Two trades to watch: Dax, GBP/USD

Dax extends losses amid fears of vaccine shortages and extended lockdown restrictions GBP/USD trades under pressure ahead of US Q4 GDP

Downtrend 5

Dax extends losses 

Risk off is setting the scene as Europe stock markets open after stocks on Wall Street saw the worst performance since October.

Concerns over the impact of the pandemic still dominate in Europe with extended lockdown restrictions and fears of vaccine shortages.

Looking ahead German CPI data is expected to show a rebound in inflation +0.7% MoM in January vs -0.3% in December.

Dax technical analysis

The Dax has been trading in an ascending channel since early November. It trades above its 100 sma on the daily chart but has just slipped below its 50 sma and it currently testing the lower band on the ascending channel at 13500.

The RSI points to further weakness in the price as it sits below 50 but with some way to go until the oversold level of 30.

A break through the lower band of the ascending channel at 13500 could see the current selloff extended towards 13100 100 sma and towards horizontal support at 12500.

On the flip side, should 13500 hold an attempted recovery could see the price could look to rebound towards 14000 psychological level and all time high reached on 8th January. 

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GBP/USD under pressure ahead of US Q4 GDP

The GBP/USD is trading under pressure declining for a second straight session amid a firmer US Dollar and as EU demands UK covid vaccines from AstraZeneca.

UK calendar is quiet today so the focus will be on the US side as traders continue to digest the FOMC policy decision and as traders look ahead to the US Q4 GDP reading which is expected to show that the US economy rose 4% in the final quarter. 

Fed Powell warned that last years’ momentum was likely to fade at the start of this year. 

Here my colleague Matthew Weller analyses the FOMC meeting and its impact on the USD.

US jobless claims and consumer spending numbers will also be in focus later.

GBP/USD technical analysis

After the formation of a double top pattern, GBP/USD continues to retreat from its 32 month high, trading -0.2% at 1.3660 at the time of writing.

The price has fallen through its 50 sma on the 4 hour chart and the RSI is also in negative territory and pointing southwards. The bias is to the downside with further weakness towards 1.36 possible.

First strong support at 1.3630 the confluence of the 100 sma and the ascending trend line needs to be overcome. A move below 1.3520 would indicate the start of a deeper pullback.

On the flipside any attempted rebound could see resistance tested at 1.37 prior to the multi year high of 1.3750.

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