Source: PaxForex Premium Analytics Portal, Fundamental Insight
The German IFO Business Climate Index for May is predicted at 90.4, the German IFO Current Assessment Index at 89.9, and the German IFO Expectations Index at 90.5. Forex traders can compare this to the German IFO Business Climate Index for April, reported at 89.4, the German IFO Current Assessment Index at 88.9, and the German IFO Expectations Index at 89.9.
The new trading week will start slowly, with the UK closed for a bank holiday and the US closed for a public holiday. Despite the NASDAQ100 closing at an all-time high, the underlying picture for equity markets is bearish. Gains in the US are driven by a handful of technology firms led by Nvidia, but other core economic sectors suggest a slowing consumer. The AI hype continues to drive Nvidia higher, but it has also created a temporary bubble ready to implode as the companies buying Nvidia chips will struggle to sell services in the current consumer environment.
Inflation is an ongoing threat and will witness a double injection of tailwinds. The US summer driving season officially starts today, putting upside pressures on oil prices. The most ignored inflation driver is a rise in container rates, which some industry experts compare to the supply chain issues witnessed during COVID-19. Companies will pass on those rates to consumers, keeping upward pressure on inflation as retail debt stands at an all-time high with rising delinquencies.
The forecast for the Euro STOXX 50 remains bearish, with this equity index stuck at its horizontal resistance area. After completing a bullish crossover, the Tenkan-sen began to drift lower with the Kijun-sen flat. The Ichimoku Kinko Hyo Cloud has narrowed, with the downward shifting Senkou Span A and the flat Senkou Span B suggesting more volatility. Traders should also monitor the CCI following a double breakdown from extreme overbought territory and below zero. This technical indicator may bounce off extreme oversold levels before resuming its downtrend. Can bears maintain control over the Euro STOXX 50 and force price action into its horizontal support area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the Euro STOXX 50 Index remain inside the or breakdown below the 4,990 to 5,070 zone, PaxForex recommends the following trade setup:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 5.035
- Take Profit Zone: 4.750 – 4,825
- Stop Loss Level: 5.120
Should price action for the Euro STOXX 50 Index break out above 5,070, PaxForex recommends the following trade setup:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 5.120
- Take Profit Zone: 5.215 – 5.295
- Stop Loss Level: 5.070
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