Two Trades to Watch: DAX, Gold
DAX drops as banking fears linger
- UBS buys Credit Suisse, worries linger
- German PPI cools less than expected
- DAX sellers look to 14500
The DAX is falling at the start of the week, extending losses from the previous week as investors continue fretting over the risk of contagion in the banking sector, despite UBS buying Credit Suisse over the weekend and plenty of liquidity support.
In an emergency deal, UBS bought the troubled lender Credit Suisse for CHF 3 billion, with billions in SNB and government support. While this briefly shored up confidence in the Asian session, the upbeat mood quickly faded as attention quickly shifted to the massive hit that some Credit Suisse bondholders would take under the acquisition.
Credit Suisse tier 1 bonds, with a notional value of $17 billion will be valued at 0, raising fears for holders of tier 1 bondholders at other banks.
Despite several steps of intervention in Europe and the US, jitters over the banking crisis are not going away.
On the data front, German PPI came in hotter than expected at 15.8% YoY in February, down from 17.6% in January but missing forecasts of 14.5%.
The data comes after the ECB hiked rates by 50 basis points last week to tackle stickier-than-expected inflation.
ECB President Christine Lagarde is due to speak later.
Where next for the DAX?
The DAX has fallen below its 100 & 50 sma and has broken out below the multi-month rising trendline. This, as well as the bearish RSI, keeps sellers hopeful of further downside.
Sellers could look to break below 14500, the daily low, to bring 14000, the psychological level into target.
Meanwhile, buyers could look for a rise over 14700, the December high, and 50 sma, before 15000 the rising trendline resistance. A rise above the 100 sma at 15270 could negate the near-term downtrend.
Gold rises above $2000
- Gold rises as aggressive Fed bets ease
- Safe haven flows lift the metal as banking worries linger
- Gold in overbought territory
Gold jumped 6.4% last week and is extending those gains on Monday. The precious metal is finding support from the weaker USD and falling treasury yields as investors rein in Fed rate hike expectations and from safe-haven flows amid fears of a banking crisis.
What a difference a week makes. Just 10 days ago, the market was pricing in a 70% probability of a 50 bps hike. Today, the 50 bps hike is off the table, and the market sees a 40% likelihood of the Fed keeping policy unchanged and a 60% chance of a 25 bps hike.
The expected terminal Fed rate has also come down to 4.8% from 5.5%. Banking sector news will remain in focus ahead of the FOMC rate decision.
Where next for Gold prices?
Gold jumped 3.5% on Friday, rising above resistance at 1959 the February high. Today, the price has risen above 2000 ahead of the European open. Still, the RSI in overbought territory could spark a corrective move lower.
Immediate support can be seen at 1959, with a break below here opening the door to 1950 round number
Meanwhile, buyers could look for a close above 2000 psychological level, which could open the door to 2050 and 2070 the March ’22 high.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
For further details see our full non-independent research disclaimer and quarterly summary.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.
City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.
City Index is a trademark of StoneX Financial Ltd.
The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.
© City Index 2024