DAX, USD/JPY Forecast: Two trades to watch

DAX slips as tech jitters overshadow stronger data

The Dax, along with its European peers, is opening lower, extending losses for a second day. The negative start follows overnight deep declines in the US and Asia, as caution persists across global markets amid concerns about high valuations in AI-related and tech shares.

Valuation fears resurfaced this week on Wall Street after the record-breaking rally this year, driven by AI. However, warnings of a correction by the CEOs of major U.S. banks, Goldman Sachs, and Morgan Stanley, fueled concerns, accelerating the move lower.

Stronger-than-expected German data could help stem the sell-off. German factory orders rose 1.1% month on month in September, recovering from a 0.4% decline in August.

Meanwhile, the German services PMI shows that activity in the service sector in October was stronger than expected, with output revised from the preliminary reading of 54.5 to 54.6.  This marked the fastest growth in the sector in two years, supported by a notable increase in new business and contributing to the first rise in employment in the sector in 3 months. The composite PMI, considered a good gauge of business activity, was also upwardly revised to 53.9. The level 50 separates expansion from contraction.

On the corporate front, Siemens Healthineer was the largest loser, dropping over 7% after posting Q4 revenue slightly below expectations, pressured by US tariff imports.

BMW is rising despite a decrease in earnings before tax to €2.3 billion, which contributed to a year-to-date figure of €8 billion. Vehicle deliveries rose by 8.7% year on year, with strong growth in Europe and the US.

DAX forecast – technical analysis

After running into resistance at 24,635 in early August, the DAX has fallen further, breaking below the 50 SMA at 24,000 and spiking to a low of 23,580, which is the rising trendline support. The long lower wick suggests that there was little demand at the lower levels as dip buyers stepped in.

Buyers would need to rise above 24,000 to be on a more stable footing, bringing 24,400 into focus.

Sellers will need to break below yesterday’s low at 23580 and the rising trendline support. A break below here brings 23,400, the 200 SMA, and horizontal support into play.

 

USD/JPY steadies post BoJ minutes and ahead of ADP payrolls

USD/JPY is holding steady after yesterday's losses, when the yen benefited from safe-haven flows amid the risk-off mood in the broader market.

However, today the picture has stabilised, suggesting that yesterday's risk-off mood was more of a pause for breath rather than a decisive turning point.

Overnight, the minutes from the Bank of Japan meeting showed caution among board members due to the nation's prolonged experience with deflation. The more dovish stance is limiting any upside in the yen.

While safe-haven plays have supported the yen, the US dollar also rose against its major peers yesterday on the same trade.

The US dollar trades at multi-month highs against its major peers, supported by declining bets on near-term Federal Reserve rate cuts amid deep divisions among Federal Reserve board members.

Investors and policymakers are contending with a record-long government shutdown, which means U.S. economic data is scarce. As a result, more attention than usual will be on the private ADP payrolls later today, which is expected to show 25,000 jobs after -32k last month.

ISM services PMI will also be in focus and as expected to rise to 50.8 up from 50 in September. Stronger data could help lift the US dollar, boosting USD/JPY.

USD/JPY forecast – technical analysis

USD/JPY trades in a rising channel. The price rose to an 8-month high of 154.50 in late October, hitting the upper bound of the rising channel before easing back to test 153.00, the October 9 high. The bullish trend is still intact. Buyers will look to rise above 154.50 to create a higher high, bringing 155 into focus ahead of 156.75.

Sellers will need to break below 153.00 to open the door to a deeper selloff towards 151.

By Fiona Cincotta