We present a medium-term investment review of the Frankfurt Stock Exchange DAX 40 index.

Since the beginning of autumn, the market has been showing neutral dynamics. However, macroeconomic statistics and the situation on the debt market may soon act as a driver for the growth of stock assets, mainly European ones. The EU Q2 gross domestic product (GDP) adjusted by 0.1% MoM, meeting forecasts, and from –0.2 to 0.0% YoY. Although the German economy remains one of the weakest in the region, the prospects for a change in trend are high, as indicated by other indicators such as inflation and unemployment. The August consumer price index fell below the target of 2.0% for the first time since March 2021, amounting to 1.9%. The labor market has also stabilized, with unemployment remaining 6.0% for the third month. A key factor to support the stock market is the European Central Bank’s (ECB) decision to cut interest rates by 60 basis points to 3.65%, making borrowings more attractive in the long term and stimulating business growth that has been stagnant for more than four years.

The debt market remains in a stable downward trend. Since the beginning of September, the yield on leading 10-year German bonds has fallen from 2.293% to 2.146%, continuing to support stock prices, and the most conservative debt securities with a maturity of 30 years are trading at a rate of 2.409%, significantly lower than 2.564% at the beginning of autumn. In addition to the underlying fundamental factors, the technical indicators confirm the positive dynamics: on the weekly chart, the price moves in a channel with dynamic boundaries of 20300.0–17000.0.

The main factors indicate a high probability of the quotes reaching the initial trend level of 61.8% by the Fibonacci extension of 19700.0. Consolidation above will become the main driver for movement toward the target around ​​the core trend level of 100.0% by the Fibonacci extension of 21400.0.

We suggest considering the key levels on the daily chart.

As can be seen from the chart, the asset is forming an Expanding formation pattern that began in March, and the annual high of 19000.0 is a key level for activating long positions. After a reversal, decline, and breakout of 17500.0, the upward scenario will be either canceled or postponed, and it is better to liquidate open buy positions. Around ​​the core trend of 100.0% by the Fibonacci extension of 21400.0, there is the target zone. After reaching, it is better to fix profit on buy positions. In more detail, the entry levels for transactions should be assessed on the four-hour chart.

The entry level for transactions for purchase is at 19000.0, and a local signal can be received in the coming days after the breakout of the high of August 30. Then, there will be no significant resistance on the price path to the target level of 21400.0, and the positions can be implemented.

Considering the average daily volatility of the trading instrument over the last month, which is 2123.0 points, the price movement to the target zone of 21400.0 may take approximately 55 trading sessions. However, with an increase in volatility, this time may be reduced to 47 days.