DAX attempts to recover after 6% declines in 2 days
The German DAX is attempting to recover on Wednesday after two sessions of steep declines amid the escalating conflict in the Middle East.
The mood has improved slightly after President Trump said yesterday that the US Navy could escort oil tankers through the strategic Strait of Hormuz, the key checkpoint for oil, where traffic remains at a standstill.
Oil prices are still rising on Wednesday, up 14.5% so far this week, amid concerns about supply. Meanwhile, European natural gas prices are still rising, surging 60% over the past two days following the closure of the Strait of Hormuz and the shutdown of Qatar's LNG facilities.
Europe, like Asia, has been hard hit by rising energy prices, given its reliance on imported energy. The South Korean Kospi has fell 11% overnight. Rising imported energy costs raise concerns of stagflation.
The DAX fell 6% over the last two sessions as traders priced in these fears. What happens from here depends largely on whether the Strait of Hormuz reopens, whether energy prices ease, and how long the war lasts. A prolonged conflict raises the risk of an energy shock and stagflationary effects.
Looking at sectors on the DAX, tech stocks are rising with Infinium Technologies and SAP, up 1.9% and 0.9% respectively. Defence stocks are also staging a limited company recovery.
Adidas is down around 7% after reporting disappointing results, and Bayer is down 4% after Q4 earnings beat forecasts but 2026 profit guidance was weaker than expected.
DAX forecast- technical analyst
The DAX failed to make a new record high in February, running into resistance at 25,400 before falling sharply. The price broke below the 50 and 200 SMA and the rising trendline support to 23,590. However, the long lower wick on yesterday's candle and the hammer candle so far today suggest that a local bottom could be in for now.
Buyers would need to rise above the 200 SMA and horizontal support at 24,200 to be on a firmer footing. Above here, 24,700 resistance comes into play, the rising trendline and horizontal resistance.
Should sellers take out 23,590, this creates a lower low and brings 23,400, the September low, into focus ahead of 22,900, the November low.
XAU/USD rebounds on safe haven demand as Middle East worries persist
Gold is rebounding after falling close to 5% yesterday, boosted by safe-haven demand as the Middle East conflict enters its fifth day.
The precious metal fell sharply on Tuesday, pressured by a strong U.S. dollar, which rose to a 6-week high, and by concerns about the Federal Reserve's easing path as Treasury yields rose. Surging energy prices and worries of rising inflation are forcing the markets to rethink the Fed's path for rate cuts, with just 37 bps of cuts now priced in, down from 60 bps last Friday. A stronger dollar and rising bond yields make for a double headwind for gold despite its safe-haven characteristics.
The uncertainty continues to support safe havens, as investors see no clear endgame and, perhaps more importantly, no visible plan for one. During the rotation away from risk assets, investors are turning to commodities as a hedge.
The more pessimistic stance is that this is starting to feel like the Russian invasion of Ukraine and could potentially last for many weeks if not months. This could support gold prices as long as gains in the USD remain limited.
Any sense of de-escalation could see risk sentiment return and gold fall lower.
XAU/USD forecast- technical analyst
XAU/USD extended its recovery from 4400 but failed to close above 5330, the 78.6% Fib retracement of the 5598 high and 4400 low. The price rebounded lower, finding support at 5000, the round number and 50% retracement.
While buyers are attempting a recovery today, they will need to rise above 5200 and close above 5330 to extend the bullish move towards 5598 and fresh record highs.
Support is seen at 5000. A break below here opens the door to 4850, the 38.2% Fib retracement level and the 50 SMA. Below here, 4680 comes into play.
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