Two trades to watch: DAX, GBP/USD

DAX rises ahead of German IFO business climate data, GBP/USD rises ahead of BoE’s Bailey.

Charts (6)

DAX rises ahead of German IFO business climate data

The DAX, along with its European peers is rising at the start of the week, after booking mild losses last week.

Risk sentiment is improving, although concerns over rising inflation and higher interest rates keep the market mood in check.

German IFO business climate data is due to be released shortly and is expected to fall to 91.4, down from 91.8 as soaring input costs drag on business sentiment.

Last week German PPI inflation jumped to a record high of 33.5%.

Where next for the DAX?

The DAX is extending its recovery from 13280 the 10 May low, rising above its multi-month falling trendline and recapturing the 50 sma. The RSI moving above 50 is keeping buyers hopeful of further upside.

Buyers need to rise above 14280 last week’s high in order to expose the 100 sma and the April high of 14600. A move above here could open the door to 14930 the March high.

On the flipside, failure to hold above the 50 sma and the falling trendline at 14000 could see the DAX head back towards 13500 the April low.

DAX chart

GBP/USD rises ahead of BoE’s Bailey

GBPUSD rose 1.8% last week on the back of strong UK economic data and a falling USD.

Last week’s data showed that the UK jobs market remained firm, inflation rose to 9% and retail sales unexpectedly rose 1.4%.

The USD sold off firmly last week amid growing fears of a recession in the US as inflation surged and economic data, in addition to company earnings fell.

Today Brexit optimism is helping the pair rise ahead of a speech by BoE’s Andrew Bailey. The BoE recently acknowledged that there is still some way to go in policy tightening.

Meanwhile, the USD selloff continues today despite US 10-year treasury yields ticking higher, as concerns over a recession in the US remain.

Where next for GBP/USD?

GBP/USD has extended its rebound from the 2022 low of 1.2160 rising above the multi-week falling trendline and the 20 sma. This combined with the bullish crossover on the MACD gives buyers hope of further gains.

Buyers will need to break above 1.2640 the May high to extend the bullish trend and expose the 50 sma at 1.2815.

On the flip side, immediate support can be seen at 1.2420 the 20 sma and April low ahead of 1.2330 Friday’s low.

 

gbpusd chart


 

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