Could Trade Talks Trigger a DAX Breakout?
Traders should also monitor US-EU trade developments. Progress toward a trade deal may impact the ECB’s stance on a July rate cut. Failed talks may revive hopes for a July rate cut, raising demand for DAX-listed stocks.
Frederik Ducrozet, Head of Macroeconomic Research at Pictet Wealth Management, commented on the potential effects of tariffs on the Euro Area GDP and ECB rate path, stating:
“ECB staff projections with trade shocks: in a severe trade war scenario, GDP is 1% lower and inflation down to 1.8% in 2027, calling for more rate cuts. A mild scenario implies stronger growth and stable inflation, with the ECB likely on hold.”
Outlook: Key Catalysts for the DAX
The DAX’s near-term trajectory hinges on the US inflation, US-EU trade developments, and central bank commentary.
- Bullish Case: Positive US-EU trade developments, softer US inflation, and dovish central bank signals could send the DAX toward 24,500.
- Bearish Case: A breakdown in trade talks, stronger-than-expected US inflation, or hawkish central bank commentary may pull the DAX toward 24,000.
As of Monday morning, the DAX futures were flat, while the Nasdaq 100 mini dropped 30 points, signaling potential for a volatile start to the week.
Technical Setup Suggests Cautious Optimism
Despite Friday’s loss, the DAX remains above the 50-day and the 200-day Exponential Moving Averages (EMA), signaling underlying bullish momentum.
- Upside Target: A breakout above the June 5 record high of 24,479 could pave the way to 24,750, with 25,000 level the next key psychological resistance level.
- Downside risk: A break below 24,000 brings 23,750 into play, followed by the May 23 low of 23,275 as the next support level.
The 14-day Relative Strength Index (RSI), at 65.38, suggests the DAX has room to retest 24,479 without entering overbought territory (RSI > 70).