DAX, USD/JPY Forecast: Two trades to watch

DAX falls on trade tariff worries, & after Nvidia earnings

• Trump announced 25% reciprocal trade tariffs on Europe
• Automakers are falling sharply
• Eurozone economic sentiment data is due
• DAX falls 1% but uptrend remains intact

The DAX opened sharply lower, falling by around 1% on Thursday, reversing gains from the previous session sentiment weekend after President Trump announced more trade tariffs.

Trump pledged 25% tariffs on European cars and other goods, accusing the region of unfair trade practices. Trump's pledge to firmly and immediately implement tariffs fueled fears of an escalating trade war.

Losses driven by Porsche, which is down 3%, Volkswagen 2.7%, and BMW 2.6%

Worries regarding trade tariffs have weighed on business and consumer confidence in Germany, the eurozone's largest economy. GFK consumer confidence yesterday unexpectedly fell to -24.7.

Today, attention will be on eurozone economic sentiment, which is expected to improve to 96, up from 95.2.

The data comes as the ECB is expected to cut interest rates by 25 basis points further next week to support the struggling economy, even before any trade tariffs have been applied.

Meanwhile, the market is unimpressed by Nvidia’s results despite the AI chipmaker beating earnings and revenue forecasts. Still, revenue grew by the smallest margin since February 2023 and earnings by the smallest margin since November 2022. Instead, the prospect of tighter margins and the shifting AI landscape keep the share price under pressure in pre-market trade. Investors are proving to be a tough crowd to please after two years of impressive gains in the Nvidia share price.

DAX forecast – technical analysis

The DAX recovery from 22,150, last week’s low, ran into resistance at 22,835 and the price has slipped back to 22,500. The uptrend is still intact, and the RSI is out of overbought territory.

Buyers will need to rise above 22,835 to extend gains to 23,000 and fresh record highs.

Sellers would need a break below 22,150 to create a lower low, opening the door to 21,500 round number and 21,000 the February low.

USD/JPY rises on Trump trade tariff news & ahead of GDP data

• Trump pledged 25% tariffs on Europe
• Mexico and Canada trade tariffs are still coming
• US Q4 GDP, jobless claims & durable goods orders data due
• USD/JPY steadies at a 4.5 month low

USD/JPY is rising after two days of losses, as the USD recovered from an 11-month low on Thursday. The USD firmed after President Trump pledged to impose tariffs on Europe but may delay tariffs on Mexico and Canada until early April.

Trump hinted at a 25% reciprocal tariff on Europe and said that Mexico and Canadian tariffs could start on April 2 rather than the previously mentioned March 3. However, comments from the White House suggested that this wasn’t the case, adding to the confusion and prompting only muted moves in the FX market. A clearer message is needed to drive a more significant move in the market.

While the US dollar index has recovered from its 106.12 low on Monday, its still 4% down from its January 2 year high.

A slew of weaker-than-expected US economic data has raised concerns about the economic outlook under Trump’s administration. Consumer and business confidence have fallen sharply.

Attention will turn to US Q4 GDP data, which is expected to show 2.3% annualized. Meanwhile, durable goods orders for January are expected to rebound 2% MoM, and jobless claims are set to rise to 221k.

The yen has been supported in recent weeks on expectations the BoJ will continue hiking rates, after hotter than expected Japanese inflation.

Attention will be on a raft of data released tomorrow, including Tokyo inflation, retail sales, and industrial production, which will provide further insight into the BoJ’s next move.

USD/JPY forecast- technical analysis

After running into resistance at 158.80 on January 10, USD/JPY has trended lower in a falling channel, dropping to a 4.5-month low.

Sellers will look to break below 148.50, the 4.5 month low reached this week, and 148.10 the 38.2% Fib retracement of the 162 high and 139.5 low. Below here 145.00 comes into focus.

Should 148.50-148.10 support zone hold, a recovery could run into resistance at 150.70 the 50% fib retracement level ahead of 152.50 the 200 SMA.