DAX, USD/JPY Forecast: Two trades to watch

DAX falls amid global tech rout, weaker German business confidence

Nasdaq fell almost 4% after underwhelming mega-cap earnings
DAX IFO business climate fell to 87 from 88.6
DAX breaks below 100 SMA support

The DAX and its European peers are tumbling lower on Thursday, pulled down by disappointing corporate earnings and following a steep sell-off on Wall Street.

Disappointing earnings from Tesla and Alphabet triggered a 3.6% selloff in the Nasdaq, marking its worst day since October 2022 and sparking a global tech route.

Weaker-than-expected German business sentiment has added to the downbeat mood. The German Ifo business sentiment climate unexpectedly fell to 87 in July, down from 88.6 in June and defying expectations of a rise to 88.9. This reaffirms softer business conditions and the outlook for the German economy.

The data comes after data from the euro area this week has been poor, to say the least. Yesterday's PMI data showed that the eurozone economy stalled, with the composite PMI at 50.1. Meanwhile, alarm bells sounded over the German economy, which fell back into contraction territory, dragged down by a steep decline in the manufacturing PMI.

Looking ahead, attention will turn to Q2 US GDP figures later today, which could provide further clues about when the Fed might start to cut rates.

DAX forecast – technical analysis

The DAX has broken below the 100 SMA dynamic support, which has been guiding the price higher since mid-June. The break below the 100 SMA combined with the RSI below 50 keeps sellers hopeful of further losses.

Support can be seen around the 18025 – 17950 zone, the July and June lows. A break below here opens the door to 17,800, the May low.

Any recovery would need to retake 18,300 of the 100 SMA. Above here 18780, the June and July high comes into focus ahead of 18990 and fresh all-time highs.

USD/JPY drops to a 12-week low as the carry trade unwinds & on safe-haven flows

BoJ could raise interest rates next week
JPY benefits from safe-haven flows
USD/JPY falls towards 152.00

USD/JPY has fallen sharply, extending losses from yesterday as the pair drops to a 12-week low. The pair is being dragged lower by various factors, including the unwinding of the carry trades and on safe-haven flows as risk appetite sours.

A selloff in US equities and a global tech route has boosted safe-haven demand, and the Japanese yen is the asset of choice, outperforming gold, which has fallen below 2400.

Attention is turning to the Bank of Japan's July meeting, where the market expects a 10 basis point rate hike and could potentially unveil a plan to halve bond purchases in the coming year, signaling it's ready to unwind its massive monetary stimulus.

This is happening while the Federal Reserve is widely expected to start cutting interest rates in September.

Attention today will be on US Q2 GDP data, which includes the core PCE figures for the quarter. GDP is expected to grow 2% annualized, up from 1.4% in the first quarter, but this is still below trend and down significantly from 4.9% in Q3 2023.

The data comes after U.S. business activity climbed to a 27-month high in July, but firms have had difficulty sustaining higher prices.

Core PCE data, the Fed's preferred gauge for inflation, is due tomorrow.

USD/JPY forecast - technical analysis

USD/JPY ran into resistance at 161.95 and has fallen sharply lower, taking out several key support levels as it heads towards 151.86, the May low. A break below here exposes the 200 SMA at 151.60 before bringing 150.75, the February high, into play.

The RSI has moved into oversold territory, so there could be consolidation or a higher move. Should buyers defend 151.86, a recovery would need to retake 155.00 to negate the near-term downtrend.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.