Rising inflation unnerves the markets, UK GDP due
DAX => The index falls below 13500
EUR/GBP => The pair rises over 0.84
Gold => The commodity heads towards $1980
DAX falls, ECB turns hawkish
The DAX closed lower again on Thursday, shedding 2.9%, after rallying 8% on Wednesday, and is pointing to a lower start again today.
The German index is set to rise 2% across the week, a week that has been particularly volatile as investors digest the latest eastern Europe headlines. While the hope of a diplomatic solution to the Ukraine crisis lifted the index on Wednesday, that optimism was proved to be misplaced as the latest round of peace talks ended in stalemate yesterday.
With oil prices up 18% since the start of the month concerns over rising inflation and slowing growth prompted a more hawkish than forecast ECB.
Today, Ukraine headlines will remain in focus, as well as German inflation, the final reading.
Where next for DAX?
The DAX trades well below is 50 & 100 sma and its falling trend line dating back to mid-February.
The RSI supports further downside; however, the long lower wick suggests that the price isn’t finding acceptance at the lower price.
Sellers would need to break through support at 13300 to open the door to 12960 the low March 4 and bring 12430 the 2022 low into play.
Buyers could look for a move over 13750 the falling trendline support to open the door to 14000, a move above here could see buyers gain momentum.
EUR/GBP looks to UK GDP
EUR/GBP edged 0.1% lower yesterday after three straight days of gains.
The euro failed to capitalise on the surprise hawkish move by the ECB, whereby the asset purchase programme will be wound down faster than initially expected, paving the way for a potential rate hike in Q3.
Instead, geopolitical concerns denominated, putting the euro back under pressure.
Today the pair is moving higher, attention will be on German inflation data, although this is a second reading, which is usually less market moving, and UK GDP data.
The UK economy is expected to have grown mildly in January as Omicron concerns started to ease However, looking forward UK GDP is likely to be hurt by the Ukraine crisis.
Gold falls to weekly low after US inflation rises
Gold prices rose modestly yesterday after steep falls on Wednesday and are falling again today.
Even so across the week, Gold is set to rise 0.7%, adding to 4% gains from last week, in a week that has seen some wild swings.
The price has traded $110 range rising to $2070, a level last seen in 2008 before falling to $1980 where it trades now. The price has weakened after US inflation data fuelled expectations of a more hawkish Fed.
Inflation, as measured by the consumer price index, rose to 7.9%, and given the 18% jump in oil prices this month, is expected to keep rising.
Should the Fed move faster to raise interest rates this could boost the USD, which is bad news for USD denominated and non-yielding Gold.
Looking ahead US consumer confidence could influence Gold in addition to Russia headlines.
Support can be found at 1878 (February 24 high) and 1962 (rising trendline support)
Resistance can be seen at 2000 (round number) and 2006 (March 10 high).
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