Two trades to watch: Dax, GBP/USD
Fiona Cincotta June 22, 2021 7:58 AM
DAX moves higher, tracing Wall Street and rebounding from 4 week low. Eurozone consumer confidence & Jerome Powell in focus. GBPUSD trades under the pressure of a stronger USD despite upbeat Government borrowing data.
Dax looks to consumer confidence and Jerome Powell
European bourses look set to extend their recovery after strong gains on Wall Street. The Dow recorded its largest one-day rally in three months.
Stocks in Europe are bouncing from 4 week lows as economic growth optimism offsets concerns over potential rises in US interest rates.
Attention will turn to Eurozone consumer confidence data which is expected to show that morale picked up in June to -2.9 to -5.1.
Jerome Powell is due to testify before Congress later, more hawkish rhetoric could drag on demand for equities.
Where next for the DAX?
Last week the Dax broke out of the ascending wedge. The selloff found support of the 50 day ma just below 15300 and rebounded higher to current levels of 15640
The MACD has formed a bullish crossover, keeping the bulls hopeful of further upside.
The Dax is currently caught between the 50 & 100 sma on the 4 hour chart. Should the bulls push above the 50 sma at 15650 and the week old descending trendline at 15700, the Dax could look to retest the all time high of 15800.
Conversely should the Dax break below the 100 sma and June 10 low at 15620 a deeper selloff to 15500 could be on the cards. A break below this level could bring support at 15300 back into play.
GBP/USD slips on stronger USD, despite upbeat UK Government borrowing data
After a strong rebound in the previous session, GBP/USD is moving lower. Strong UK data failed to reverse the trend.
UK net public borrowing fell by more than expected to in May to £23.6 billion, down from £30.1 billion in April. Expectations were for a decline to £26.1 billion.
Government spending eased as the economy continued to reopen sand more people came off furlough.
US Dollar is picking up amid an uptick in treasury yields ahead of Jerome Powell’s testimony before Congress.
Jay Powell's testimony comes following the Fed’s hawkish shift last week. Pre-released remarks say that the Fed needs to continue supporting the economy.
Where next for GBP/USD?
GBP/USD found support at 1.38 the April low last week, before rebounding in the previous session. The pair trades below its 50 & 100 day ma and the MACD supports further downside.
Any recovery would need to retake the 100 sma at 1.3945 before looking to retake the key psychological 1.40 and 1.4030 the 50 sma.
On the down side, sellers look to target 1.38 yesterday’s low. A move below this level could see sellers gain momentum towards 1.3670 the April low.
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