Germany's DAX 40 broke above 26,500 for the first time, capping a rally of close to 10% over the past twelve months, and the index has since pulled back modestly from that peak. The index now sits at the top of an ascending channel that has held for nearly five months, with traders watching whether it breaks higher or turns back toward support.
Germany's benchmark index broke above 26,500 for the first time ever. The move extended a rally that has already delivered close to 10% over the past twelve months, on fresh optimism around a potential resolution to the Iran conflict.
That optimism proved short-lived. President Trump's latest demands that Tehran compensate for lives lost in recent attacks have added friction to already fragile diplomacy around reopening the Strait of Hormuz, and the index has pulled back modestly from its peak.
Earnings and data support the rally
Beneath the geopolitical noise, the underlying story remains constructive. Stronger-than-expected industrial production and export data have reinforced confidence in German manufacturing, while solid corporate earnings, with notable strength from SAP and Infineon, have kept sentiment bullish.
Roughly a third of this year's growth still owes to calendar effects and government stimulus in defence and infrastructure, a detail worth remembering. Even so, private-sector momentum finally looks like it's stabilizing rather than collapsing.
Price tests the top of a nearly five-month channel
The DAX 40 remains within a well-defined ascending channel that has guided price higher since April, with the index now testing the channel's upper boundary near current record highs. The 50-period EMA continues to trend higher well below price, reinforcing the strength of the broader uptrend, while the RSI sits at 67.83, comfortably bullish without yet flashing overbought extremes.
Should buyers maintain momentum and break above the upper channel trendline, the index would confirm an acceleration of the current trend, opening the door toward fresh uncharted territory beyond 26,800, with the EMA and lower channel boundary offering support on any pullback.
Conversely, a rejection at the upper trendline could see price pull back toward the 50-period EMA near 25,450, or even the lower channel boundary, without necessarily threatening the broader bullish structure. Only a decisive break below the channel itself, and the 23,600-23,800 support zone that anchored April's advance, would put the medium-term uptrend at risk.
Source: ActionForex
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