Two trades to watch: Dax, Gold

Dax looks back towards 14000 amid an upbeat market mood ahead of ZEW economic sentiment data Gold awaits further direction from Janet Yellen

Charts (1)

Dax advances back towards 14000

• An upbeat market mood after Monday’s lull is lifting the Dax along with its European peers. Eyes on vaccine updates, Yellen's testimony setting the case for fiscal stimulus.

• German ZEW economic sentiment data expected to show up tick to 60 in January, from 55

Dax technical analysis

The daily chart shows that the Dax has come under pressure in recent sessions. After rebounding lower off the upper band of the ascending channel reach on 8th January, the Dax has shed around 3%. However, the German index has found its feet again and is on the rise.

The Dax trades above the key lower band of the ascending channel at 13650. It also trades above its 20 sma and 50 sma which suggest that the outlook bias remains to the upside. The RSI is also supportive of further gains, above 50 but below overbought territory. 

The recent weakness that we have in the Dax price could well be in response to the attempt on 14,000, a key psychological level. Technically the outlook remains bullish.
Immediate resistance can be seen at 14,000 prior to 14137, high 8th January.

On the flip slide it would take a move below 13650 the lower band of the ascending channel and a subsequent move through the 50 sma at 13480 to negate the current bullish trend and see the bears take control.

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A look at Gold ahead of Yellen’s testimony

• After testing $1800 Gold extended its recovery to $1840 where it has stalled ahead of the keenly awaited appearance US Treasury Secretary Janet Yellen’s hearing. 
• Janet Yell has yet to endorse the larger covid stimulus package of $1.9 trillion which President elect Joe Biden announced last week.
• Prospects of additional stimulus bode well for inflation hedge gold, although US Dollar strength has dampened demand for the yellow metal.

Gold technical analysis

Gold trades +0.1% at $1840 at the time of writing having picked up from support at $1800. 

It trades within a descending channel dating back to late August on the daily chart. However, on the 4 hour chart the picture is starting to look more bullish. Gold has broken above the steep descending trendline from early January. A bullish divergence trend is also being noted on the RSI.

Gold is testing its 20 sma at $1840. A break above here is needed to open the door to the 50 sma at $1860 before a move towards the upper band of the longer term descending trendline at $1880. 

Failure to break through the 20 sma at $1840 could see an immediate test of the descending trend line resistance turned support at $1835 before the round number and yesterday’s low of $1800 is approached.

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