DAX => The index falls below 13500
Oil => The commodity trades around $110
USD/JPY => The pair holds steady below 115.50
DAX set for 7% weekly loss
The DAX fell 2.6% yesterday and is set to 2.4% today. The index is set to fall over 7% this week.
The German index has already fallen into correction territory by dropping over 10% from its late 2022 high and appears to be heading towards a bear market (a 20% decline from a recent high).
Germany is highly dependent on Russian oil and gas, making it vulnerable to the Russian invasion. Supply disruptions and self-imposed sanctions sent gas prices to a record high as no companies want anything to do with Russian products.
With the growth outlook deteriorating rapidly and inflation expected to rise further, the outlook for the German economy is grim.
News that Russia has set alight a nuclear plant in Ukraine is adding to the risk-off mood; sentiment will drive trade, in addition to the German trade balance and eurozone retail sales.
|German composite PMI
EZ Retail sales
|Actual: 55.6 (2.8)
Expected: 9.1% (7.1%)
Where next for DAX?
The DAX trades below its falling trendline, below its 50 & 100 sma.
The 50 sma has crossed below the 100 sma, which is a bearish signal and broken below a key support at 13650.
The RSI has moved into oversold conditions suggesting there could be some consolidation. Support can be seen at 13250 the 2021 low ahead of 13000 round number. On the upside, a move above 13650 brings 14000 round number into play and the falling trendline resistance.
Oil eases from a 14-year high on Iran optimism
WTI oil closed -2% lower yesterday but is still on track for gains of 20% this week.
WTI oil rallied to $116, a 14-month high, before dropping sharply to $106.00 on renewed optimism that Iran talks to revive the 2015 nuclear pact were making a good progress and that a deal could be signed imminently. This would mean that Iranian oil sanctions would be lifted, and additional oil supplies of around 1 million barrels per day could be released into the market.
While this wouldn’t make up for the supply that is being shunned from Russia, it would at least go some ways to relieve a very tight oil market. Today oil is rising again; headlines surrounding Russia or Iran will drive prices today.
USD/JPY looks to US jobs report
USD/JPY ended yesterday flat, despite climbing to a three-week high of 115.82 earlier in the session.
While the Japanese yen found support from safe-haven flows as the Russian war continued, the US dollar fell from session highs after weaker than forecast ISM service sector data.
Activity in the service sector grew at the slowest pace in 12 months, posting its third straight month of declines due to Omicron.
Today the pair holds steady with all eyes are on the US non-farm payroll. Analysts expect another strong month of job creation after a stellar January.
Unemployment is expected to tick lower to 3.9% and wages to rise 0.5%, adding pressure to the Fed to raise interest rates. Fed Powell as good as confirmed a rate hike in March.
|US ISM Services PMI
US Non-farm payroll
|Actual: 56.5 (3.4)
Expected: 407k (60k)
Support can be found at 115.00 (50 sma) and 114.35 (100 sma).
Resistance for the pair can be seen at 115.80 (February 15 high) and 116.35 (2022 high).