DAX, USD/JPY Forecast: Two trades to watch

DAX rises ahead of German IFO business climate

• Recovery in tech stocks boosts the market mood
• Tesla surges despite missing on the top & bottom line
• German IFO business sentiment is expected to rise to 88.9
• DAX rises above 18000

Dax has opened higher extending gains of 1.5% from the previous session amid an upbeat market mood and as investors look ahead to German business climate data.

The DAX and most European stock markets are maintaining an optimistic tone as the earning season continues. Equities have benefited from the upbeat mood surrounding a rebound in the US tech sector, which has been helped by solid gains from EV giant Tesla after Tuesday's close.

Tesla surged over 13% in after-hours despite the EV maker missing top-line forecasts by almost $1 billion and missing EPS. Instead, Investors were impressed by the focus on AI, autonomy, and accelerated plans to develop cheaper EV models.

In Europe corporate updates remain focus with updates from Roche, Volvo, Lloyds and Orange.

Looking ahead, the main economic data release in Europe today will be Germany's Ifo business sentiment figures, which are expected to show a slight improvement to 88.9 in April, up from 87.8.

The data comes amid signs of recovery in the eurozone's largest economy. Yesterday, German service sector activity fueled a breakout in the DAX. The services PMI rose to 53.3, up from 50.1, and the eurozone services PMI rose to 52.9 in April, up from 51.5. Signs of a recovery in the economy are encouraging, but they're unlikely to knock the ECB off track for cutting interest rates in June.

DAX forecast – technical analysis

The DAX rebounded from 17400, the April low, as the hammer candle marked the end of the downtrend.

The DAX has risen above 50 SMA and 18000, round number, with 18375, the rising trendline resistance seen as the next hurdle. Above here, buyers will look to 18650 and fresh all-time highs.

On the downside, 18000 offers immediate support, followed by 17600, the March low. A break below here brings 17400 back into focus.

USD/JPY inches higher despite intervention threats & ahead of US durable goods orders

• US durable goods are forecast to rise 0.3% MoM in March vs 0.5% previously.
• Yen at risk of intervention
• USD/JPY looks to 155.00

USD/JPY inches higher to fresh 34-year highs on USD strength, despite the market being on alert for intervention.

The US dollar is rising, recouping after yesterday's losses as investors look ahead to US durable goods data, which could provide further clues about the health of the US economy. Expectations for durable goods orders to increase 0.3% in March after rising 0.5% in February are high.

However, the data comes after disappointing private sector PMIs yesterday. The US services PMI eased to 50.9 from 51.7 in a sign that the economic upturn could be losing momentum. New orders fell for the first time in six months, and companies cut jobs at a rate not seen since the global financial crisis, excluding pandemic lockdown months.

Weaker-than-expected US durable goods orders following yesterday's weak PMI figures could raise questions about a soft landing in the US and potentially pull the USD lower.

Meanwhile, the yen is still struggling at 34-year lows despite an ongoing risk of intervention by Japanese authorities and ahead of the Bank of Japan meeting on Friday.

On Tuesday, Japanese finance minister Suzuki gave his strongest warning yet on the chances of intervention. However, this would be a highly political move; an intervention hasn't occurred since 202.

The yen has declined around 9% this year, driven by the market reining in expectations of a near-term Fed rate cut while expecting the Bank of Japan to keep rates unchanged.

USD/JPY forecast – technical analysis

USD/JPY is inching towards 155.00, a level that is seen as the line in the sand for intervention. The market respected 152.00 in a similar manner ahead of the US CPI reading, which sent the price firmly above the marker. This week’s core PCE, if hotter than forecast, could see a similar reaction.

Above 155.00, the 160.00 level is the next logical level.

On the downside, strong support is at 152.00, the March high. Some minor support could be seen at 153.50, last week’s low.