Dax Index News: Forecast Turns Bearish Amid Trade Stalemate and Middle East Tensions

DAX on Edge as US-Iran Standoff Rattles Market

President Trump fueled fears of a US attack on Iran overnight, signaling a sharp escalation in the Iran-Israel war. The DAX fell 0.61% to 23,176 in early trading on Thursday, June 19.

Trump reportedly approved attack plans for Iran but held off on the final order, leaving markets on edge. According to CN Wire:

“President Donald Trump told senior aides he approved attack plans for Iran but is holding off to see if Tehran will abandon its nuclear program, according to people familiar with the discussions.”

When asked about striking Iran’s nuclear sites, Trump stated:

“I may do it, I may not do it. The next week is going to be very big, may less than a week.”

US deployment of jet fighters and navy destroyers to the region underscored the potential threat of an imminent attack on Iran.

Sector Performance

Uncertainty about a US-EU trade deal pressured auto and tech stocks. Porsche dropped 0.80%, with BMW, Mercedes-Benz Group, and Volkswagen also trending lower. Infineon Technologies and SAP fell 0.98% and 0.93%, respectively.

Meanwhile, Rheinmetall and MTU Aero rose 0.26% and 1.8%, respectively, as investors monitored geopolitical developments.

ECB President Lagarde in the Spotlight

During Thursday’s European session, ECB President Christine Lagarde may influence demand for DAX-listed stocks. Uncertainty about the timing of the ECB’s next rate cut leaves German stocks sensitive to policy signals. Support for additional rate cuts in Q3 may boost demand for rate-sensitive sectors, while hints of holding rates steady may weigh on sentiment.

On June 16, ECB Vice President Luis de Guindos added to policy uncertainty, stating:

“The projections provide the key to understanding our policy decision. It’s almost a cliché now but the level of uncertainty is huge. So much so, we published alternative scenarios. The key differences in the scenarios relate to trade policy. In the baseline, we assume no retaliation and a 10% tariff. In the adverse scenario, we assume higher tariffs and retaliation.”

Trade Developments Crucial for the DAX

The ECB Vice President’s comments underscored the significance of trade policy for the ECB and the DAX. This week, progress toward a US-EU trade deal stalled. Trump remarked:

“We’re talking, but I don’t feel that they’re offering a fair deal yet. They’re either going to make a good deal or they’ll just pay whatever we say they have to pay.”

However, the President of the EU Commission, Ursula von der Leyen, struck a more optimistic tone at the G7 Summit:

“On trade, we instructed the teams to accelerate their work to strike a good and fair deal. Let’s get it done.”

Wall Street Mixed as Fed Holds Rates

US markets closed mixed on June 18 following the Fed’s interest rate decision, economic projections, and Fed Chair Powell’s press conference. The Nasdaq Composite Index gained 0.13%, while the Dow and S&P 500 fell 0.10% and 0.03%, respectively.

The Fed left rates at 4.5% and projected two rate cuts later this year. However, Fed Chair Powell downplayed the projections, reinforcing the Fed’s data-dependent stance after raising its inflation forecast and trimming its 2025 growth outlook.

The Fed’s policy stance and the Middle East conflict weighed on risk appetite, setting the tone for Thursday’s European session.

Near-Term Outlook

The DAX’s direction hinges on developments in the Middle East, US-EU trade talks, and ECB commentary.

• Bearish Scenario: US involvement in the Israel-Iran conflict, faltering US-EU trade negotiations, or hawkish ECB rhetoric. Under these scenarios, the DAX could drop toward 23,000, bringing sub-23,000 levels into play.
• Bullish Scenario: An Israel-Iran ceasefire, progress toward a US-Iran nuclear agreement, and dovish ECB signals may drive the DAX above 23,500, with 24,000 in view.

DAX Technical Indicators

Daily Chart

After two consecutive daily losses, the DAX trades below the 50-day Exponential Moving Average (EMA) while holding above the 200-day EMA. The EMAs signaled a bearish near-term outlook.

A breakout above the 50-day EMA could signal a move toward 23,500. A sustained move through 23,500 may pave the way to 23,750.

On the downside, a drop below the crucial 23,000 support level exposes the May low of 22,765.

The 14-day Relative Strength Index (RSI) at 39.47 indicates the DAX has room to drop below 23,000 before entering oversold conditions (RSI< 30).

Final Thoughts

Volatility may rise as traders respond to headlines from the Middle East, trade updates, and ECB chatter. Fiscal developments from Berlin could further influence sentiment.

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