Two trades to watch: Gold, DAX

Gold nuggets
Fiona Cincotta
By :  ,  Market Analyst

Gold slips ahead of Powell’s speech.

Gold is edging lower after three days of gains as investors await Federal Reserve Powell’s speech at Jackson Hole.

The USD is seeing revived demand on expectations that Federal Reserve Chair Powell will deliver a hawkish address. Hawkish Fed rhetoric this week has set the scene for what to expect.

With inflation still four times the Federal Reserve’s 2% target level, the Fed Chair will likely reiterate the central bank’s commitment to lower inflation. He could also use this opportunity to put dovish pivot hopes to bed and dampen any speculation of lowering rates next year.

Those hoping for guidance on September’s rate hike will likely be disappointed. With another jobs report due before the FOMC meeting, Powell is unlikely to spell out whether the Fed will go for a 50 or 75 basis point hike. The market is currently pricing in a 63% probability of the latter.

A more hawkish tone from Fed Chair Powell could power the USD higher and pull Gold lower.

US core PCE is due to be released just before Fed Powell’s speech and is forecast to tick lower to 4.7% from 4.8%.

Where next for Gold prices?

The recovery from the weekly low of 1727 failed to rise over the 50 sma at 1765. A move over this level is needed for the bulls to extend gains to 1807, the August high, before bringing the 200 sma at 1838 into focus.

Sellers will be encouraged by the failure to rise above the 50 sma, the modest move below 50 on the RSI, and the 20 sma crossing below the 50 sma. A move below 1727 will create a lower low, extending the bearish trend.

 

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DAX rises despite consumer confidence hitting a record low

The German index is heading higher for a third straight session. Yesterday the index gained 0.4% after better-than-expected German GDP data and a smaller than expected decline in the German IFO business climate survey.

Today cautious optimism is helping lift stocks, which are shrugging off the dismal German consumer confidence data. The GFK consumer confidence fell to -36.5 in September, well below the 31.8 forecast and steeply down from August’s -30.9 reading.

Worries over rising energy bills are hurting morale as the energy crisis in Europe deepens. With the energy crisis expected to worsen over the winter months, consumer confidence could well plunge lower. It is no longer a question of if the German economy will tip into a recession but more a question of when and how deep will it be?

Looking ahead, Europe will likely take its cues from the US and Powell’s speech.

Where next for the DAX?

As the DAX extends its rise from the weekly low the index trades caught between the 20 & 50 sma. The price trading below the multi-month falling trendline and the RSI below 50 favours the bears. Sellers need to break below the 50 sma at 13230 and 13080 to create a lower low towards 12800.

Buyers will need to rise above 13600 the 20 sma to bring 14000 the August high into focus. A move over here creates a higher high.

 

 

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Related tags: Trade Ideas Dax Gold Indices

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