- Eurozone GDP Growth 3.9% YoY vs 4% Expected, QoQ 0.6% vs 0.7% Expected.
- German Gas Stockpiles Reach 77%, Government targeting 95%.
- Key Rhine River Waypoint Expected to Rise and Bringing a Sliver of Relief.
DAX 40: at Inflection Point, Retreats from Key 14000 Level
The DAX rally came to a halt in European trade as we pushed lower throughout the session, posting lows around 13700. This comes on the back of uninspiring Q2 GDP Numbers as well as negative employment change figures for the Eurozone. Growth concerns returned to the fore this week offering a glimpse of potential risks ahead for a corporate sector buoyed by the recent earnings run.
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Germany will struggle to have enough natural gas to get through the coming winter, even if reserves are replenished in line with government targetsaccording to Klaus Mueller, president of the Federal Network Agency, the country’s energy regulator. Stockpiles are currently 77% full, which is two weeks ahead of schedule. According to Mueller gas inventories will only last two and a half months should Russia completely cut off gas supplies. With power rationing still a possibility, Mueller made it clear that there is still a lot of uncertainty as to how the crisis will develop.
On the corporate front, Uniper (UN01) stock fell 7.9% after the German energy company, which secured a 15 billion euro bailout last month, unveiled a net loss of more than 12 billion euros (USD12.2 billion) for the first half of the year. The company apportioned blame for this mess on lower Russian gas supplies that forced it to buy at much higher prices elsewhere. As discussed yesterday the company received approval from government to pass rising energy costs to consumers.
With strong technical roadblocks above current price all eyes will be on the 14000 psychological level, which has a host of confluences. A sustained break above (either a daily or weekly candle close) at this stage seems unlikely without any significant catalyst. Something in a similar mode to the softer US CPI print last Wednesday.
DAX 40 Daily Chart –August 17, 2022
From a technical perspective, Friday’s weekly candle close saw us post 4 consecutive weeks of bullish price action and higher prices as the bullish rally gained steam. The weekly candle closed without any upside wick indicating buyers were firmly in control. Monday’s inside bar hanging man candlestick hinted at continued downside, however it was followed by yesterday’s bullish engulfing candlestick highlighting the indecision in markets as well as the importance of the key psychological 14000 level. We have a host of confluences including the 61.8-76.4% fib retracement level, trendline resistance as well as the fact that we have traded below the level since the 10th June 2022.
DAX 40 1H Chart –August 17, 2022
On a 1H chart we have seen a push higher of support discussed yesterday at 13830-13850 before creating a new high. As the European session began this morning we have pushed down aggressively and, in the process, changing the 1H structure to bearish. We now trade back below the 20,50 and 100-SMA. I would urge caution regarding the 1H bearish structure as our daily candle has closed above the trendline and we could push higher in the US session continuing the weekly trend of higher prices in the US session for the index.
Key intraday levels that are worth watching:
Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter:@zvawda