Two trades to watch: DAX, USD/JPY

DAX rallies post-Federal Reserve Chair Jerome Powell's speech

After surging 8% across the month of November, the DAX is showing few signs of slowing. The German index is pointing to a 1% jump o the open, continuing the upbeat mood from Wall Street.

Federal Reserve Chair Powell signaled that the Fed would slow the pace at which it raises interest rates from December. His comments come as expectations for a slower rate hike build in Europe as well.

After eurozone inflation came in cooler than forecast at 10%, down from the record high of 10.6% in October, the odds of a 50 basis point hike in December have risen. A slower pace of hikes would be beneficial for stocks.

German retail sales disappointed, falling -2.8% MoM in October, after rising 0.9% in September. This was below forecasts of -0.6% decline. Sales fell as surging fuel bills mean that consumers spend less on non-essential items.

Looking ahead, German manufacturing PMI data is expected to confirm 46.7, an improvement from October’s 45.1.

Where next for the DAX?

The DAX extends its runup towards 14700, the June high. The RSI is teetering on overbought territory, so buyers should be cautious. A rise above 14700 brings 14930, the March high, into play.

On the flip side, support can be seen at 14100 the mid-November low. A break below here opens the door to 13950, the August high, before exposing the 200 sma at 13570. A break below here negates the near-term uptrend.

USD/JPY falls to a 3-month low ahead of core-PCE

USD/JPY has fallen to a 3-month low after Federal Reserve Chair Jerome Powell speech. The market has focused on the downshift in rate hikes rather than the comments that interest rates would need to rise higher.

Meanwhile, the yen is rallying after BoJ’s board member Noguchi prompted speculation that the BoJ could adopt a less dovish stance should inflation remain elevated.

Inflation will remain in focus with the release of US core PCE data. Expectations are for a tick lower to 5% from 5.1%.

A large than-expected decline could fuel the less hawkish Fed trades pulling the USD lower still.

US ISM manufacturing data is also due to be released. Expectations are for a fall below 50 to 49.3.

Where next for USD/JPY?

USD/JPY has fallen through support at 137.65 the previous November low, as the selloff extends towards the 200 sma.

The RSI is on the verge of oversold territory, so sellers should be cautious; some consolidation or a tick higher could be on the cards.

Sellers could look for a move below 134.40 the daily low to expose the 200 sma. A move below the 200 sma would be significant given that the price has traded above the 200 sma since February 2021.

On the flipside, buyers could look for a rise over 140.35 the September low to extend a recovery towards 141.60 last week’s high. A move over here creates a higher high.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.