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The DAX recovered slightly in European trade as we surged after yesterday’s odd sell-off from 360. Overall, sentiment in European trade appeared to be mixed as markets digested the Fed’s FOMC minutes released yesterday. The key takeaway is that the Fed continues to believe rate hikes will continue amid fears that inflationary pressures will become entrenched. However, they did announce an eventual slowdown in the pace of rate hikes, but did not shift to cuts in 2023, which were already common before the minutes were released.
All economic news and events affecting the market can be found on the DailyFX calendar
As Europe’s energy crisis deepens, a diesel-powered fleet is heading to the European market. Preliminary data from Vortexa showed that five vessels carrying nearly 3 million barrels of crude oil will be shipped from Asia to Europe in August. This is the highest level in five months, and shipments from the Middle East are also expected to rise.
New York Session: Forex Trading Tips
To help German consumers, German Chancellor Olaf Schultz announced a temporary reduction in the gas sales tax from 19% to 7% to ease the burden on households and businesses. This measure is welcome given the new October levy discussed yesterday. Chancellor Schultz: “With this step, we relieve our gas customers to a greater extent than the gas surcharge. This reduced VAT rate applies as long as the gas tax is levied.”
Another positive aspect of the German economy is the Rhine crisis, which is showing signs of abating as water levels rise. However, federal figures show the crisis is far from over, with markings at Kaub, a narrow, flat waypoint west of Frankfurt, set to rise to 67 centimeters (26.4 inches) by August 22. This compares to current levels of about 38cm. Some ships continue to restrict loading as the Rhine is seen as one of the problems exacerbating the energy crisis.
Yesterday’s strong psychological level of 14,000 came into play, with the index dropping about 360 points from its highs. As mentioned late last week, a break above 14,000 seems unlikely without a sustained positive shift in overall market sentiment.
DAX 40 Daily Chart – August 18, 2022
Technically, at the close of Friday’s weekly candle, we recorded 4 consecutive weeks of bullish price action and higher prices as bullish rallies gather momentum. The weekly candle closed without an upward wick, indicating that buyers are in control. Monday’s Hanging Man candlestick pointed to a continued downside, but was followed by Tuesday’s bullish engulfing candlestick and yesterday’s bearish engulfing candlestick, underscoring the market’s indecision and the importance of the key psychological level of 14,000. At this stage, we may enter a period of range-bound price action without a catalyst to push the index in either direction.
DAX 40 1H Chart – August 18, 2022
On the 1H chart, we see a close above the trendline, which can be called a false breakout. After yesterday’s sharp decline, we found 1H support around 13600 before climbing 179 points to an intraday high of 13779. We are now trading above the 20 SMA again, with the 50 and 100 SMAs above the current price and providing resistance. A daily close below 13500 would also change the daily structure and outlook bearish. I would urge caution as we head back to the weekly high and key psychological level of 14,000
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