DAX falls in risk off trade as energy concerns rise. Oil falls as COVID cases in China fuels fears of more lockdowns.

Pixabay

DAX falls on energy worries

The DAX is pointing to a weaker start, paring gains from the previous week.

The positive tone from the end of last week is failing to hold up as the new week begins as inflation worries return ahead of US CPI data later in the week.

Worries over energy security are also hurting risk sentiment. Nord Stream 1 will close today for ten days for scheduled repairs. However, fears are rising that the Russians won’t turn the supply back on, using the gas supply as a political weapon.

Any need to ration gas supplies could fuel fears of recession, particularly in Germany, the eurozone’s largest economy.

Rising COVID cases in China fuel fears of further lockdowns adding to the risk-off mood.

There is no high impacting Eurozone economic data due to be released today.

Where next for DAX price?

The DAX rebounded from 12385, running into resistance at the 20 sma at 13030 and falling lower. Failure to retake the 20 sma combined with the bearish RSI keeps sellers hopeful of further downside.

A fall below 12630 support the June 30 low and could open the door to 12385, the 2022 low, with a break below here needed to extend the bearish trend to 12000 round number.

Buyers will look for a move over 13030 the 20 sma, ahead of 13430, the June 21 high to expose the 50 sma at 13690.

Oil falls on demand concerns as COVID rises is China

Oil prices are heading low, adding to losses from the previous week. Oil saw volatile trade last week, dropping over 9% last Tuesday as recession fears hurt the demand outlook, before rebounding 5% in the latter part of the week.

News of further COVID cases in China unnerves the market, fueling fears of additional lockdown restrictions. The highly transmissible Omicron variant has been identified in Shanghai. Should China stick with its zero-COVID policy, more lockdown restrictions could be coming.

President Biden is also holding talks with Saudi Arabia this week to repair the troubled relationship. However, the negotiations are unlikely to result in an immediate increase in oil supply.

Oil flows through the Caspian Pipeline Consortium will remain in focus after Russian courts ordered the halt of flows through the line. So far, oil continues to flow along the pipeline, which carries 1% of global.

Where next for oil prices?

Oil prices found support at 95 last week and rebounded higher. However, the move higher ran into resistance at 103.50 and is falling to the key psychological level of 100.00.

A break below here, combined with the bearish RSI, could keep sellers optimistic about further downside. A break below 97.70 is needed to bring 95.00 back into play. A break below here creates a lower low and exposes the 200 sma, any meaningful break below here would be important given that oil has traded above its 200 sma since October 2020.

Buyers will look for a move over 103.50, the July 8 high, to expose the 50 sma at 110.45, with a move above here cresting a higher high.

More By This Author:

Two Trades To Watch: Gold, USD/CAD
Two Trades To Watch: EUR/USD, FTSE - Thursday, July 7
Two Trades To Watch: EUR/GBP, Gold - July 6, 2022