DAX Index at a Critical Juncture: Can the 24,000-Point Recovery Sustain Momentum Amid EU-US Trade Tensions?

The DAX Index, Germany's flagship equity benchmark, stands at a pivotal moment. As it inches toward the 24,000-point threshold—a level that has historically acted as both support and resistance—investors are grappling with a complex interplay of technical momentum, macroeconomic fundamentals, and geopolitical headwinds. The index's recovery in 2025 has been fueled by fiscal stimulus, energy sector gains, and a shift in global capital flows, but the looming specter of U.S.-EU trade tensions threatens to disrupt this fragile equilibrium.

Technical Analysis: A Tug of War Between Bullish and Bearish Forces

From a technical standpoint, the DAX is in a rising trend channel, with the 24,000-point level serving as a critical psychological marker. The Relative Strength Index (RSI) currently sits below 50, signaling oversold conditions—a historically favorable setup for upward momentum. The 200-day moving average (at ~23,500) provides a key floor for dips, while the 50-day simple moving average (SMA) crossing above the 200-day EMA suggests a potential bullish crossover.

However, caution is warranted. The Average Directional Index (ADX) at 11.8906 indicates a weak trend, underscoring the lack of a strong directional bias. The MACD line remains above the signal line, hinting at bullish momentum, but volume has been inconsistent, with sharp dips below 50 million shares raising questions about conviction. A sustained break above 24,322.85 (a key resistance level) could validate the 24,000-point recovery, while a drop below 23,380 would signal renewed vulnerability.

Fundamental Drivers: Fiscal Stimulus and Sectoral Divergence

The DAX's resilience in 2025 is underpinned by Germany's aggressive fiscal expansion. A €500 billion infrastructure fund and increased defense spending have injected liquidity into the economy, with the industrial sector rebounding to a PMI of 51.4 in June 2025 after a decade-low of 47.6 earlier in the year. Energy stocks, representing 15% of the index, have surged 12% year-to-date, driven by high natural gas prices and U.S.-EU LNG partnerships. Companies like Siemens Energy and RWE are capitalizing on renewable grid investments and hydrogen projects, positioning themselves as beneficiaries of the green transition.

Yet, sectoral divergences are stark. The banking sector, which accounts for 18% of the DAX, has underperformed by 3% year-to-date, with Deutsche Bank down 9% amid fears of a European recession and low interest rates. This underperformance highlights the uneven impact of macroeconomic risks, particularly as trade tensions persist.

Geopolitical Risks: The EU-US Trade Deal and Sectoral Fallout

The July 2025 EU-US trade deal, struck under intense pressure from U.S. President Donald Trump, has introduced new uncertainties. The agreement imposes a 15% U.S. tariff on most EU exports—including German automotive and industrial goods—tripling the previous rate. This has sent shockwaves through the automotive sector, with estimates suggesting up to 70,000 jobs could be lost as automakers shift production to the U.S. to avoid tariffs. BMW's strategic pivot to Mexico for EV production is a case study in risk mitigation, but smaller firms may lack such flexibility.

The pharmaceutical sector, another key export driver, faces potential 15% tariffs, threatening thin-margin generics manufacturers. Meanwhile, the steel industry is bracing for a 50% tariff, despite a “ring fence” proposal to isolate U.S.-EU markets from Chinese steel. These developments underscore the fragility of Germany's export-dependent economy and the uneven sectoral impact of trade policy.

Investment Implications: Sectoral Opportunities and Hedging Strategies

For investors, the DAX presents a paradox: a technically bullish index with uneven sectoral performance and macroeconomic headwinds. Energy and industrials remain compelling long-term plays, supported by fiscal stimulus and green energy tailwinds. Siemens Energy and RWE, for instance, are positioned to benefit from U.S.-EU hydrogen partnerships and LNG infrastructure.

Conversely, the banking sector's underperformance offers tactical opportunities if trade tensions ease. Deutsche Bank and Commerzbank could rebound if cross-border lending normalizes and interest rates stabilize. However, investors must remain cautious, given the ECB's accommodative stance and the risk of a European recession.

A sectoral ETF approach, such as the DB X-Trackers MSCI Germany UCITS ETF (DGLY), provides broad exposure while mitigating concentration risks. Short-term traders may focus on Airbus and ThyssenKrupp, which stand to gain from tariff exemptions or trade resolution.

Conclusion: A Delicate Balance

The DAX Index is at a crossroads. While technical indicators and fiscal stimulus suggest a path of cautious optimism, the EU-US trade deal has exposed vulnerabilities in key sectors. The 24,000-point recovery is plausible if bullish momentum strengthens and trade tensions de-escalate, but sustained growth will depend on Germany's ability to adapt to a shifting geopolitical landscape. For investors, a sectoral and hedged approach—favoring energy and industrials while avoiding overexposure to banking—offers the best path forward in this high-stakes environment.

As the DAX navigates this critical juncture, the coming months will test not only the index's technical strength but also the resilience of Germany's economic model in an era of geopolitical fragmentation.