DAX rises as wholesale inflation falls
The DAX finished Friday on the front foot, although still booked losses across the week as US debt ceiling jitters weighed on sentiment.
Today the DAX is heading for a stronger start after German wholesale prices fall for the first time since December 2020. Wholesale prices fell -0.5% YoY in April, down from a 2% rise in March.
Wholesale prices are often considered a lead indicator for consumer price inflation, taking some pressure off the ECB to hike rates aggressively.
Looking ahead, Eurozone industrial production data will be in focus and is expected to fall -1.8% MoM in March, after rising 1.5% in February.
The European Union is also set to release its growth forecasts. The data comes ahead of GDP data later in the week and are expected to show that the region could avoid a recession this year. That said, higher interest rates for longer could weigh on the growth outlook.
DAX outlook – technical analysis
DAX trades within a rising wedge, finding support on the 20 sma at the end of last week, closing above 15870 but failing to retest the high of 16009. Buyers need to rise above 16009 to extend gains towards 16120, the rising trendline support and 16285 the January 2022 high.
Meanwhile, sellers could be encouraged by the bearish RSI divergence. A break below the 20 sma at 15870 opens the door to 15785 the rising trendline support at 15660 the May low. The break below here exposes the 50 sma at 15580 and 15330.
Gold rises with debt ceiling talks and Fed speakers in focus
Gold is rising at the start of the week after three days of declines, which saw the precious metal drop back down to around 2000, from a high of 2072 at the start of the month, while the USD rose to a 5-week high.
On Friday the inflation expectation component of the US Michigan consumer sentiment survey rose to the highest level since 2011, which fueled bets that the Fed could raise interest rates again in the June meeting. While the data lifted the USD, the selloff in gold wasn’t as pronounced.
The precious metal remains supported by US debt ceiling jitters and regional banking concerns, which are fueling Gold’s safe-haven appeal.
US debt ceiling talk will resume again on Tuesday after being pushed back last week, President Biden commented that the two sides are keen to reach a deal.
Looking ahead, the US session is dominated by Federal Reserve speakers, with Barkin, Kashkari, and Bostic due to hit the airwaves. Investors will be listening carefully for clues over whether the Fed will likely raise interest rates again in June or press the pause button on monetary policy tightening.
According to the CME Fed Watch tool, the market is currently pricing in a 16.6% probability of another 25-basis point rate hike in June, roughly unchanged from last week.
Gold outlook – technical analysis
Gold trades within a rising trendline dating back to November last year. However, within the long-term upward trend, after hitting a high of 2072 a descending triangle formation has appeared.
The level $2000 offered support, the 20 sma and late April low, prompting dip buying and a rise on the open today.
Buyers will now look for a rise above 2020 the falling trendline resistance to bring 2048, last week’s high into focus.
Sellers would need a break below $2008 the 20 sma, and $2001 in order to extend losses towards 1977, the May low, and 1975 the 50 sma. A break below here opens the door to 1971, the late April low.