Uncertainty surrounds the inflation outlook due to US tariffs and the EU’s response.
The DAX index faces a “precarious situation” technically, with the potential for a correction ahead of tariff announcements. What is next for the DAX?
in the Euro Area dropped to 2.2% in March 2025, its lowest level since November 2024 and just below the expected 2.3%, according to early estimates.
Prices for services grew more slowly (3.4% compared to 3.7% in February), and energy costs fell (-0.7% compared to a 0.2% rise before). However, inflation stayed the same for non-energy goods (0.6%) and processed food, alcohol, and tobacco (2.6%), while unprocessed food prices jumped significantly (4.1% compared to 3.0%).
, which excludes food and energy, also eased to 2.4%, slightly below the 2.5% forecast and its lowest since January 2022. Month-over-month, increased by 0.6% in March, up from a 0.4% rise in February.
Inflation Outlook Moving Forward
The short-term outlook for inflation is highly uncertain. US tariffs could lower eurozone inflation by reducing exports and slowing economic growth. These tariffs also increase the supply of goods in the eurozone as the US makes it harder to access their market. However, if the European Commission retaliates, it could push higher since these measures act like a domestic tax that consumers will partly bear.
Last year in March, ECB President Lagarde hinted at potential rate cuts, saying, “We will know a little more in April and a lot more in June.” This year, by April, she’ll have much more clarity on US tariffs on European goods and the EU’s planned response, which will be discussed at the April ECB meeting. This will play a big role in deciding future interest rates.
One concern is that the job market is still very tight, with hitting a record low of 6.1% in February, according to Eurostat data released on Tuesday. For now, today’s lower-than-expected inflation supports the case for another rate cut to bring rates closer to neutral.
Markets are now pricing in around an 82% chance of a 25 bps rate cut at the ECB meeting on April 17.
ECB Interest Rate Expectations
Source: LSEG0
Technical Analysis – DAX Index (DAX 40)
Looking at from a technical standpoint, the index has enjoyed a stellar 2025 YTD.
However, recent technicals have suggested that a potential correction may be in the offing with a potential double top pattern forming at recent highs. A break of the neckline has yet to materialize however, and today’s weaker inflation data has helped with that.
However, a daily candle close below the 22405 handle (neckline) could lead to an accelerated selloff in the DAX just as President Trump prepares his tariff announcements.
This leaves the DAX in a precarious situation at present, with immediate resistance resting at 22886, 23200 and of course the recent highs at 23454.
Immediate support rests at 22405, 21758 before the 200-day MA comes into focus at 21164.
DAX 40 Daily Chart, April 1, 2025
Source: TradingView.com
Support
Resistance
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