- Robust Eearnings Sseason and mergers and acquisitions transactionsHaIBmuffled Mmarket Semotion.
- Investors Fback Afight Rrisk of aMore Pelongate Iinflation Flight and Fed rate hike.
Bond yields and their relationship to FX
DAX 40: DAX
The DAXstarted the week in the green as markets digested more corporate earnings as we have the US CPI later in the week. The importance of this version was exacerbated by the explosion NFP Jobs Data released on Friday.
Given the largely positive revenue reception so far, Siemens Energy (ENR1n) reversed trend on Monday, its stock falling 3.9% after the power industry equipment supplier warned of a bigger-than-expected net loss in 2022, announcing a charge of €200 million ($204 million) due to the restructuring of its Russian operations. The positives are a few M&A deals that seem to have contributed to the overall tone of the market.
European bond investors, caught between a central bank raising rates for the first time since 2011 and the prospect of a recession, are braving some of the wildest swings on record by some metrics. The yield on Germany’s benchmark bond has oscillated 10 basis points over nearly 80 days this year, which has only happened once in 2021. euro rate the markets soared.“Rate volatility has seen an explosion in activity,” said Phillip Pearce, partner at Validus Risk Management. “Without any firm guidance, the market is free to price whatever the data warrants.”The fallout is palpable. Investors say it’s getting harder to execute orders in certain corners of the market. European companies are reluctant to issue debt or buy prohibitively priced protection against price fluctuations. While traders typically dream of volatile conditions, some market participants are hesitant to take larger positions, creating a self-amplifying cycle of deeper swings as liquidity dries up. Since April, the German two-year yield has ended the day down 20 basis points three times and up 20 basis points once.. Moves of this magnitude have not been seen since the depths of the Eurozone crisis in 2011.
The focus for the week will be on the US CPI figure due out on Wednesday whileIInvestors will also have a chance to hear from several speakers from the Fed, as policymakers come under renewed pressure to deliver a third rate hike of 75 basis points at their next meeting in September. We also released final German inflation figures on Wednesday, which may give investors more guidance going forward.
For all economic news and events affecting the market, see the DailyFX Calendar
DAX 40 Daily Chart – August 8, 2022
Source: Trading View
From a technical point of view, last week Friday saw an weekly undecided candle close as the daily closed like a hanging man candlestick hinting at other drawbacks. We had bullish price action during the European trade as we trade between the 50 and 100-SMA and just below the 61.8% fiber level. We need a daily candle above or below the SMA to confirm a longer term bias.
DAX 40 1H Chart – August 8, 2022
Source: Trading View
The 1H-card has seen a decline in price since hitting last week’s high of 13787 on Wednesday and tapping into the 100-SMA on the daily chart. We have seen a change in structure on the 1H as we are now creating higher highs and higher lows. If we had no surprises in the US session or sentiment shifts, we could very well move higher and look to break above the 61.8% fib level targeting the trendline or higher in the 78.6% fiber content.
Key intraday levels worth watching:
Areas of resistance
Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter:@zvawda