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The DAX and euro stumble ahead of ECB meeting minutes

We have some Tier-1 data out today which will be market moving for the euro and the US dollar. Today is also the start of the Jackson Hole Symposium which the market has been treading water for. Being nimble or on the sidelines is probably a wise way to start the day, at least until we get past the Initial Jobless Claims from the USA.

Market Brief

European bourses opened lower this morning on the back of worse-than-expected consumer confidence data from Germany and awaited the start of the US Federal Reserve's Jackson Hole symposium. The FTSE 100 had declined 0.33% before the London open but has started to reclaim those losses as has the German DAX. The DAX slid 0.61% as Deutsche Bank shares dropped 1.68% at the European open.

The DAX tested the rising trend line and had looked to be trading below it on the back of the Gfk Consumer Climate Indicator which decreased to -1.2. This reading is the lowest in 3 months and is being attributed to rising inflation and continued worries around the coronavirus disruptions.

EURUSD had been falling in price on the London open, but traders quickly jumped on the single currency in favor of the greenback. Whether this is to take the liquidity that resides above the 1.1780 level resistance is to be seen, as it could be just an ego-driven spike to take the stops from above the Asia-Pac session higher ahead of the ECB meeting minutes due out in a few hours’ time.

The ActivTrades sentiment indicator shows that the traders on the platform are more bullish on the euro than the pound.

To be fair, they are currently on the right side of the trade as the EURGBP has clearly moved out of a well-defined descending channel and looks to have found support. A measured move to the upside is possible as indicated by the channel on the above chart. If the EURUSD were to drop from its current levels the euro complex is likely to fall too, so the EURGBP should trade below Tuesday's lows would be the end of the bull run for me and I’d be looking to fade the retail traders.

Later on today we receive the Initial Jobless Claims which have been market-moving for the US dollar recently and also it is the start of the virtual Jackson Hole Symposium, where central bankers come together to talk all things global monetary policy.

Oil is showing signs of finding resistance at the previous breakdown level and the swing high from mid-August. Brent is up 7.63% for the week so profit-taking should be expected at these sorts of levels. The sentiment indicators are showing that consumers and businesses are worried about the disruptions caused by the coronavirus, and this will weigh on oil traders who will be looking for signs of decreasing demand. Having a clear double bottom at $64.65 on the Brent crude chart is also a major target for me, as I like to see these levels get tested.

Currently, the US dollar index isn’t showing any signs of rising out of these corrective areas and if anything, we could see a drop back to the $92.50 swing lows as the DXY has broken a short trend line. Most traders will be sat on the sidelines waiting to hear how the Fed and central bankers are going to if at all, reduce their loose monetary policies and start tapering. When we have this information there should be some clear trends starting.


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