Dax Index News: Forecast Turns Cautious as Focus Shifts to Tariffs and Fed Tensions

DAX Eyes 24,000 as Traders Watch Ceasefire, Tariffs, and Fed Signals

A fragile ceasefire between Iran and Israel calmed early nerves in the markets, lifting the DAX slightly in opening trades. The DAX rose 0.67% to 23,655 early in the Thursday, June 26 session.

WTI crude oil extended its losing streak to three sessions on June 25, falling 0.29% to close at $64.305. Oil price trends remain tightly linked to geopolitical developments.

However, concerns about the ceasefire’s fragility capped the DAX’s early gains. Oil prices could rebound if Iran or Israel breaks the truce. Higher oil prices could fuel inflationary pressures, potentially delaying ECB rate cuts.

Sector Performance

Bank and tech stocks sent the DAX higher in early trading on easing geopolitical tensions. Infineon Technologies rallied 2.25%, while Commerzbank gained 1.24%.

Auto stocks also trended higher after May’s upbeat sales data. BMW, Porsche, and Volkswagen posted early gains. However, trade uncertainty capped the upside.

German Consumer Confidence Improves

Ahead of the European open, GfK consumer confidence offered modest support. The GfK Consumer Confidence Indicator dropped from -19.9 for June to -20.3 for July. Waning confidence may point to a drop in consumer spending, supporting a more dovish ECB policy stance.

Tariff Deadline Looms as US-EU Trade Talks Stall

While the ceasefire supported sentiment, stalled US-EU trade negotiations continued to test risk appetite. Failure to reach a trade agreement by July 9 could lead to the US reintroducing full reciprocal tariffs on the EU, pressuring demand for German goods.

Traders should monitor tariff headlines closely. Progress toward a trade deal would lift sentiment, while renewed tensions could weigh export-sensitive stocks.

Wall Street Mixed As Fed Chair Powell Maintains Caution

US markets ended mixed on June 25. The Nasdaq Composite Index climbed 0.31%, while the Dow dropped 0.25%. The S&P 500 ended the session flat. Fed Chair Powell reiterated a wait-and-see stance, citing tariff-driven inflation risks.

Meanwhile, President Trump is pressing the Fed Chair for rate cuts, hinting at potential replacements. Trump’s threats to replace Powell raised concerns about Fed independence.

David Scutt, a market analyst at StoneX, remarked:

“Would have thought Powell getting shadowed by a chair-in-waiting would have been largely in the price… guess I’m wrong.”

Nevertheless, the ceasefire held overnight, supporting market sentiment.

US GDP and Jobless Claims in Focus

Later in the session, US GDP and labor market data will influence market trends. The US economy contracted by 0.2% quarter-on-quarter in Q1 2024, according to preliminary numbers. A downward revision may fuel recession fears, affecting demand for risk assets such as the DAX. Conversely, a higher GDP reading could lift sentiment.

However, labor market data may carry more weight. Economists expect initial jobless claims to come in at 245k (week ending June 21), mirroring the previous week. A sharper increase would raise fears of a US recession, pressuring risk assets. On the other hand, a drop below 240k may improve risk appetite.

Other stats include durable goods orders and housing sector data. However, unless there are marked deviations from forecasts, these will likely play second fiddle to the labor market and GDP data.

Near-Term Outlook

The DAX’s trajectory hinges on US-EU trade developments, the Iran-Israel ceasefire, and central bank guidance.

• Bearish Scenario: Renewed Middle East tensions, US-EU trade friction, or hawkish central bank guidance. Under these scenarios, the DAX could fall below the 50-day EMA, exposing sub-23,000 levels.
• Bullish Scenario: A durable ceasefire, progress on US-EU trade talks, and dovish central bank rhetoric may drive the DAX toward 24,000.

DAX Technical Indicators

Daily Chart

Despite Wednesday’s pullback, the DAX remains above the 50-day and 200-day Exponential Moving Averages (EMA), indicating a bullish trend.

A move above 23,750 could open the door to 24,000. Sustained momentum may put the June 5 high of 24,479 level in focus.

On the downside, a break below the 50-day EMA could enable the bears to target the crucial 23,000 support level.

The 14-day Relative Strength Index (RSI) at 51.50 indicates the DAX has room to climb to 24,479 before entering overbought conditions (RSI > 70).

Final Thoughts

Volatility will likely persist as markets react to Middle East developments, trade headlines, and central bank signals. Fiscal developments may further influence sentiment.

Traders should stay attuned to technical and fundamental drivers and consult our economic calendar.