DAX Index Technical Analysis: Bullish Breakout Pattern Strengthens Amid Global Uncertainty

The DAX index drops slightly from record levels as political risk in France triggered a broad sell-off across Europe. France’s CAC 40 plunged over 2% after opposition parties refused to support President Bayrou’s confidence vote. The rejection raises the likelihood of a new government, fueling uncertainty in the euro zone’s second-largest economy.

Investors fear that stalled fiscal reforms could derail France’s budget consolidation efforts. This weighed heavily on French banking stocks and pulled down the pan-European STOXX 600 for a second consecutive day. As a component of the broader index, the DAX also felt the ripple effects despite no direct domestic unrest.

German equities, especially exporters and financials, remain highly sensitive to EU-wide sentiment. When political confidence in France weakens, it creates broader macro instability across the eurozone. This backdrop makes the DAX more vulnerable to investor rotation away from cyclical sectors.

Trump’s Intervention at Fed Sends Shockwaves Through European Markets

Global markets reacted sharply after US President Trump fired Fed Governor Lisa Cook, raising concerns about central bank independence. This unprecedented move triggered a sell-off in risk assets, including European stocks, as investors rushed to safe havens amid growing uncertainty.

The DAX had rallied earlier on dovish hints from Fed Chair Powell. However, it lost momentum as fresh doubts emerged over the stability of US monetary policy. Since the Fed’s credibility underpins global liquidity, any disruption can quickly ripple across markets, dampening risk appetite in Europe.

The chart below shows that the Chicago Fed National Financial Conditions Index has dropped to -0.55, which indicates loose credit conditions. The loose credit conditions and expectations of rate cuts provided strong support for the DAX. However, political intervention at the Fed raises uncertainty about the path of monetary easing. If rate expectations shift again, volatility in the DAX could increase, with persistent inflation and energy-related risks in Germany.

DAX Technical Analysis

DAX Index Weekly – Bull Flag Pattern

The weekly chart for the DAX index shows that it is forming a bull flag pattern near the edge of an ascending broadening wedge. This wedge developed after an inverted head-and-shoulders pattern, signalling bullish price action.

The chart shows that the key buy signals were observed at the support of the black dotted trendline within the wedge in October 2023, August 2024, and April 2025. These signals triggered a strong rally in the DAX index.

Moreover, the formation of the bull flag suggests that a breakout above 24,650 will likely initiate the next upward surge in the DAX.

DAX Index Daily – Ascending Broadening Wedge

The bullish price action for the DAX index is further evident on the daily chart through the ascending broadening wedge pattern. Currently, the index has been consolidating within the 23,400 to 24,500 region.

Previously, the sharp rebound in April 2025 from the 18,500–18,900 zone highlighted intense volatility, likely driven by Trump’s tariffs. This rebound has formed a bull flag pattern as discussed using the weekly chart.

Currently, the consolidation near the upper edge of resistance strongly suggests that an upside breakout is likely. Therefore, a break above the 24,500-24650 area would initiate the next leg higher in the DAX index.

DAX Index 4-Hour – Inverted Head and Shoulders

The 4-hour chart for the DAX index also shows the formation of an inverted head and shoulders pattern, with the head at 23,375 and shoulders around the 23,900–24,000 region.

The neckline lies at 24,450, and a break above this level would trigger a strong surge toward the 24,650 level.

This bullish setup suggests that a breakout above 24,650 could initiate a powerful rally in the DAX index.