US Tariffs Start This Week, NFP on Radar
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US PCE data was steady, but US consumer spending weakened on Friday, briefly sending US stocks lower. President Trump's announcement that tariffs on Canada, China, and Mexico would commence on the 4th reversed the slump, as Trump trades were put back on. US stocks rallied with the US dollar, while oil prices fell along with gold, which entered correction territory.
The S&P 500 rose by 1.59%, the Nasdaq gained 1.63%, and the Dow Jones added 1.39%.
Over the weekend, China's official PMIs beat expectations, which could offset tariff fears today. Official manufacturing PMI outperformed, rising to 50.2, as did official non-manufacturing PMI, which rose to 50.4
Friday’s price action on Wall Street confirmed the risk of a top in US stock markets, as discussed in last Tuesday's note. The S&P 500 and Dow Jones have traced out material highs on the charts, while the Nasdaq has failed at resistance once again but is clinging to medium-term support.
Today, we receive China's Caixin Manufacturing PMI, a broader survey, and Jibun Bank Manufacturing PMI from Japan. China's Two Sessions meetings are this week, the highlight being Premier Li Qiang's government work report this Wednesday. It is followed closely and sets out, amongst other things, China's official GDP growth target for 2025.
The international calendar is packed with European PMIs and an ECB rate decision on Thursday. The ECB is expected to cut rates by 0.25%, although geopolitics is currently the main driver of EUR/USD value.
The US announces PMIs today, ADP Employment on Wednesday, Initial Jo0bless Claims on Thursday, culminating with Friday US Non-Farm Payrolls and Unemployment. Markets are pricing a slight fall from last month to 133,000 jobs gained.
Far more important will be whether President Trump's tariffs actually go ahead on Tuesday as planned or whether he will have a last-minute change of heart again. Although markets have some tariff fatigue, Trump trade flows were evident on Friday, with stocks rising and the US dollar index (DXY) rising by 0.25% to 107.56. Notable losers were JPY, KRW, AUD, and NZD.
Two days of turmoil in Washington, D.C., have seen the DXY strengthen, tracing a double bottom at 107.13 and closing just shy of resistance at 107.67. The fall of the US dollar has paused for now, and the charts suggest further strength unless President Trump does a tariff reversal. A close above 107.67 sets the stage for further gains targeting the 109.00 regions.
The commodity-centric AUD had a torrid week last week, with AUD/USD fading at the 0.6410 resistance level before retreating through support at 0.6335 to close at 0.6209 Friday. That puts AUD/USD deeper into correction territory, and if Tuesday tariff day stays on course, a retest of significant support at 0.6090 could be possible.
Gold has staged a short-term correction as expected, falling 0.66% to $2,858.00 an ounce on Friday, closing below short-term support at $2,890.00. The Relative Strength Index (RSI) has moved from overbought to neutral, meaning support at $2,790.00 is likely to hold. Long-term support lies at $2,700.00, and gold's technical outlook remains bullish above this level.
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