- Eurozone CPI Beats Estimates. Actual 9.1% vs 9% Expected, as Cost of Living Crisis Worsens.
- European Natural Gas Prices Resume Advance, as Traders Weigh Supply Risks.
- German Unemployment Rate Increased to 5.5% vs 5.4% Expected.
DAX 40: Indecisive as Red-Hot Eurozone Inflation Stokes Rate Hike Fears
The DAX struggled in European trade continuing its decline since yesterday’s rejection of the key 13000 level. The index flip-flopped between gains and losses, falling 200 odd points from early session highs, weighed down by worsening unemployment in Germany and record-setting Eurozone CPI numbers. German unemployment rate meanwhile increased to 5.5% from 5.4%, as expected.
For all market-moving economic releases and events, see the DailyFX Calendar
Last Friday saw a sentiment shift thanks to hawkish rhetoric from Fed Chair Jerome Powell, with market bets on a shallower trajectory for Federal Reserve tightening receding, raising the prospect of more losses for stocks and bonds in an already difficult year. This was seen by Friday’s selloff which seems set to continue, following some early week gains. The weekend and early this week saw hawkish rhetoric from several European Central Bank members with market pricing quite firmly on the hawkish side, currently 70bp is priced in for September and 160bp by year-end, next week’s central bank meeting is key.
The New York Session: Forex Trading Tips
Energy shares and utilities led declines in Europe, extending their selloff to a fourth session as investors continue to fret over Russian gas supplies. Europe’s gas prices have backed down from record highs but are now climbing once more as Russia has shut off gas flow along the Nord Stream pipeline to Germany, for the second time in as many months. The risk of blackouts, rationing and a severe recession persists if Russia further slashes gas deliveries or delays the pipeline outage.
Currently, we are in very difficult conditions to determine the market’s next moves. There are many conflicting economic signals which are making the monetary policy path extremely difficult to determine. We have seen constant shifts from members of all major central banks as their rhetoric seems to shift on the back of every significant data release.
DAX 40 Daily Chart – August 31, 2022
Source: TradingView
From a technical perspective, we had a huge bearish candle close last week which closed as a marubozu candlestick with no downside wick. Such a candle usually indicates further downside ahead which might still occur as the week progresses. On the daily timeframe we have seen a rejection yesterday from resistance area 13100 before closing back below the key psychological 13000 level. We currently trade below the 20, 50 and 100-SMA with the gradients not boding well for the index. If we are to see any upside from here, we first need a daily candle close above the psychological level. A further rejection of the psychological level could result in a test of the YTD lows.
Key intraday levels that are worth watching:
Support Areas
•12820
•12700
•12400
Resistance Areas
•13000
•13105
•13275
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Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter:@zvawda
