Charts of the Week - Stocks Attempt a Recovery Rally, but FX Market Signals Risk Aversion

The GER30 had an almost perfect bounce off the 200 DMA and managed to break above the psychological resistance level of 12,000 points as well as the 21 DMA and falling trendline resistance from the May high. DAX bulls are therefore feeling optimistic, with the next major level seen at 12,450 points. Overall, investors remain cautious as the mood of US President Trump could change quickly, and the risk of a trade war may increase rapidly. However, the charts suggest that the GER30 may still have some room to go with the RSI not even close to overbought territory.

The recovery in USOIL is showing signs of weakness, and most speculators continue to have a negative outlook on Oil prices. The commodity would have to clear the important area of resistance between $56.80 and $57.20 for bulls to regain the upper hand. That region seems still quite far away, and USOIL has lost some of its momentum recently. The risk that the downtrend will resume may have increased, and traders are looking at the $51 level for key support.

In the FX market, there is still a feeling of risk aversion going around. JPY and CHF - traditional safe havens - are in demand, while commodity currencies are under renewed pressure. However, a potential recovery rally in equities could improve risk appetite, and traders may look at cross pairs such as AUD/JPY to express their view. The pair has been stuck in a relatively tight range in recent weeks, but a clear break above 76.37 resistance may give it some momentum.

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