DAX falls as the mood sours ahead of German inflation data
The DAX, along with its European peers, booked modest gains yesterday as the market mood improved following an intervention by the BoE into the gilt market.
The BoE pledged to buy unlimited long-dated bonds over the next two weeks to stabilize a jittery market. The relief rally was short-lived, and the DAX and other European indices are falling steeply again on Thursday.
Attention now shifts to German inflation data, which is expected to show that inflation in the eurozone’s largest economy continues to accelerate. Inflation is expected to rise to 9.4% YoY, up from 7.9%. This will pile pressure on the ECB to continue hiking rates aggressively.
Meanwhile, the escalating energy crisis in Europe could keep sentiment downbeat. German manufacturers are starting to struggle as the crisis deepens.
Where next for the DAX?
The rebound from 11860 the 2022 low was brief, and the price is falling. Sellers will look for a break below 11860 to extend the bearish trend. The RSI supports more downside while it remains out of oversold territory.
The first area of resistance buyers could come across is at 12430, the March low, ahead of 12600, the early September low. It would take a move over 13100 the 50 sma to negate the near-term downtrend.
USD/CAD rises ahead of US, Cad GDP data
USD/CAD fell 0.6% yesterday as the USD tracked US treasury yields lower. The weaker USD helped boost oil prices, which jumped over 4%.
However, the relief in the market, stemming from the BoE’s intervention in the gilt market, has been short-lived, and USD/CAD is on the rise again today.
Higher bond yields are helping revive USD demand, as investors are once again focusing on hawkish Fed expectations.
Meanwhile, recession fears again hurt the oil demand outlook, pulling oil prices lower.
On the data front, US Q2 GDP, the final reading is expected to confirm -0.6%QoQ annualised. Meanwhile, US jobless claims are expected to remain low at 215k. Fed speakers could also fuel hawkish Fed bets, lifting the USD.
Canada’s GDP will also be in focus and is expected to contract -0.1% MoM in July after rising 0.1% in June.
Where next for USD/CAD?
USDCAD fell back to find support on the multi-week rising trendline at 1.36. From here, the price is reversing higher, retaking the 20 sma on the 4-hour chart. The RSI supports further upside.
Having risen over 1.37, buyers will look for a move over 1.3750 ahead of 1.3830 and fresh 2022 highs.
Sellers will need to break below 1.36 to expose the 50 sma at 1.3530, and from here, the psychological level of 1.35 comes into focus.