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The DAX continues to recover from last week's sell-off, supported by easing energy concerns and improving short-term momentum. While buyers have regained control of the four-hour trend, the index is now approaching a critical resistance zone between 25,450 and 25,600. A decisive break higher would strengthen the bullish case and open the door toward 25,800, while failure at resistance could quickly revive downside pressure.
The global equity markets remain under pressure and with oil surging higher again this week, we have even more reason to remain cautious. Already, the S&P and Nasdaq were running support from only a handful of hyperscalers and AI stocks. But even these indices have started to take notice of the deteriorating market breadth and global indices. Still, for me, the ongoing weakness is becoming more evident in the Dow and the small-cap Russell 2000 indices, and as such I will continuing watching these markets closely to provide a more accurate signal about the health of the stock markets.
Brent’s recovery above $100 is reinforcing inflation concerns and pressure on bond yields. Depleted inventories could limit oil’s downside even if a US-Iran deal emerges.
The 10-year Treasury yield is testing a resistance zone respected since the 1920s, as bearish RSI divergence signals fading upside momentum.
Oil prices and the U.S. dollar are both on the front foot as elevated energy costs feed Fed warnings that inflation may prove sticky.
Donald Trump’s speech at the UN seems to have poured cold waters on any hopes of a deal. Crude oil, the US dollar and bond yields all bounced back from their lows, causing fresh pressure on foreign currencies, European indices and to a lesser degree precious metals.
US equity index futures surrendered an earlier midday bounce in London, as investors struggled to look past an increasingly uncomfortable macro backdrop. Higher oil prices and rising government bond yields are combining to put renewed pressure on risk assets, while the absence of a clear catalyst for improvement makes it difficult to see why investors would materially increase equity exposure at current levels.
The ECB’s decision on Thursday comes between two important US inflation releases, leaving EUR/USD forecast exposed to developments on both sides of the Atlantic, as well as the situation in the Strait of Hormuz.
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