Two trades to watch: DAX, USD/CAD
Fiona Cincotta December 19, 2022 8:22 AM
DAX rises ahead of German IFO figures, USD/CAD falls as oil prices rises and ahead of Canadian PPI.
DAX rises ahead of German IFO business climate figures
After falling to a 5-week low last week, the DAX, along with its European peers, is heading higher on Monday.
The index fell last week, for a third straight week, after the ECB slowed the pace of rate hikes but signaled many more hikes to come in 2023, as inflation is set to be stickier than initially expected.
Today attention is turning to the German IFO business climate survey, which is forecast to improve again in December to 87.3, up from 86.7 in November. The improving sentiment is expected as inflation could be cooling and as the fears over the energy market stabilise. A rise in the business climate could suggest that the expected recession in Europe’s largest economy could be shallower than initially feared.
Where next for the DAX price?
The DAX ran into resistance at 14000 and rebounded lower, finding support at 13810, the December low.
The RSI supports further downside, below 50. look for a move below 13750, the 50 & 100 sma, and 13555 the 200 sma to open the door towards 13,000, the November low.
Meanwhile, buyers could be encouraged by the 50 S ma crossing above the 200 and 100 sma in a bullish signal. Resistance can be seen at 4200, the December 7th low, ahead of 14680, the December high. A move above here creates a higher high and brings 14,930, the March peak into focus.
USD/CAD falls as oil prices rise, CAD PPI is due
USD/CAD is falling after booking games last week. The pair ran into resistance at 1.37 and is rebounding lower, helped in part by stronger oil prices and a weaker dollar.
Canada’s main export oil trades modestly higher amid optimism surrounding demand recovery in China and as the US looks to buy back oil to replenish state reserves, which overshadowed worries of a global recession hurting demand.
Meanwhile, the U.S. dollar is edging lower despite a hawkish federal reserve meeting last week as the Fed upwardly revised its terminal rate.
Today there is no US economic data due to be released. Canadian PPI will be in focus and is expected to rise to 3% MoM, up from 2.4%.
The data comes ahead of Canadian inflation data later in the week.
US core PCE, the Federal Reserve’s preferred measure of inflation, will be in focus at the end of the week.
Where next for USD/CAD?
USD/CAD rebounded off support at 1.3520, recapturing the 50 sma and retesting the December high and the upper band of the rising channel at 1.37, a level that is proving to be a tough nut to crack.
Buyers need to push above 137 in order to bring 13820, the November high, into target.
Should sellers successfully defend the 137 level, the price could fall back towards 13560, the 50 sma, and 13520, last week’s low. I break below here creates a lower no ringing 1.34, the December low into focus ahead of 13230, the November low.
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