Following yesterday's rally, European markets were trading a bit on the soft side this morning as weak-to-mixed earnings and uncertainty about the US-Iran situation discouraged excessive risk-taking. Still, the sentiment surrounding a potential US-Iran agreement remained largely positive, and this helped to keep pressure on oil prices for the third day. Yesterday saw US technology sector fuel Wall Street to new highs while the Nikkei in Japan has also hit a fresh unchartered territory above 63,000 for the first time ever. Chinese markets also remained supported. Thus, the global risk sentiment is positive and for that reason we are also expecting fresh highs for German stocks soon, supported by strength in technology stocks and a softer energy backdrop. That said, volatility in crude oil suggests traders are far from convinced that geopolitical risks have fully disappeared. Still, the DAX forecast remains positive barring a major re-escalation in the Middle East conflict.
Will US and Iran strike a deal?
Judging by oil prices over the past few days, markets are continuing to lean that ways, even if major nuclear discussions are pushed further down the road. Reports that Tehran is reviewing a US proposal, combined with Donald Trump’s optimistic remarks ahead of his meeting with Xi Jinping, helped fuel another wave of dollar selling while equities pushed higher globally. Falling crude oil prices have been a key driver behind the rally, easing concerns about inflation and reducing fears of a major supply shock through the Strait of Hormuz. That said, market may be pricing in a near best-case scenario, which leaves sentiment vulnerable if negotiations stall or tensions unexpectedly flare up again.
Technical DAX forecast: New highs incoming?
The technical picture for the German DAX index is improving by the day.
We have seen the index climb back above the 200-day moving average, and now the 21-day exponential moving average has crossed above the 200-day moving average to provide a short-term bullish signal — an objective bullish signal at that.
Recently, the DAX had been consolidating inside a range as it oscillated around the 200-day moving average, but it has now broken out of that consolidation zone to the upside, suggesting that the bullish trend has resumed. That is a positive development.
In the days ahead, we could see the index extend its gains as buyers defend the broken levels of former resistance and target new highs.
The January 2026 high comes in at 25,512, and that is now the primary objective for the German DAX index. If it can break above the 25,150 resistance level, which held yesterday, then it could pave the way to fresh all-time highs and clear blue skies, with no major prior reference points overhead. That means psychological round-number levels such as 26,000 could become the next upside target.
Should we get there, Fibonacci extension levels will also come into play. The 127.2% extension of the drop from the January high to the March low comes in at 26,505, and that is our medium-term bullish target.
Meanwhile, on the downside, there are a couple of broken levels that could now offer support, including the 24,750 level, which was previously an area of resistance.
This week’s key breakout area sits at 24,500, and that is now a very important level of support that needs to hold on any meaningful pullback.
The line in the sand is around the 24,000 level, where the trend line converges with a couple of moving averages as well as prior support and resistance. That level is therefore very important. If we were to break below it — and specifically below the most recent low of 23,844 — then the outlook would start to turn bearish once again.
Unless that area gives way, the onus remains on the bears to step in, while the market itself continues to look increasingly bullish.
As a result, we favour buying dips into support and expect resistance levels to eventually give way.
For that reason, our German DAX forecast remains bullish from a technical point of view.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
