German business climate and big tech earnings begin

DAX => The index holds steady above 12900

Microsoft =>The stock rises toward $250

GBP/USD => The pair rises to 1.13

DAX looks to IFO business climate data

DAX rose 1.2% in the previous session boosting speculation that the Federal Reserve could soon be reaching a point where it would ease back on aggressive rate hikes. Comments from Fed President Mary Daly fuelled expectations that from December, the Fed will hike rates by 50 basis points, down from 75. A less aggressive Fed would be beneficial for global stocks. On the data front, German business activity data was weak, contracting by more than expected. Rising energy costs pushed the PMI to a 29-month low. High energy costs, particularly in manufacturing, hurt activity. The same high energy costs are expected to weigh on IFO economic sentiment in October, pulling the index lower from its two-year low reached in September.

Where might the DAX price head to?

DAX is extending its rebound from the 2022 low of 11810, rising above the 20 & 50 sma. This, combined with the RSI above 50 could keep buyers hopeful of further upside? Buyers will look for a move over 13025, yesterday’s high, to possibly extend gains towards 13300, the falling trendline resistance and 13570, the September high. On the other hand, sellers could look for a move below 12790 the 50 sma and 12500 the 20 sma to bring 12000 the psychological level and October 12 low into focus.

Microsoft Q1 earnings preview

Microsoft is due to release Q1 earnings after the close today. Microsoft is expected to post its slowest quarterly revenue growth in 5 years amid a slowdown in PC sales and due to a strong USD. With inflation spiking, consumers and businesses have reined in spending on computers and laptops, hurting sales of key products such as Microsoft Office & Windows. Furthermore, the USD trades 17% higher this year. Microsoft earns 50% of its revenue outside of the US so the exchange rate will be very unfavorable. The question is whether Microsoft can maintain full-year 2023 guidance. Expectations are for Q1 revenue of $49.61 billion, a 9.5% rise. EPS is expected at $2.30.

GBP/USD rises as Sunak becomes PM

The pound initially rose on the news that Rishi Sunak, the former Chancellor, would be taking over as Prime Minister. He is considered a fiscally prudent candidate in contrast to Liz Truss and her first Chancellor, Kwasi Kwarteng.  Bond yields dropped sharply after Rishi Sunak’s election. The pound came under pressure after PMI data, considered a good gauge for business activity, fell deeper into contraction, adding to the evidence that the UK was falling into a deep recession and highlighting the challenges ahead for Sunak. Meanwhile, the USD fell slightly after weaker-than-forecast PMI data and amid softening hawkish bets. Today GBP/USD is rising. There is no UK economic data; attention will be on Sunak and his plans for guiding the country forward. US consumer confidence is due to be released.

Support can be found at 1.1180 (20 sma) and 1.0930 (last week’s low).

Resistance for the pair can be seen at 1.14 (50 sma) and 1.1720 (September high).