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Breaking news

Fed Leaves Rates, QE Unchanged, FOMC Sees 2 Rate Hikes in 2023

Real Time News
  • DAX is making its way higher, but the grinding wedge behavior is concerning CAC has been extremely impressive, but a dip could be around the bend. Get your #DAX market update from @PaulRobinsonFX here:https://t.co/rD3sYiWGk4 https://t.co/8PLSIwLlAl
  • Fed's Powell: - The problem we have with inflation has nothing to do with the central banking system - We will taper when we feel the economy has achieved substantial further progress
  • trendline dance $ES $SPX looks almost too clean with scope. almost 'easy' with enough hindsight. reality is this was a messy scenario and the short-term chart shows that (img 2) ES +36 as of now https://t.co/2qhaz0w6mB https://t.co/qIRIZ9DJ7B
  • Fed's Powell: - There is nothing in the framework that prevents us from achieving our objectives - We are not in a "behind the curve" scenario
  • Fed's Powell: - A higher neutral rate would allow for further rate cuts - We can't estimate the neutral rate with great precision
  • Fed's Powell: - The fundamental factors that have weighed on inflation for the past quarter-century remain unchanged - If inflation rises to a degree or persists long enough, we will be prepared to use tools to counter it
  • one of the few trends that hasn't yet turned around - the $USD, still pressing higher $DXY https://t.co/iEW04U3dVE https://t.co/siOzTtNk2H
  • Fed's Powell: - 2022 will be a really good year, with substantial job development as a result of growth - Forecasts show that next year will be a fantastic year
  • Fed's Powell: - Inflation will be higher by 2023, according to the Fed, due to high jobs - For next year, we are looking at an economy that will not have the same degree of fiscal support
  • Fed's Powell: - Inflationary pressures are expected to increase in the near future as the economy reopens - By 2023, inflation forecasts would more accurately represent increased resource use
DAX & CAC Technical Outlook: Italy Turns Euro Correlation on its Head

DAX & CAC Technical Outlook: Italy Turns Euro Correlation on its Head

Paul Robinson, Strategist

DAX/CAC Technical Highlights:

  • Euro tailwind no longer as Italy weighs on FX & stocks
  • DAX turn lower to be put to the test
  • CAC sell-off to be tested on recovery soon

For a broader fundamental and technical outlook on major markets, and to see how our Trading Opportunities for 2018 are performing, check out the DailyFX Trading Guides.

Euro tailwind no longer as Italy weighs on FX & stocks

Political upheaval in Italy has taken down both the euro and Euro-zone stocks in recent sessions with force, splintering the nice, neat inverse correlation previously in place. Not long ago we were discussing the tailwind the euro, in addition to firming global risk appetite, was providing for the DAX & CAC.

The turnabout, regardless of its cause is no surprise on this end; this is what we had to say in regards to placing too much emphasis on correlations – “It’s worth heeding caution when doing this [analyzing correlations], as correlations have a tendency to change without warning.”

Indeed, not only has the relationship between the euro and stocks changed, but the two-week correlations have gone from -96% (DAX/EUR) and -92% (CAC/EUR) to current levels of +88% and +95%, respectively. From one extreme to the other.

What does this mean? It means it might be best to simply focus on the indices themselves for now, but be mindful when trading both the euro and the indices that they are trading together, so when establishing positions, you need to consider how they will interact with one another. For example, taking directional bets in the same direction right now is effectively one larger position.

See this guide for 4 ideas on how to Build Confidence in Trading.

DAX turn lower to be put to the test

The DAX turned down below the 12900/1300 region we were once looking at as resistance earlier this month. A bounce from support around a swing-high created in April (12600s) and the 200-day will have attention focused on whether that area will become resistance and potentially mark a lower-high from the monthly high.

DAX Daily Chart (w/2-wk Euro Correlation)

dax daily chart with 2-week correlation to the euro

CAC sell-off to be tested on recovery soon

The move to fresh decade+ highs was short-lived for the French benchmark. The turn lower came from right around a top-side trend-line passing over from May 2017. There is some support around 5364. A turn higher from here or a little lower could be telling. A failed attempt to recover could put the index in position to continue rolling over towards the trend-line from June 2016.

CAC Daily Chart (w/2-wk Euro Correlation)

CAC daily chart with 2-wk correlation to the euro

Forex & CFD Trader Resources

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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