DAX ,USD/JPY Forecast: Two Trades to Watch

Graphic of trading data chart
Fiona Cincotta
By :  ,  Senior Market Analyst

DAX rises even as consumer confidence slip

  • China optimism leads stocks higher for a second day
  • German consumer confidence unexpectedly falls to -25.5
  • DAX rises above 20 sma towards 16000

The DAX is opening higher, adding to yesterday’s gains amid a broadly upbeat mood in the market and despite weaker-than-expected German consumer confidence data.

Stocks are moving higher for a second day amid a positive response to stimulus from Beijing, easing concerns over slowing China's growth. Over the weekend, Beijing announced a series of measures to support the market, including reduced stamp duty for stock trading, which boosted Asian equities again today, leading to another positive open in Europe.

Weaker than expected German consumer confidence hasn’t weighed on demand for the DAX. GFK consumer confidence unexpectedly fell -25.5 in September from 24.4 in August, defying expectations of an improvement to -24.3.

The data comes after PMI data earlier in the month highlighted the struggles that the German economy is facing amid a deepening downturn in manufacturing output and 0% GDP growth in Q2. However, on a more positive note, German inflation is cooling, and data tomorrow is expected to show that inflation cooled further.

That said, ECB President Christine Lagarde’s hawkish comments on Friday could limit the upside for stocks. Lagarde said that interest rates will remain high as long as needed to tame inflation.

Looking ahead US consumer confidence and JOLTS job opening data will be in focus.

DAX forecast – technical analysis

The DAX found support at 15465 in mid-August and has rebounded, climbing above 15700 resistance and the 20 sma at 15790. The RSI is neutral.

Buyers could look towards 15690, the confluence of the 50 and 100 sma, ahead of 16065, the August 10 high to extend gains towards 16335.

Meanwhile, sellers could look for a break below 15700 to open the door to the 15465 low. A break below here and the 200 sma at 15430 would create a lower low.

dax forecast chart

USD/JPY falls ahead of consumer confidence and Job openings data

  • Fed-BoJ divergence boosted UDS/JPY to a 10 month high
  • US consumer confidence is expected to slip to 116 & job vacancies to moderate
  • USD/JPY trades in a rising channel

USD/JPY is easing lower, snapping a three-day winning streak. The pair is edging away from 146.50 but remains above 145-145.80, a level where Japanese authorities have previously intervened.

The USD is weakening amid an improved market mood and as treasury yields tick lower despite hawkish takeaways from Jackson Hole. Federal Reserve Chair Jerome Powell hinted towards further rate hikes and rates staying higher for longer if necessary.

This was in contrast to a dovish-sounding BoJ Governor Kazuo Ueda, who said that below-target inflation supports the central bank’s ultra-accommodative stance. An unexpected rise in unemployment to 2.7% from 2.5% provided more support for BoJ’s dovishness.

Attention now turns to US consumer confidence, home prices, and JOLTS job opening data ahead of Friday’s non-farm payroll report. Job vacancies are expected to moderate further to 9.465 million from 9.582 million.  Meanwhile, consumer confidence is expected to ease slightly to 116 from 117, and US home prices could fall for a fourth straight month of year-on-year declines.

A series of weaker data could see investors rein in Fed rate hike bets. According to the CME Fedwatch tool, the market is pricing in a 21% probability of a rate hike in September and a 60% probability that rates will be higher by November.

USD/JPY forecast – technical analysis

USD/JPY trades within a rising channel dating back to the start of the year. The pair pushed to 146.75, a fresh 10-month high. The RSI supports further upside while it remains out of oversold territory.

Buyers will look for a rise above 146.75 to 148.80, the November 2022 high and the rising trendline resistance.

Support can be seen at 145.00 the July high and the 20 sma. A break below here could open the door to 141.50 the August low.


usd/usd forecast chart


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