upside, resistance is seen at 1.1760 ahead of 1.1985 the 20 sma. A move above here would negate the near-term down trend. A move above 1.2280 is needed to create a higher high.





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