Recession risks keep risk sentiment weak
DAX => The index hovers around a 3-month low
BTC/USD => The crypto falls below 20k
GBP/USD => The pair rises towards 1.2250
DAX steadies ahead of PPI
DAX fell 4.6% last week, marking its third straight week of losses.
The index trades down over 8% so far in June. The index fell as risk sentiment took a turn for the worse on recession fears after a week of big central bank action. Inflation in Germany remains at record levels and with energy prices, and wholesale inflation numbers still rising, it looks unlikely to ease soon. German whole sales inflation data today is expected to confirm the record preliminary print.
The slowing of Russian gas supply is adding to the negative sentiment surrounding the German index as German energy company Uniper said it is getting less than 60% of the gas ordered.
| Ger. PPI YoY May | Expected: 33.5% (0%) | Previous: 33.5% |
Where next for DAX share price?
After briefly rising above the multi-month falling trendline, the DAX trades back below this key support turned resistance.
The DAX ran into resistance at 14700 and fell lower. The break below the 20 and 50 sma and the falling trendline, coupled with the bearish RSI points to further losses. The 20 sma is crossing below the 50 sma in a bearish signal. Sellers need to break below 12945 the June low to extend the selloff towards 12430 the 7 March low. On the upside, resistance can be seen at 13250 the May 10 low ahead of 13600 the falling trendline support.
Bitcoin slips below 20k
Bitcoin fell to a low of $17, 611 over the weekend, its weakest level since December 2020, but rebounded back above 20k fairly rapidly.
BTCUSD trades down 60% so far this year while crypto peer ETH/USD has lost 74%. Bitcoin’s break below 20K, although un-sustained so far, suggests that confidence in the industry has collapsed.
The sector has been hit by increasing signs of stress following the plunge in stablecoin Terra last month. Since then, lending company Celsius froze withdrawals and transfers between accounts. Other crypto firms have started to cut staff numbers. Coinbase announced last week that it culled 18% of its workforce. Meanwhile, crypto hedge fund Three Arrows Capital said it had suffered large losses.
GBP/USD rises ahead of train strikes
GBP/USD fell 0.7% across last week despite the BoE raising interest rates by 25 basis points.
The move was expected and took the benchmark lending rate to 1.25% as the central bank attempts to rein in inflation. UK CPI rose to 9% in May and is expected to rise further to 11% in the coming months, according to the BoE. UK CPI for May is due on Wednesday. In addition to rising inflation expectations, growth is also stalling. The pair is rising today as the UK braces itself for the biggest train strike since 1989 as train workers are set to walk out for three days.
The strikes will hit the UK economy, which is already on the verge of a recession. Meanwhile, the USD was boosted last week by a hawkish Fed which hikes rates by 75 basis points and suggested that there were more hikes to come. There is no high impacting data due today. However, BoE policy makers are due to speak.
Support can be found at 1.22 (round number) and 1.2165 (May low).
Resistance for the pair can be seen at 1.2305 last (week’s high) and 1.2440 20 sma)
