GBP/USD, DAX Forecast: Two trades to watch

GBP/USD rises to a weekly high after UK jobs data

• UK vacancies fell by 43,000 in Q3
• Total pay growth slowed to 7.9%
• US inflation data is expected to cool to 3.3% YoY
• GBP/USD rose to a weekly high

GBP/USD is climbing after mixed UK jobs data with falling vacancies showing signs of weakness, but total wage growth is hotter than expected.

Unemployment held steady at 4.2%; however, the number of vacancies declined by 43,000 to 988,000 in the July to September period, compared to the April to June period. This is the 15th straight quarterly decline in vacancies, and the drop was seen in 14 of 18 industries, suggesting that it was broad-based. The vacancy decline reflects slowing economic activity feeding through to the labour market.

However, on the other side of the coin, wage growth, including bonuses, came in hotter than expected. Total wage growth eased to 7.9%, down from 8.2%. Expectations had been for a decline to 7.3%.

The hotter-than-expected wage growth, which is still among the highest annual growth rates since records began in 2001, could be a concern for the BoE as they decide whether to raise interest rates again and is helping to lift the pound and

The data comes ahead of UK inflation figures due tomorrow and are expected to show the inflation fell to 4.8% from 6.7% in October.

Cooler inflation could offset concerns about the hotter-than-forecast wage growth, which is at least trending in the right direction even if slower than expected.

Separately in the US dollar is holding steady ahead of US inflation data, which is expected to show that inflation cooled to 3.3% firm 3.7% YoY. Cool inflation could fuel bets that the fed is done with hiking rates.

GBP/USD outlook – technical analysis

GBP/USD found support on the 20 SMA and has risen over the 50 SMA, bringing 1.2340, the October high into focus as the next target. A rise above here could see buyers aim for 1.2440, the 200 sma.

On the downside, a break below the 50 sma at 1.2255 and the 20 sma at 12210 could see sellers push the price back to 1.21 the November low, ahead of 1.20409 the October low.

DAX trades cautiously ahead of EZ GDP & US CPI data

• US CPI is set to cool to 3.3% and core CPI to 4.1%
• Eurozone GDP is expected to confirm -0.1% QoQ
• DAX has risen above 50 sma, falling trendline

The DAX, along with its European peers, are set to open in a relatively subdued fashion as investors look ahead to Eurozone GDP data as well as US inflation figures.

US CPI is likely to be the biggest driver of the market today. US CPI data could provide further clues over whether the Federal Reserve will hike interest rates again. The central bank left rates unchanged at the November meeting. However, Fed Chair Jerome Powell said last week that he was unsure whether monetary policy was tight enough to bring inflation back to 2%, a message that was echoed by several Fed policymakers last week.

Expectations are for CPI to cool to 3.3% YoY in October and rise 0.1% MoM. Core inflation is expected to rise 4.1% across the year and 0.3% on the month.

Hotter-than-expected inflation could fuel bets that the Fed will hike rates again, which could hurt demand for stocks. Currently, the market is pricing in a 90% probability that the Fed will leave rates on hold in December.

As well as US inflation figures, eurozone GDP data will also be in focus and is expected to confirm the preliminary reading of -0.1% contraction QoQ in Q3. Weak growth could ease pressure on the ECB to stick to its hawkish rate path and may fuel bets that the ECB will start to cut interest rates sooner.

German ZEW economic sentiment figures are also due and are expected to show that sentiment improved for a third straight month, rising to 5 from -1.1 as inflation in the region continues to cool.

DAX forecast - technical analysis

The DAX extended its rebound from 14600, rising above the 20, 50 SMAs and the falling trendline resistance, keeping buyers optimistic of further gains.

Buyers will look for a rise above 15500, a level that has capped gains or limited losses on several occasions, to expose the 200 sma at 15650.

Support can be seen at 15280 the 50 sma and 15175 the falling trendline support, ahead of 15000 the psychological level and 20 sma.