DAX, Oil Forecast: Two trades to watch

Oil extraction
Fiona Cincotta
By :  ,  Senior Market Analyst

DAX eases ahead of German business confidence data 

  • DAX eases after recent gains 
  • German IFO business climate expected to rise to 87.8 
  • DAX tests rising trendline support 

The DAX along with its European peers, is heading for a modestly lower open after gains across last week. The markets are heading into the lull in the final week of trading before Christmas, where volumes could slow.  

There are still, however, a few data points to be watching out for, including the German Ifo business climate released later today, which economists expect to improve slightly to 87.8 in December up from 87.3. 

The figures come after German PMI data on Friday contracted by more than expected. Both the services on the manufacturing PMI were weaker than expected, and a recession in Q4 looks unavoidable. 

However, the business climate could start to improve as the ECB appears to be at the end of its rate-hiking cycle. The idea that the next move by the central banks, including the ECB and the Federal Reserve, will be a rate card has lifted sentiment and stocks across November and December. 

As well as the German business sentiment data, ECB chief economist Philip Lane and policy maker Isabel Schnabel are due to speak. Their comments will be watched closely for signs that the ECB is pushing back on rate cut bets. 

DAX forecast - technical analysis 

The DAX is falling away from 17000, the all-time high reached last week. The price has fallen below support at 16700 and is testing the lower band of the rising channel. The RSI is moving out of overbought territory. 

A break out of the rising channel opens the door to 16530, the July high, and 16430, the June. 

Should the rising trendline support hold, buyers need to rise above 16730 to extend gains back up towards 17000. 

DAX forecast chart

Oil rises on supply concerns, Red Sea shipping attacks 

  • Houthi militants attack ships in the Red Sea 
  • Russia could slow output 
  • Oil rises above 70.00 

Oil prices are heading higher, extending gains from the previous week, which was the first weekly increase in oil prices in two months. 

While stimulus measures from China and the Federal Reserve pointing to three interest rate cuts last week boosted the demand outlook, lifting oil prices, today, the focus on the supply side. 

Oil prices rose over 1% in the Asian session on lower exports from Russia and amid attacks by Houthi on ships in the Red Sea 

Russia said on Sunday that it would deepen oil export cuts in December by a possible 50,000 barrels per day or more in an attempt to support global oil prices. This announcement comes after bad weather in Russia also slowed supply. 

Meanwhile, the world's largest shipping companies said that they would avoid the Suez Canal as militants in Yemen attacked the Red Sea. This is one of the most important routes for shipping oil from the Gulf to the Mediterranean as well as for the pipeline heading towards Asia. 

Oil forecast – technical analysis 

Oil is extending its rebound from 67.70, the December low, rising above 70.00 is testing resistance at 72.40, the mid-November low. This, combined with the bullish crossover on the MACD, keeps buyers hopeful of further gains. 

A rise above 72.40 exposes the 20 SMA at 73.40 and the 74.75 early November support. 

On the downside, sellers will look to take out 70.00 and 67.70 to test 67.00 the May low. 




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