Two trades to watch: DAX, Gold

DAX looks to PMI data

DAX is rising cautiously higher, extending gains from the previous session, as investors digest the latest German consumer confidence data and look ahead to the PMI data.

German consumer confidence is set to improve again in February, Rising to -33.9, up from -37.6 as inflation cools and as an energy supply crunch looks increasingly unlikely.

Attention will now turn to German PMI data, which is expected to show that the services and the manufacturing sector contracted at a slower pace in January. Meanwhile, the composite PMI, which is considered a good gauge for business activity is expected to rise to 49.6, up from 49 in December, the figure 50 separates expansion from contraction.

Improving PMIs could support the view that a recession in Germany may not be as deep as initially feared.

Where next for the DAX?

After rising to an 11-month high, the DAX is consolidating above 15000. The index continues to trade within a multi-month rising channel. However, the RSI is on the brink of overbought territory.

Buyers could look for a rise above 15270, the 2023 high, to extend gains towards 15360 the upper band of the rising channel, and on to 15730 the February high.

Immediate support can be seen at 14900, last week’s low, ahead of 14700, the December high, with a break below here negating the near-term uptrend and exposing the 50 sma, at 14475.

Gold reaches a 9 month high ahead of US PMIs

Gold is extending gains for a third straight day, rising to a fresh 9-month high. Expectations that the Federal Reserve will slow the pace of rate hikes to 25 basis points and the market pricing in two rate cuts by the end of the year have pulled the USD to a month low and are boosting the USD-denominated, non-yielding gold.

Attention is now on US PMI data due later today. Expectations are for the services and manufacturing activity to contract at a faster pace in January, falling to 44.5 and 46.1 respectively. The composite PMI is forecast to fall to 44.7, down from 45.

Weak data could pull the USD lower and raise concerns over a US recession, which could lift Gold safe haven demand.

Where next for Gold prices?

Gold continues to trade above its multi-month rising trendline, its 50, 100 & 200 sma. The 50 sma has crossed above the latter two in a golden cross bullish signal. The RSI. However, is in overbought territory so buyers should be cautious.

Buyers need to rise above resistance at 1942, the 2023 high, in order to push towards 1950 round number and 1966, the March 24 high.

Sellers could look for a move below 1911, yesterday’s low to open the door to 1900 the rising trendline support, and ahead of 1870 a level that has offered support and resistance on several occasions across the year.