DAX 40 drops further as AUD/USD rallies, copper price stabilises 

Macro update

Global bond markets stabilise: Government bonds rebounded after the US Treasury announced plans to at least double its purchases of long-dated debt, which helped drive yields down following the recent sell-off and relieved some pressure on equities.

US dollar weakens: The dollar fell to roughly a 2½-month low, as declining Treasury yields made it less attractive, lending support to other currencies and dollar-denominated commodities.

Gold hits 2½-month high: Gold rose to a more-than-two-month peak near $4,525 an ounce before easing back, buoyed by falling yields, a softer dollar, geopolitical tensions, and worries about US fiscal sustainability.

Oil holds at elevated levels: Brent crude remains near $92 a barrel, with the continuing Iran conflict and threats of disruption around the Strait of Hormuz keeping an inflation risk premium embedded in energy markets.

Fed split on rate path: The Federal Reserve's July meeting minutes showed rising concern about persistent inflation, with some officials open to further rate increases, even as markets still price in a 69% chance rates hold steady at the September meeting.

Crypto explodes: The huge injection of liquidity into US bond markets by the Treasury led to a surge in cryptocurrencies amid a historic short-squeeze, as billions of dollars of bearish positions were forced to unwind. Bitcoin hit the $70,000 mark.

DAX 40 slips through support

The DAX 40's decline from last week's 26,573 record high on Wednesday found short-term support around its 6 August 26,082 low but this has now given way with the early July high at 25,900 thus being in sight. The area around this level is expected to offer at least interim support. If not, a slide all the way to the May peak at 25,438 may ensue.

For bulls to regain control at least a rise and daily chart close above Tuesday's 26,293 high would need to be seen. In this case the 5 August high at 26,404 would likely be back in view.

Short-term outlook: bearish while below the 18 August high at 26,293 on a daily chart closing basis

Medium-term outlook: bullish while above the 26 June low at 24,548

DAX 40  daily candlestick chart

AUD/USD powers ahead

AUD/USD's bull run from its $0.6866 late June low has taken the cross above its mid-June high at $0.7088 to around the 61.8% Fibonacci retracement of the May-to-June decline at $0.7121, around which it has been capped all of this week.

While Wednesday's low at $0.7067 underpins though, upside pressure should be maintained with the mid-March $0.7150 region remaining in sight. Further up beckon the March peak at $0.7187 and the late May high at $0.7200.

Short-term outlook: bullish while above the 19 August $0.7067 low

Medium-term outlook: bullish now that the $0.7088 mid-June peak has been overcome, targeting the $0.7200 region, provided that no bearish reversal takes the cross below its 3 August $0.6984 low 

AUD/USD daily candlestick chart

Copper stems its fall

The Copper price's sharp drop to $6.3338 has been followed by some stabilisation. While this level holds, further sideways trading is likely to be witnessed with the mid-June and July peaks at $6.4941-to-$6.5164 representing a resistance area. While it caps, renewed downside may ensue.

In case of a fall through this week's $6.3338 low taking place, the March-to-August uptrend line at $6.2830 may be revisited. Support below it may be spotted around the late July trough at $6.2206.

Short-term outlook: bearish while below the mid-June $6.5164 high

Medium-term outlook: toppish while below the 17 August high at $6.6951

Copper daily candlestick chart