DAX, USD/JPY Forecast: Two trades to watch

DAX rebounds as Trump backs down over Greenland & tariffs

The DAX, along with its European peers, has rebounded on Thursday after President Trump abandoned tariff threats linked to Greenland and also ruled out using force to take the territory.

Trump announced that he had withdrawn tariff threats after a meeting with NATO Secretary General Mark Rutte, during which they reached a framework for a deal on Greenland's future.

While details are few and far between, reports suggest the framework may involve mineral rights and the golden dome, Trump's most ambitious missile defence plan yet. Greenland is home to a large amount of rare earth elements, many of which are crucial to technologies such as mobile phones and EVs.

NATO Secretary General said there was no discussion over the key issue of Danish sovereignty over Greenland

Trump's comments have been enough to boost risk sentiment, calming fears of a potential trade war.

Those sectors which had been badly beaten in recent days are rebounding, with German automakers leading the charge higher.

With the TACO (Trump Always Chickens Out) trade in full swing, attention is also turning to financial updates. Volkswagen Europe's largest carmaker is up 4.3% after posting better-than-expected net cash flow for 2025.

Attention will also be on U.S. data later today, including core PCE, the Fed's preferred gauge for inflation, for October and November, although this may seem like old news now, as well as Q3 GDP.

DAX forecast – technical analysis

The DAX rebounded lower from its record high of 25,500 to a low of 24,350, although crucially closed above the 24,700 support level and the July and October highs, keeping the uptrend intact.

Buyers, encouraged by recovering momentum, will look to extend gains towards the 25,000 round number and 25,500 to fresh record highs.

Sellers would need to break meaningfully below the 24,700 level to negate the near-term uptrend. Below here, the 50 SMA and 200 SMA come into play at 24,275 and 23,930, also the mid-December low.

USD/JPY rebounds as the "Sell America" trade unwinds

USD/JPY is rising as the USD holds onto yesterday’s gains after Trump backpedalled on trade tariffs and on Greenland, announcing a framework for a deal. As a result, investors unwound the “Sell America” trade, and risk sentiment has returned. 

In the absence of further updates regarding Greenland, attention will turn to US data and central banks. The US core PCE for October and November, the Fed's preferred inflation gauge, will be released, helping to clear some of the haze left by the US government shutdown at the end of last year. US GDP for Q3, as well as jobless claims, will also be watched for clues over the Fed's next move.

The market is pricing in two rate cuts by the Fed this year.

The yen is weakening and remains in intervention territory at these levels. However, Japanese long-dated government bonds are extending gains on Thursday after a steep sell-off at the start of the week. Expectations are rising that the finance ministry could take some measures to contain further rises in yields.

Attention is turning to the Bank of Japan's rate decision early on Friday. The central bank is expected to leave rates unchanged at 0.75% after raising them to the highest level since 1995 in the December meeting.

Attention will be on the extent to which BoJ governor Ueda provides hawkish signals at a time when the yen is on the brink of a key level versus the dollar at 160. This is the level considered a rough line in the sand, where authorities step in for multiple rounds of intervention, as in 2024.

The BoJ will be paying closer attention to the impact of the currency on inflation, as further weakening could accelerate the pace of future rate hikes.

USD/JPY forecast – technical analysis

USD/JPY eased lower from its 18-month high of 159.45, finding support on its multi-month rising trendline and recovering higher. The uptrend remains intact. The RSI supports further gains as long as it remains out of overbought territory.

Buyers will look to rise above 159.45 to create a higher high towards 160.00 and 162.00, the 2024 high.

Support is seen around 157.75, the November high and weekly low.  A break below here and the 50 SMA at 156.50 opens the door to 145.50, the December low.

​