DAX, Oil Forecast: Two trades to watch

DAX eases after Chinese data and on inflation jitters

• US, French & Spanish inflation support higher rates for longer
• Eurozone industrial production could fuel recession worries
• DAX tests 20 sma

The DAX is pointing to a weaker start after a lower close on Wall Street following hotter-than-expected U.S. consumer inflation, which supported the view that the Federal Reserve will keep interest rates higher for an extended period of time.

Meanwhile, Spanish and French inflation also ticked higher to 3.5% and 4.9% respectively, supporting the view that the ECB could also keep rates elevated for an extended period of time.

Inflation data from China also raised concerns about deflationary pressures persisting in the Chinese economy after CPI came in at 0%. This overshadowed the trade data which showed that the fall in exports and imports slowed in September which suggests that the Chinese economy could be starting to stabilize after a raft of policy support measures from China.

Looking ahead investors will focus on eurozone industrial production figures which are expected to show 0.1% MoM rise in August after falling 1.1% in July.

The data comes amid ongoing concerns over the health of the eurozone economy, concerns that were highlighted In the minutes of the September ECB meeting. The minutes showed that the majority of policymakers supported the 25 basis point rate hike, but the minutes also highlighted growing concerns over a downturn in the second half of the year.

ECB president Lagarde is due to speak today and may offer further insight into the future path of interest rates.

Looking ahead to the US session, US earning season will kick off with banks reporting. JP Morgan Wells Fargo and Citibank are due to report before the US open and the results will likely set the tone for trade.

DAX forecast – technical analysis

The recovery from the 14495 October low ran into resistance at 15575 and is easing lower, testing support of the 20 sma at 15385. The RSI is neutral, giving away few clues.

Sellers, could be encouraged by the death cross, 50 sma crossing below the 200 sma in a bearish signal. Sellers will look for a break below the 20 sma to extend losses towards 215130, the September low. A break below here opens the door to 14495, the October low.

Should buyers successfully defend the 20 sma, buyers could look for a rise above 15575, the weekly high to create a higher high and expose the 50 and 200 sma around 15620/50.

Oil rises after US ramps up sanctions on Russia

• US to sanction tankers carrying Russian oil above $60 per barrel
• China imports fell 10.5% in September
• Oil rises towards 50 sma

Oil prices are pushing higher with supply concerns once again in the driving seat as the US ramped up sanctions against Russian crude exports and as global inventories are expected to decline across the current quarter.

While it's been a choppy week for trading in oil, WTI is set to book gains of over 1% for the week, driven by concerns of potential supply disruptions after Hamas attacked Israel over the weekend. While the geopolitical risk premium has eased significantly since Monday it's still supportive of oil prices at least in the short term.

Supply remains in focus after the US imposed sanctions on owners of tankers carrying Russian oil priced above the G7 price cap of $60 a barrel. The sanctions are part of an ongoing drive to punish Russia for its invasion into Ukraine.

Meanwhile, an OPEC report released yesterday showed that the oil cartel left its forecast for growth for oil demand unchanged, citing a resilient global economy and robust demand from China.

Oil prices have brushed off the weaker-than-expected Chinese inflation data and a month-on-month decline in Chinese crude imports. Imports fell 10.5% in September compared to the August level, which was the third highest on record. That said, Chinese crude imports of 45.74 million metric tonnes marked a 14% year-on-year increase.

Oil forecast – technical analysis

Oil is pushing higher towards the 50 sma at 85.00. The price failed to push meaningfully above this level at the start of the week, but this remains the upside obstacle for buyers.

Buyers will look for a rise over 85.00 to test resistance at 86.10 the weekly high, ahead of 87.000 the falling trendline resistance.

Sellers will look to take out 81.20, the weekly low to bring 80.70 into play. A break below here creates a lower low and exposes the 100 sma at 79.30.