Dead Cat Bounce or a New Bullish Trend?

What a great day we had yesterday! Almost all stocks finished trading day with rises. Not that we weren’t expecting it. We mentioned a buy signal on DAX in our analytical pieces this week, so call us unsurprised.

If you’re looking for a reason or an explanation for that rally, there really is none. Media outlets are pointing at the general belief that we reached the bottom, but I don’t really buy it and again, I am aware of the fact that not every single move needs an explanation.

It can be a dead cat bounce, a simple bull rally in a deep bearish trend. It can also be a concrete bottom and the end of a downtrend. It can be both. For sure, indices just got a fresh, new, mid-term buy signal, which can continue for weeks.

As for the calendar, we had a few words from RBA Governor Lowe. He pointed out that inflation is on the rise and he confirmed a path of steady rate rises in Australia. That was another thing that helped the Australian Dollar, which has had a really great time recently. AUDUSD is on the highest levels in July and has an appetite for more and with the current sentiment, should get it.

We also received comments from Andrew Bailey the Governor of the Bank of England that the BoE will consider a half-point rate hike in August. That naturally helped the Sterling but today was only one half of the puzzle. Early in the morning, we learned the UK’s inflation data. Expectations were on 9.3% and the number that hit our screens was 9.4%, so a little bit higher. The initial reaction on the GBP was negative but let’s see if sellers will be able to keep the pressure on for the whole day.

The calendar today is not really busy. Apart from the CPI from UK, we are going to get the same number but from Canada. USDCAD drops sharply this week, which is really a sweet movement for price action traders. USDCAD has an amazing bearish situation on the weekly chart and the current slide was more than anticipated.

Looking elsewhere, China reports rises in Covid cases, which may trigger the zero covid protocol again and we know what a negative factor that can be for oil. So far, black gold is holding strong after the bounce off the 100 USD/bbl. support, but rising covid cases may block a further rise north for this instrument.

We finish with a quick glimpse on the EURUSD, which is currently having a fourth bullish day in a row. 0.9999 worked like a charm and will currently be the most important support on the Forex market.