The DAX is seemingly moving into turbulent waters, mirroring the overnight declines of Wall Street. This comes after unsettling treasury yields and unexpected figures from tech giant Alphabet, resulting in a 2.4% plunge for the Nasdaq.
The spotlight now shifts towards the forthcoming ECB rate announcement. Speculations are rife that the central bank will maintain the interest rates at the unprecedented 4%, especially after a succession of ten rate augmentations.
In the interim since the last discussion, inflation rates have mellowed. Yet, ominous clouds loom over the economy, hinting at potential recessionary currents in the latter half of the year. Recent PMI indicators reinforce this sentiment, revealing a considerable dip in eurozone commercial activity, hitting a 3-year trough.
Recent utterances from policymakers intimate a stable interest rate in the upcoming October session. However, they have subtly indicated the intention to uphold these elevated rates to realign inflation closer to the ECB’s desired 2%. Market pundits anticipate an interest rate reduction by the ECB around the third quarter of the coming year, but rising tensions in the Middle East might toss a wrench in the works, potentially escalating inflationary trends.
Any assertive stance from the ECB or mounting apprehensions regarding the eurozone’s fiscal health might dampen the stock market’s spirits.
The corporate earnings announcements, with the spotlight on heavyweights like Mercedes-Benz and Volkswagen, are also anticipated keenly. Concurrently, in the US, all eyes are on the forthcoming GDP data. A bullish US growth trajectory could amplify confidence in the US’s economic fortitude vis-à-vis Europe’s frailty. This could also stoke speculations of a rate hike in December by the Fed, potentially exerting downward pressure on stocks.
DAX Predictions – A Technical Perspective
The DAX’s unsuccessful attempt to breach the 14945 barrier led to a downward pivot, targeting the October nadir at 14625. The RSI indicates the likelihood of this downturn. A descent below 14625 might steer towards 14450, the lowest for 2023. For any revival, surpassing the 14945/15000 barrier is crucial.
USD/JPY’s Ascent: Awaiting US Q3 GDP Reveal
With the Yen crossing the pivotal 150.00 mark, it’s now under vigilant observation. The rising USD has notched a weekly high against several currencies, echoing the ascent of treasury yields and the diminishing appetite for risk-laden currencies.
Reaching 150 puts the yen at risk of potential corrective measures by Japanese overseers. Finance Minister Suzuki of Japan cautioned against undervaluing the yen, emphasizing that monetary movements are under strict scrutiny.
If the 150.00 mark goes unchallenged by Japanese regulators, the USDJPY could witness a substantial surge. The USD’s recent vigor, propelled by robust PMI figures, underscores the robustness of the US economy and the likelihood of the Fed maintaining elevated interest rates.
The imminent US GDP data will be pivotal for USD/JPY trajectories. Forecasts hint at a 4.3% annualized growth in Q3, a leap from the 2.1% in Q2. This momentum would solidify the notion that the Federal Reserve might consider another rate hike in December.
At present, market sentiments predict a 97% likelihood of the Fed retaining the current rates in the ensuing week and a 30% chance for a December rate hike. This revelation precedes the core PCE data expected tomorrow.
USD/JPY Projections – Delving into the Technicals
The USD/JPY is seeing gains beyond the 150.00 mark and is nudging the 150.50 resistance. The RSI augurs well for further ascent as long as it avoids the overbought zone.
Investors will keenly observe for a decisive move past 1.50.50, setting sights on 151.00, and subsequently, the rising trendline at 151.80.
Conversely, a tumble below 150.00 might aim for the 149.50 support level, followed by 148.75, the previous week’s trough. Should there be a yen rally due to regulatory interventions, we might see a sharp dive towards 147.30, reminiscent of October’s lows.