GBP/USD, DAX Forecast: Two trades to watch

GBP/USD trades at a monthly low ahead of US CPI

US CPI is expected to ease to 2.3% o from 2.5%
Fed minutes point to a gradual pace of rate cuts
GBP/USD would turn bearish below 1.30

GBP/USD is inching higher after yesterday's losses as the rally in the US dollar pauses for breath ahead of US inflation figures.

The U.S. dollar hovers around an almost two-month high against its major peers as the market ha grown more confident that the Fed would adopt a patient approach to cutting interest rates.

All eyes are on US CPI data, which is expected to show that inflation eased to 2.3%, down from 2.5%, and core inflation held steady at 3.2%. The data comes following the unexpectedly strong payroll date last week and after minutes from the September Fed meeting pointed to a steady approach to rate cuts.

However, an upside surprise in US inflation could force the Feds to rethink their path for interest rates. That said, San Francisco Fed president Mary Daly said yesterday she was less concerned about inflation and more so about hurting the labor market.

The market is pricing an 80% probability of the Fed cutting rates by 25 basis points at the beginning of November against the 20% probability that the central bank will leave rates unchanged.

Meanwhile, the pound is drifting amid a quiet week for economic data. Sterling fell away from its 2024 high at the beginning of October following more dovish comments from Bank of England governor Andrew Bailey he suggested that the central bank may adopt a more aggressive approach to interest rate cuts should inflation data allow it.

GBP/USD forecast – technical analysis

GBP/USD has trended higher since May, forming a series of higher highs and lower lows. The price ran into resistance at 1.34 and has corrected lower, falling below 1.3260, the August high, and has slipped below the 50 SMA.

Sellers will need to break below 1.30 to negate the uptrend, which brings the rising trendline support at 1.2880 into focus.

Should buyers rise above the 50 SMA, a rise back up towards 1.3260 could be on the cards. A rose above here opens the door to 1.34.

DAX falls despite a rebound in retail sales & ahead of US CPI data

US CPI data to ease to 2.3% YoY
German retail sales rose 1.6% MoM in August
DAX trades caught between 19k to 19.5k

The DAX is heading lower after solid gains yesterday amid stronger-than-expected German retail sales and ahead of US inflation figures.

The market mood is cautious across the board ahead of US inflation data, which is due later today. The data is expected to show that headline inflation eased on an annual basis to its lowest level since March 2021, which could allow the Fed to continue lowering borrowing costs.

The caution overshadows stronger-than-expected German retail sales data. German retail sales rebounded in August, adding to a 1.5% increase in July and pointing to solid consumption trends despite weakness in the manufacturing sector.

Private consumption contributes to over 50% of the German economy, meaning that the increase in retail sales was significant.

The positive trend contrasts with expectations of a deteriorating economic outlook for the eurozone's largest economy this year. The government forecast the economy will contract by 0.2% in 2024 after shrinking by 0.3% in 2023.

Looking ahead, attention will also be on the minutes of the September ECB meeting, which investors will scrutinize for further clues about the ECB's next moves and outlook for the eurozone economy. The ECB cut rates by 25 basis points at the September meeting and is expected to cut rates by a further 25 basis points at the meeting this month.

DAX forecast – technical analysis

DAX continues to trade above its rising trendline dating back to August 5. The price is caught between the record high at 19500 on the upside and 19,000 on the downside.

Buyers will need to rise above 19500 to reach fresh all-time highs.

Sellers would need to break below 19000 to negate the near-term uptrend and bring 18500, the 50 SMA, into focus.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.