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USD/JPY rises to an 8-month high

• JPY has fallen 3.3% this week following the weekend elections
• FOMC minutes & Fed speakers are in focus
• USD/JPY smashes through 150.00

USD/JPY has jumped to an 8-month high on yen weakness and a rebounding dollar.

The yen has tumbled over 3.3% this week against the greenback after fiscal dove Sanse Takaichi won the LDP leadership election at the weekend and is likely to become the next Prime Minister.

Takaichi is a supporter of looser fiscal and monetary policies; as a result, traders have reined in expectations of another rate hike this year, even though consumer inflation remained well above the BoJ's 2% target.

The market is currently pricing in a 20% probability of a BoJ rate increase at this month's meeting, down from 60% before the election. A delay in rate hikes into next year or potentially even later could further pull on the yen.

Meanwhile, the US dollar is gaining against its major peers, boosted by the weakness of the euro and yen for a third straight day. These currencies are under pressure due to recent political developments.

The USD is pushing higher despite the ongoing U.S. government shutdown, which shows few signs of being resolved, and despite the market having almost fully priced in a rate cut this month.

Attention will be focused on the FOMC minutes and a plethora of Fed speakers for further clarity on the Fed's next move, as data remains in short supply due to the shutdown. Dovish commentary could limit the upside for USD/JPY for now.
 

USD/JPY forecast- technical analysis

The USD/JPY trades above its rising trendline, which dates back to April 22. The pair broke out of a recent consolidation pattern, rising above key resistance levels to hit an 8 8-month high of 152.64. The RSI is tipping into overbought territory on multiple time frames, so some consolidation or a minor pullback could be on the cards.

Buyers will look to extend gains towards 153 and then on towards 155, the round number, and the 78.6% Fib retracement of the 158.9 and 2025 high, and the 139.9 and 2025 low.

Support can be seen at 151.20 – 151 zone, the March and August highs. Below here, 150, the round number comes into play ahead of 148.80, the recent consolidation level.

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DAX rises to a 3-month high as steel stocks jump

• The EU announced an import quota on steel
• German industrial production dropped 4.3%
• DAX steadies around 24,500

The DAX rose on Wednesday, reaching its highest level since July 9, driven by steel stocks following the European Union's trade measures unveiled on Tuesday and despite pressure on the auto sector.

The European Union announced plans to halve the amount of steel that can be imported into the bloc, with new 50% tariffs applying to any excess. These protectionist measures will help support the steel sector, with shares in industrial conglomerate Thyssenkrupp jumping more than 5% on the news.

However, gains on the DAX are being held back by ongoing uncertainty surrounding France's political crisis and the ongoing U.S. government shutdown, as well as weak German economic data.

German industrial production fell 4.3% month-on-month in August, significantly more than the 1% decline forecast, marking the steepest drop since March 2022.

The auto sector was also acting as a drag on the markets after Germany's BMW announced its 2025 earnings forecast, citing US tariffs and weaker-than-expected growth in the Chinese market.
 

DAX forecast – technical analysis

The DAX recovered from its September lows around 23,500, rallying above the 50 SMA and the rising trend line to 24,500, where it now consolidates. The RSI above 50 supports further upside.

Buyers will look to extend gains towards 24,630 to fresh record highs. 25k would be the next logical target.

Support is seen at 24,250, the weekly low, and the rising trendline support. Below here 24,000, the round number and the 50 SMA come into focus. A break below 23,350 creates a lower low.
 

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