The mood improves cautiously after last week’s hawkish central banks

DAX => The index rises towards 14000
BTC/USD => The cryptocurrency falls towards 16.5k
USD/JPY => The pair falls to 136.00

Could German IFO business climate data boost the DAX?

The DAX fell 3.3% last week, marking its third straight week of losses after the ECB adopted a more hawkish tone and warned of significantly more interest rate hikes to come. Higher interest rates for longer raised concerns of a deeper recession in Germany. Investors shrugged off a better-than-expected German composite PMI of 48.9 in December, up from 46.3 in November, which still indicated that the economy was contracting. Today the DAX is rising as attention turns to the IFO German business climate index, which is expected to improve again in December to 87.2, up from 86.3. A continued rebound in business morale could fuel recovery hopes and help the DAX higher.

Where might the DAX price head to?

After hitting a high of 14680 last week, the DAX has fallen sharply lower, dropping below the key 140000 psychological level to a low of 13800. This, combined with the RSI dropping below 50 could keep sellers hopeful of further downside. A break below the 13760 100 sma and 13574, the 200 sma could open the door to further downside towards 13020, the November low. Meanwhile, buyers could find support from the golden cross formation, with the 50 sma crossing above the 200 sma. Buyers could look to retake resistance at 14000 ahead of 14680 and 14930, the March high.

BTC/USD steadies after volatility last week

Bitcoin experienced a wild week after the turbulent phase of the FTX collapse passed, putting the focus back on the US Federal Reserve. US inflation cooled, but the Fed and the ECB gave more hawkish outlooks than expected, prompting BTC/USD to give back gains from earlier in the week. Data showed that the total crypto market cap was at risk of falling below $825 billion. While the economic calendar is quietening down this week, there are still a few key releases to be watching, with US core PCE, the Fed’s preferred gauge of inflation, set to be a key focus on Friday. Until the n volatility could well slow considerably as the Christmas/New year break approaches, possibly creating a slow bleed into the end of the year. 

USD/JPY rises ahead of the BoJ rate decision

USD/JPY fall 0.4% last week, after two straight weeks of gains, after data showed that inflation cooled further in December and the Federal Reserve slowed the pace of rate hikes to 50 basis points. However, the US central bank also warned that interest rates would rise higher than initially expected next year. Today, USD/JPY is falling further as attention turns to the BoJ monetary policy decision, and the yen finds support from expectations of an eventual BoJ pivot. The most dovish major central bank is expected to leave policy unchanged, with interest rates at -0.1%, and to stick to its ultra-accommodative guidance. However, reports that the Japanese government plans to revise the BoJ’s inflation target to make it more flexible, supporting the idea of a potential policy shift away from the ultra-accommodative stance, which has weighed heavily on the yen.

Support for the pair could be seen at 135.20 (200 sma) and 133.60 (December low).

Resistance could be seen at 138.00 (last week’s high) and 140.00 (psychological level).