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DAX rises amid a global risk-on sentiment

The DAX is rising on Thursday, recovering from yesterday's slight loss and mirroring a more positive mood across global markets.

Data yesterday in the US reinforced expectations of a Fed rate cut next week. The markets are now pricing in the 90% probability that the Fed will reduce rates by 25 basis points on December 11th.

Meanwhile, investors also continue to monitor developments in the Ukraine peace deal.

Delving into sectors, industrial stocks are the biggest rises, with Schneider Electric and Siemens Energy rising 3.5% and 2.8% respectively, following a ratings upgrade by JP Morgan. Banks are also performing well.

On the data front, eurozone retail sales are expected to rise 0.1% month on month 0.1% in October. The data will provide some clues about the economy, but is not expected to impact the ECB's monetary policy outlook.

The ECB is expected to leave interest rates unchanged in December, and President Christine Lagarde confirmed that the central bank sees inflation remaining around the 2% target for the medium term.

ECB chief economist Philip Lane is due to speak later today.

US challenger job cuts and jobless claims could also influence sentiment in the US session.
 

DAX – forecast technical analysis

The DAX trades within a familiar range, within which it has traded since late May. The DAX has recovered from the 22,900 low, rising back above the 200 SMA, the rising trendline resistance, and 23,700 as it heads towards the 50 SMA and 24,000. A rise above here brings the November high of 24,500 into focus. A rise above here brings the 24,775 record high into play.

Support can be seen at 23,540, the 200 SMA, and 23,350 support. A break below here opens the door to the 23,000 support zone. Should sellers take out this level, it creates a lower low and could spur a deeper selloff towards 22,000.
 

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GBP/USD consolidates around 1.335 ahead of US data

GBP/USD is consolidating around 1.3350, a two-month high, after recent gains amid renewed USD demand. However, rising expectations of a December Fed rate cut mean USD gains are limited.

Yesterday, ADP payrolls came in weaker than expected, showing that payrolls fell by 32k, the steepest decline in 18 months, and defied expectations of a 5k rise. The data adds to evidence of a weakening labour market, which the Fed has noted as a reason to cut rates again this month.

Meanwhile, ISM services PMI data came in at a nine-month high, but prices paid eased, suggesting slowing inflationary pressures.

Attention today is on initial jobless claims and challenging job cuts, as the market prices in a 90% probability of a 25-basis-point cut next week.

U.S. President Trump said on Tuesday he plans to announce his choice to succeed Jerome Powell early next year. Reports are circulating that Kevin has emerged as the frontrunner to be the next Fed chair. A monetary policy dove, he is likely to support further interest rate reductions.

Meanwhile, the Bank of England is expected to cut interest rates at its December meeting, which could limit upside in cable. Prime Minister Keir Starmer has emphasised the need to lower inflation and interest rates to boost investment and economic activity.

Data yesterday showed the UK services PMI grew at a slower pace in November, to 51.3, down from October's 52.3, as uncertainty surrounding the budget prompted firms to delay investment in new projects.
 

GBP/USD – forecast technical analysis

GBP/USD has recovered from the 1.3040 November 20 low, rising above the descending trendline, the 50 and 200 SMA to test the 1.3350 resistance zone.

Buyers supported by the RSI above 50 will look to extend gains beyond 1.3350 to test resistance at 1.3480 and above. Here, 1.36 comes into focus.

Failure to hold above the 200 SMA opens the door to support at 1.32 and 1.3140, the August low. Below here, 1.30 comes into focus.
 

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