Dax Index News: Forecast Eyes 24,000 on Fed Bets and EU Trade Optimism

DAX Rally Builds on Trade Ceasefire and Surge in Fed Rate Cut Odds

A surprise shift in US-EU trade talks and rising bets on a Fed pivot drove the DAX higher. The DAX gained 0.66% to 23,917 in early trading on Tuesday, August 5, following the previous session’s 1.42% rally.

On Monday, news broke of the EU planning to suspend trade countermeasures against the US for six months. The delay lifted hopes of a more favorable trade agreement, potentially crucial for the German economy.

Daniel Kral, a Europe macro specialist, commented on Germany’s economy, stating:

“With the latest revisions, Germany is now the worst performing economy in Europe since pre-COVID. It is basically the same size as 6 years ago, although population grew a lot since. Supply chain, energy, China, and US trade shocks all playing out. The new govt needs to deliver growth.”

Despite concerns about the economy, rising expectations of a September Fed rate cut lifted sentiment. Lower borrowing costs may ease the effect of tariffs, potentially boosting corporate profits and share prices.

Tech Stocks Rally Amid Tariff and Fed Uncertainty

Tech stocks posted early gains on August 5 as sentiment toward the Fed’s policy stance and tariff headlines lifted demand for risk assets.

Infineon Technologies rallied 4%, while SAP gained 0.72% in early trading.

Auto shares also posted gains ahead of key economic indicators. Mercedes-Benz Group advanced 0.74%, with BMW, Porsche, and Volkswagen also posting early gains. Later in today’s European session, new car registration figures could affect the auto sector. Economists expect registrations to fall 7.2% year-on-year in July after sliding 13.8% in June.

Fed Rate Cut Bet Surge Triggers Wall Street Rebound

US markets rallied on Monday, August 4, as investors shifted focus from the US Jobs Report to the Fed rate path. The Dow and the S&P 500 gained 1.34% and 1.47%, respectively, while the Nasdaq Composite Index climbed 1.95%.

According to the CME FedWatch Tool, the probability of a September rate cut jumped from 80.3% on August 1 to 92.2% on August 4.

Markets Brace for US Trade and Services PMI Data

Later in the Tuesday session, US trade data and the ISM Services PMI will face scrutiny after the weaker Jobs Report.

Economists forecast the ISM Services PMI to rise from 50.8 in June to 51.5 in July. Given that the services sector accounts for around 80% of the US GDP, a higher reading may temper recession fears. A positive economic outlook could lift demand for risk assets such as German equities. On the other hand, an unexpected drop below the neutral 50 level may spark recession fears, weighing on sentiment.

Although the Services PMI is key, trade data will also be closely watched as economists assess the impact of tariffs on trade terms. President Trump’s reaction to any wider trade deficits will likely have a greater impact on market trends.

Economists expect the trade deficit to narrow from $71.5 billion in May to $61.6 billion in June.

Near-Term Outlook

The DAX’s near-term outlook hinges on key economic data and central bank policy guidance.

• Bearish Scenario: A weaker ISM Services PMI, a wider-than-expected trade deficit, or hawkish rhetoric from central banks could slam the brakes on the DAX’s advance, dragging the index toward 23,500 and testing the psychological 23,000 level.
• Bullish Scenario: Positive US data or dovish policy signals could fuel buying momentum, lifting the DAX toward 24,000 and potentially opening the path to 24,500.

DAX Technical Indicators

Daily Chart

Despite Monday’s rally, the DAX remains below the 50-day Exponential Moving Average (EMA) while holding above the 200-day EMA. The EMAs indicate a bearish near-term but a bullish longer-term trend.

A breakout above 24,000 could enable the bulls to target the 24,500 level. A sustained move above 24,500 may pave the way to the record high of 24,639.

On the downside, a break below 23,500 may bring the 23,000 level into play.

Final Thoughts

Overall, the DAX sits at a crucial juncture, with central bank policy signals and key economic data likely to dictate the index’s next moves.

Looking ahead, traders should monitor both technical and fundamental drivers and consult our economic calendar.