Two trades to watch: DAX, USD/CAD

DAX rises, German consumer morale deteriorates. USD/CAD consolidates at yearly high ahead of Canadian retail sales, API crude oil stockpile data.

Charts (3)

DAX rises, German consumer morale deteriorates

The DAX, along with its European peers, is rebounding on turnaround Tuesday after steep losses in the previous session.

Stocks are rising across the board even as Omicron news remains downbeat and following dismal GFK consumer confidence data.

Omicron continues to spread rapidly across the globe, with tighter restrictions being implemented in German retailers and services. Global growth is expected to slow owing to tighter restrictions.

German GFK consumer confidence is expected to deteriorate further in January as the spread of the virus clouds  the outlook. The GFK consumer confidence index dropped to -6.8, down from -1.8.

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Where next for DAX?

The DAX continues to trend lower from its all time high at 16290. The selloff saw the DAX fall through its 50 & 200 sma before finding support at 15060.

The price is extending its recovery from the 15060 low, immediate resistance can be seen at 15517 the 200 sma, 15600 the falling trendline and 15760 the 50 sma. A move above here could negate the near term down trend.

Meanwhile a move above 15870, the December high could see buyers gain traction.

DAX chart

USD/CAD consolidates at yearly high ahead of retail sales, API data

USD/CAD is holding steady after gaining 1.3% since Friday, consolidating around the yearly high of 1.2950.

The loonie has been pressurized by falling WTI oil prices, Canada’s main export. Oil prices have dropped around 6% since Friday as the rapid spread of Omicron and tighter restrictions hurt the oil demand outlook.

Today the risk on mood and the weaker USD is helping the price of oil rebound offering to support the loonie.

Looking ahead Canadian retail sales are expected to rebound in October rising 1% MoM after falling -0.6% in September.

API crude stockpile data is also due to be released and could drive WTI oil prices.

There is no notable US data due to be released.

Where next for USD/CAD?

USD/CAD trades within a rising wedge which is a bearish reversal pattern. A break below 1.2840 could spark a deeper selloff towards 1.2760 December 17 swing low  and 1.2609 the December low.

It would take a move over 1.2950 to break above the rising trendline resistance bringing 1.30 psychological level into focus.





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