GBP/USD, DAX Forecast: Two trades to watch

GBP/USD falls as unemployment rises

• Unemployment rose to 4.3% from 4%
• Wage growth eased to 4.8%
• GBP/USD tests 200 SMA

GBP/USD has fallen to a 3-month low amid a stronger U.S. dollar and as UK unemployment rises.

 Unemployment in the three months to September rose by more than expected to 4.3%, up from 4% in the previous quarter. Meanwhile, the number of employees on company payrolls fell by 9000 over the same period, and vacancies also fell for the 28th straight month, the lowest level since May 2021 in signs of a bordering slowdown and the jobs market.

Average earnings, excluding bonuses, eased to 4.8%, down from 4.9%. This is still significantly above inflation, which is at 1.7%, helping households rebuild their finances after the cost-of-living crisis.

Signs of a slowdown in the jobs market are sending the pound lower. A weaker jobs market raises the likelihood of another Bank of England rate cut although wage growth remains sticky so a December rate cut is unlikely whilst a cut in February next year could be aa possibility.

Separately, the US dollar has risen to a four-month high against its major peers on expectations that Trump's inflationary policies will lead to a more gradual reduction in the Federal Reserve's interest rate cuts.

The US economic calendar is quiet today. Attention will be on Federal Reserve speakers for further clarification on the future path for interest rates in light of Trump's victory. US inflation data is due tomorrow.

GBP/USD forecast – technical analysis

GBP/USD has broken below the 1.2850 support and is testing the 200 SMA at 1.2810  as sellers take control. A meaningful break below here opens the door to 1.27.

Resistance can be seen at 1.2850, and a rise above the 1.30 level is needed to negate the downtrend.

DAX falls as Trump risks hit sentiment

• Trade tariffs could hit Germany’s exports
• Trade tariffs on China could weaken the key trade partner’s economy
• DAX trades caught between 19k to 19.5k

The DAX, along with its European peers, has opened sharply lower amid broad-based losses as the markets continue to consider the implications of US President-elect Trump's policies.

European equities have broadly been under pressure as investors assess the likelihood of trade tariffs following Trump's victory last week. Trump has threatened 10% to 20% tariffs on imported goods from Europe, which could hurt the fragile economic recovery.

However, this is only part of the story. Trade tariffs of 60% on China could negatively impact the economy, which is already struggling under a property crisis. China is also a key trade partner for Europe, particularly Germany.

Chinese inflation data over the weekend pointed to weaker domestic demand, raising concerns for exporters. Producer prices (PPI) in China declined by 2.9% year on year.

Meanwhile, inflation in Germany confirmed the preliminary reading of 2%. Attention is now turning to German ZWE economic sentiment, which is expected to slip in November to 12.8, down from 13.1 in October. Deteriorating sentiment could pull the DAX lower.

DAX forecast - technical analysis

DAX trades between 19,000 and 19,500. The price failed to rise above 19,500 yesterday and has rebounded lower today. The RSI is neutral. This set-up lends itself to a breakout trade.

Buyers will look to rise above 19,500 to extend gains towards 19670 and fresh all-time highs.

Sellers will look to take out 19,000 to expose the 100 SMA at 18,700. Below here, the 200 SMA comes into play at 18400.