The week starts in a cautious mood, EZ PPI inflation due
| DAX => The index rises towards 13000
USD/CAD => The pair rises towards 1.29 AUD/USD => The pair holds above 0.68 |
DAX looks to trade data & PPI inflation
The DAX fell -2.3% last week, marking its fifth consecutive weekly decline.
The German index fell below 13000 after inflation in the eurozone reached a record high and as recession fears rose. At the annual ECB forum in Sinatra, ECB Governor Christine Lagarde voiced her commitment to reining in surging consumer prices and suggested that the central bank could hike rates at a faster pace after July.
Today the index is rising as investors remain cautious and as attention turns to the German trade balance. Eurozone wholesale inflation is also due to be released. However, given the US public holiday, trading could be muted in the afternoon session.
| EZ PPI | Expected: 36.7% (0.5%) | Previous: 37.2% |
Where next for the DAX?
The DAX has been trending lower since the start of the year.
The index recently ran into resistance at 14700 and rebounded lower falling below the 50 & 100 sma and the falling trendline support. The price hit a low of 12620 which should now be treated as an immediate support. The RSI is in bearish territory. Sellers need to break below 12625 to target 12470 the 2022 low. Buyers will look for a move over 12870 the June 24 low to expose the falling trendline resistance and last week’s high around 13440. A move above here creates a higher high.
USD/CAD rises ahead of the BoC’s outlook survey
USD/CAD traded flat across the previous week but the loonie is one of the best-performing currencies among major peers across the first half of the year thanks to a 42% rise in oil prices.
The jump in oil prices helped the loonie remain resilient as the USD rose higher on hawkish Fed bets and safe-haven flows. Last week the pair traded flat as crude oil pushed slightly higher and the US 10year treasury yield fell to 2.89%. Fed officials continued with the hawkish rhetoric and Canadian GDP came in in line with forecasts.
Today the pair is rising on a US public holiday and as oil prices edge lower. The BoC’s business outlook survey is set to be released. Later this week both US and Canadian labour market data is due.
RBA/USD falls ahead of RBA rate announcement
AUD/USD tumbled just shy of 2% last week as risk sentiment plunged pulling the risk-sensitive Australian dollar lower.
Furthermore, gold, a key Australian export fell for a third straight week, weighing on the AUD. On the other hand, the USD rallied on hawkish Federal Reserve comments and safe-haven flows on the prospect of slowing global growth. Today the pair is starting the weak in a muted fashion amid a public holiday in the US and despite upbeat Australian job data which showed that growth is still outpacing supply.
The Aussie looks ahead to the RBA meeting and Chinese services PMI data. The RBA is expected to raise rates by 50 basis points, although given surging inflation a 75 basis point rate raise can’t be totally discounted.
| Australian job ads | Actual: 1.4% (0.4%) | Previous: 1% |
Support can be found at 0.6760 (2022 low) and 0.67 (round number).
Resistance for the pair can be seen at 0.69 (Friday’s high) and 0.6970 (20 sma).
