Two trades to watch: Dax ahead of GFK data, WTI extends selloff

Dax remains under pressure on covid strain fears. Could GFK consumer confidence data send the index lower? US spending bill fails to boost WTI.

Germany

Europe experienced its worst session in over a month as fears of the new covid strain hit saw investors take risk off the table.

News that US Congress has agreed $900 billion covid rescue package and $1.4 trillion government spending package saw US markets pair losses.

Could weak GFK data send the Dax through 13040?

• Dax futures extending sell off on covid fears
• German GFK expected to decline to -9.5 from -6.7

The Dax closed the previous session -2.8% on Monday in its worst session in over a month. A the time of writing, Dax futures are pointing to a mild extension of those losses on Tuesday. 

In yesterday’s selloff, the Dax bounced off support close to 13040, a level which has been respected several times across November and December, indicating some strength in the price at this level. A break through this level could be significant.

A break-through that 13040 level could open the door to 12930 the convergence of the 50 & 100 sma on the daily chart. Beyond there a horizontal support at the 12350 area could offer some light support ahead of the 200 sma at 12150.

That said, the Dax continues to traded above 50 & 100 sma suggesting there could be more upside on the cards. On the upside a break above resistance at 13460 could be a buy signal. This is a level which has been respected several times over the past 3 months and particularly in December before the Dax broke out to its all time high of 13677 on Friday.

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US stimulus bill fails to boost WTI

• WTI is extending losses on Tuesday, adding to steep losses from Monday as a new strain of covid in the UK triggered concerns over fuel demand recovery.
• The UK has tightened its lockdown measures and a growing number of countries have closed their borders to UK freight and travelers.
• Congress’ approval of giant US spending bill could offer some support
• Look to API inventory data later in the session.

WTI slid sharply lower in the previous session falling through its steep ascending trendline which dates back to late October. 

WTI found support at the 20 sma on the daily chart at around $46.40 rebounding off this level to settle around $1 higher. 

WTI is once again trading on the back foot and is looking to test the 20 sma and yesterday’s low of $46.40. A break through here could negate the near term bullish trend opening the door to a deeper sell off towards $44.00.
It would take another leg lower towards 50 sma at $42.50 to negate the medium term bullish outlook.

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