DAX, Oil Forecast: Two trades to watch

DAX slumps on trade tariff worries, EZ CPI rises

• Trump could follow through on EU trade tariffs
• EZ CPI rose to 2.5% YoY in January
• DAX falls from record high

The DAX, along with European peers, has tumbled on the open and trades around 2% lower at the time of writing after President Trump imposed tariffs on Canada, Mexico, and China, while also warning that the European Union and the UK could be next.

Over the weekend, Trump followed through with his pledge to place 25% tariffs on Canada and Mexico, except Canadian energy, which will see a 10% tariff. As of Tuesday, a 10% trade tariff will also be on Chinese goods.

European automakers have been the hardest hit, as they have many manufacturing plants in Mexico and Canada. These companies also stand to be hit by tariffs on the European Union given the US is a large end market for their products. Volkswagen trades over 5%, and Daimler has dropped 5.5%.

ECB policymakers have warned that trump's tariffs will increase economic uncertainty on the region which is already struggling with stagnant growth.

Last week the ECB cut interest rates by 25 basis points to support growth in the region. The central bank cut interest rates despite inflation remaining above the 2% target. Inflation data today showed CPI ticked higher to 2.5% in January, whilst core inflation remained unchanged at 2.7%, defying expectations of a fall to 2.6%. ECB policymakers remain confident that inflation will cool to target by the summer.

DAX forecast – technical analysis

The DAX has trending higher since September last year. The price broke out of its rising channel, before running into resistance at 21,800. The price has rebounded sharply lower, breaking below the upper band of the rising channel before finding support at last week’s low of 21,000.

The uptrend remains intact. Buyers will look to extend the recovery back above 21,500 towards 21,800 and fresh record highs.

Should sellers take out support at 21k, this could open the door to a deeper selloff towards 20,500, the December 2024 high.

Oil jumps after Trump announces trade tariffs on Canada & Mexico

• Supply worries drive up oil after Trump’s tariffs
• OPEC meets today to discuss oil output
• WTI tests the 200 SMA resistance

Crude oil prices jumped at the start of trade on Monday after U.S. President Donald Trump announced tariffs on Canada, Mexico, and China, fueling worries about supply disruption. These concerns overshadow the worries of weaker demand, which tariffs could cause.

Mexico and Canada have pledged to retaliate with their own tariffs, which could result in a trade war that affects global growth and revives inflation. Energy products from Canada will be charged a 10% duty, and Mexican energy imports will be charged 25%.

However, oil prices have rallied on fears that the tariffs would lead to disruptions to imports from Canada the biggest overseas supplier to US refineries.

Adding tariffs to oil imports is likely to disrupt the markets and could even make Trump's objective of lowering energy costs more challenging.

The OPEC February meeting also takes place today. However, this not an official policy-setting meeting, with the group only making recommendations to the policy-making body. The meeting comes after US Trump urged OPEC+ to lower oil prices. OPEC will likely stick to its plan of gradually increasing oil production starting in April owing to concerns over weak demand from China and ample supply from the US.

Oil forecast - technical analysis

Oil has rebounded from the 72.50 support, jumping above the 200 SMA as it heads towards 75.00. A meaningful move above this resistance opens the door to 76.50—the falling trendline resistance dating back to 2023—and on to 80.00.

Failure to retake the 200 SMA could see the price correct lower and retest support at 72.50 and the 50 SMA at 72.00. A break below here sees the price re-enter a familiar trading range of 72-67.