DAX Forecast: Technical Tuesday, August 28, 2025

Risk assets wobbled at the Asian open overnight in reaction to Trump’s sacking of the Fed governor Lisa Cook, calling into question the central bank’s independence. European markets were further hurt by the political uncertainty in France. The news caused the French CAC to drop around 1.6% this morning. Other European indices were also lower, ranging between 0.4 to 0.8 percent. But with the global markets shrugging off numerous bearish factors in the past, this could just be another such example.  Indeed, with the Dow Jones index remaining above the critical 45K handle, the bulls wouldn't be concerned yet. Among the European indices, the German DAX remains among strongest, even if it has been treading water over the past couple of weeks. The German index has been unable to break decisively higher and stuck in a wide range it’s been tracing since May. But as summer draws to a close, the backdrop looks increasingly supportive for another leg up. Continued foreign inflows, the ECB’s recent rate cuts, lower energy prices, and the faint possibility of progress on Ukraine are all tailwinds for the German index. Add in Berlin’s expansive fiscal plans and a sharp drop in tariff uncertainty – with European exports facing a cap of just 15%, far less than feared – and it’s far too soon to abandon the bullish DAX forecast.

 

French Government on the Brink

 

European markets fell late on Monday after French Prime Minister François Bayrou unexpectedly announced a vote of confidence in his government’s fiscal austerity programme, scheduled for 8 September. Bayrou’s centrist bloc holds just 210 seats, while the far left and far right together command 330 – both camps already signalling they will reject the plan. French markets had been lagging even before this twist, underperforming in what has otherwise been a calm summer for European stocks. The question now is whether this develops into a broader drag on European assets or remains a distinctly French affair.

 

Fundamentals Keep the DAX Forecast Supported

 

Economic data is offering some encouragement lately again. We saw the closely followed German ifo Business Climate come in at 89.0 yesterday, which was an improvement from 88.6 the month before and better than expected. This comes after last week’s data showed the eurozone’s composite PMI nudged higher in August, up from 50.9 to 51.1, suggesting resilience in the face of a choppy global backdrop. Manufacturing was the standout, surging to 52.3 – the strongest in over three years – while services dipped slightly to 50.7. Importantly, new orders and employment picked up, hinting at building momentum.

 

Investor appetite for the region is also firming. According to ECB Balance of Payments data, foreign buyers snapped up roughly €236 billion of eurozone debt and equities in May and June alone. That scale of demand is a solid underpinning for the DAX forecast, particularly as Germany leans on fiscal stimulus to support growth.

 

Technical DAX Forecast: Poised for a Breakout?

 

There is no question that the DAX has been stuck in consolidation mode in recent weeks. Consolidation is not necessarily bearish from a technical perspective, as this allows momentum indicators to cool off without the index giving much ground. That, one can argue, is actually a bullish sign. The rationale is that the index is holding onto its gains and not giving back much in the face of uncertainty. So, for now, it is difficult to say that the path of least resistance has turned to the downside. A lot more bearish price action is needed to tip the balance in the bears’ favour. Without that, one can only assume that the trend remains bullish until proven otherwise.

 

 

Key resistance at 24,500 has repeatedly capped rallies, but with the market camped just beneath this level, a clean breakout is on the cards. Should that level finally give way, the next logical target is the psychological 25,000 handle in the weeks ahead.

 

On the downside, short-term support sits around 24,150, with a deeper cushion at 23,950. Longer-term support rests at 23,480 – the old record high from March, before the tariff-driven dip in April. Unless that line in the sand breaks, the DAX forecast stays firmly bullish.

 

 

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R