USD/JPY, DAX Forecast: Two trades to watch

USD/JPY falls further ahead of the NFP report

USD/JPY is falling as the dollar struggles across the board, while the yen continues to outperform following Prime Minister Takaichi’s landslide election victory at the weekend.

Expectations had been for the yen to weaken if Takaichi, a fiscal dove, won a landslide victory, but the reality is the yen has strengthened amid optimism over the growth prospects, the potential for a more hawkish Bank of Japan and political clarity, which is encouraging speculators to scale back on short yen positions.

Meanwhile, the US dollar is falling across the board, extending yesterday's weakness, after slower-than-expected December retail sales and as investors look ahead to today's nonfarm payrolls report.

The delayed report, due to the government shutdown, is expected to show that 70,000 jobs were created last month, up from 50,000 in December.

The data comes at a time when the market is trying to decide whether the US economy is merely slowing towards trend or if the labour market is weakening in a way that would force the Fed to cut rates sooner.

The data could help shape expectations for Federal Reserve policy. The markets are currently pricing in 60 basis points of Fed easing by the end of the year. Weak data could lift Fed rate cut bets weighing on USD/JPY

USD/JPY forecast – technical analysis

After running into resistance at 157.65 USD/JPY rebounded lower, breaking below 154.50 support to test the rising trendline at 152.80.

Sellers supported by the RSI below 50 will look to break below the trendline to test 152, the 2026 low. A break below here creates a lower low and exposes the 200 SMA at 150.30.

Resistance is seen at 154.50, the mid-December low, with a rise above this level opening the door to 156.00. A rise above 157.80 creates a higher high.

DAX falls on AI disruption concerns & ahead of the NFP report

European stocks are under pressure on Wednesday, pulled lower by tech and financial stocks amid ongoing worries that new AI models could hurt traditional software businesses

While worries that AI is disrupting software companies hit tech stocks particularly hard in the US last week, those worries are also in Europe. French company Dassault's shares are down almost 20% and on track for their largest daily drop after the software maker posted disappointing Q4 revenue growth and a weak outlook for this year.

Fears over AI disruption are not only affecting software firms; they are also spreading to other parts of the market, including insurers, asset managers, and index providers, following the release of several new AI tools.

On the macro front, attention is on the US jobs report later today, which could help gauge expectations for Federal Reserve rate cuts this year.

The non-farm payroll report is expected to show 70,000 jobs added, up from 50,000 in December, and unemployment is expected to rise to 4.5%, up from 4.4%.

Slightly weaker jobs data could support expectations for Fed cuts, which would be positive for risk assets globally.

DAX forecast – technical analysis

The DAX rebounded from the rising trendline support, moving above the 50 SMA before encountering resistance around 25,000 as momentum faded. Buyers will look to rise above the 25,000 level towards 25,500 and fresh record highs.

Immediate support is seen at 24,650, the October and July high and the 50 SMA. A break below 24,200, the February low creates a lower low.