Dax Index News: Forecast Turns Bearish as EU Retaliation Threatens DAX Recovery

DAX Slides as Trade Deal Hopes Fade

EU threats of retaliatory measures against the US triggered a sell-off as progress toward a US-EU trade deal stalled. The DAX dropped 0.34% to 24,226 in early trading on Tuesday, July 22.

Reports of the EU considering countermeasures against the US weighed on sentiment. Plans to escalate the trade war follow reports of President Trump pushing for 15-20% tariffs on EU goods. As the August 1 tariff deadline looms, the chances of a US-EU trade agreement have faded, with the EU facing the prospect of a 30% US tariff.

US Commerce Secretary Howard Lutnick poured cold water on a tariff deadline extension, reportedly warning that the 30% tariff, effective August 1, is fixed.

Retaliatory measures from Brussels could trigger a full-blown US-EU trade war, impacting demand for German goods, the labor market, and the broader economy.

According to Polymarket, the chances of a US-EU trade deal sit at 43%, down from an overnight high of 51%.

Sector Performance: Autos and Tech Stocks Slide

Rising US-EU trade tensions weighed on auto and tech stocks.

Infineon Technologies plunged 2.43%. Meanwhile,  BMW and Mercedes-Benz Group fell 0.89% and 0.70%, respectively. Porsche, and Volkswagen also posted early losses.

Wall Street Mixed Ahead of Key Earnings

US markets had a mixed start to the week on Monday, July 21, as investors considered trade developments and upcoming earnings reports. The Dow dropped 0.04%, while the Nasdaq Composite Index and the S&P 500 advanced 0.38% and 0.14%, respectively.

A potential escalation in US-EU trade tensions weighed on sentiment, leaving the Dow in negative territory. However, tech stocks advanced on expectations of upbeat earnings results. Alphabet (GOOGL) and Tesla (TSLA) will be the first of the Magnificent Seven to release earnings on Wednesday, July 23.

Alphabet rallied 2.8%, while Amazon.com (AMZN) and Apple (AAPL) posted gains of 1.43% and 0.62%, respectively. Tesla bucked the trend, falling 0.35%.

Fed Chair Powell in the Spotlight

Later in the Tuesday session, Fed Chair Powell takes part in a policy panel discussion at the ECB Forum on Central Banking 2025. His views on tariffs, inflation, the economic outlook, and the timeline for Fed rate cuts will influence risk assets such as the DAX.

Concerns about US tariffs and inflation may weigh on sentiment. On the other hand, support for a Q3 Fed rate cut could offset concerns about US tariffs, potentially lifting support for DAX-listed stocks.

While Fed Chair Powell’s speech is the main event, trade developments remain crucial.

Near-Term Outlook

The DAX’s near-term outlook depends on US-EU trade talks and central bank policy signals.

• Bearish Scenario: Stalled US-EU trade talks or hawkish central bank rhetoric. Under these scenarios, the DAX may break below 24,000, exposing the 50-day EMA.
• Bullish Scenario: Easing US-EU trade tensions and dovish central bank cues could send the DAX toward the July record high of 24,639.

DAX Technical Indicators

Daily Chart

Despite today’s retreat, the DAX trades above the 50-day and 200-day Exponential Moving Averages (EMA). The EMAs signal a bullish bias.

A breakout above the July 18 high of 24,495 could enable the bulls to target the record high of 24,639. Sustained buying pressure may pave the way toward the 24,750 level.

On the downside, a drop below 24,000 could bring the 23,750 level into play. Increased selling pressure may push the Index toward the 50-day EMA.

The 14-day Relative Strength Index (RSI), at 55.16, suggests the DAX could climb to 24,639 before entering overbought territory (RSI > 70).

Final Thoughts

Overall, the DAX remains at a technical crossroads, with US-EU trade tensions and central bank commentary likely to dictate the next directional move.

Traders should monitor both technical and fundamental drivers and consult our economic calendar.