Technical Analysis Today

[Zerologic]

USD/CNH surges after Trump tariff announcement

Financial markets have been volatile since Trump’s tariff announcement. White House report says studies have repeatedly shown tariffs are an effective tool for achieving economic and strategic objectives

The report claims that in 2024, studies found that Trump’s tariffs strengthened the US economy and led to reshoring in sectors like manufacturing and steel production.

A 2023 report by the US International Trade Commission found that Trump’s tariffs reduced Chinese imports and stimulated more US production of affected goods.

According to the Economic Policy Institute, President Trump's tariffs during his first term “have shown no apparent correlation with inflation” and have had only a temporary impact on overall prices.

The White House report stated that the media's prediction was wrong, unlike what has been feared so far about high inflation.

Despite the positive report from the White House, according to the CME group's Fedwatch tool, the Fed at its May 7 meeting is still expected to maintain interest rates at 4.25%-4.50% with a probability level of 91.1%.

The dollar index (DXY), which tracks the USD against six major currencies, dropped, drawing a bearish candle with a low of 103.366, a high of 104.314, and a close of 103.802.

Today, investors will focus on US economic data on Unemployment Claims and PMI, which may get a market response.

 

[Zerologic]

Significant USD/CAD drop due to Trump tariffs

The Canadian dollar rallied sharply after the Trump administration’s “Liberation Day” tariff announcement. USDCAD hit a 3-month low at 1.40376 by drawing a long-bodied bearish candle and a fairly long wick at the bottom of the candle. Yesterday, the price made a high of 1.43189, a low of 1.40276, and a close of 1.40822.

The Trump administration’s tariff announcement received a surprising response from the market. The USD came under pressure, instead of acting as a safe-haven in the past. The dollar index (DXY), which tracks the USD against a basket of six major currencies, plunged with a wide gap to a low of 101.267 from a high of 103.379. The gap was quite deep, from the previous close of 103.691 to open at 103.148. The RSI shows that the DXY is currently in the oversold zone.

Unlike normal times, the USD often acts as a safe-haven currency with investors rushing to buy USD, but these are not normal times. The US Dollar is under pressure from the Trump administration's latest tariffs, which will be implemented in a gradual but rapid period.

The Trump administration will impose a 10% across-the-board tariff on all goods imported into the US starting April 5. The “reciprocal tariffs,” calculated as the ratio of US imports to exports on a per-country basis, will go into effect on April 9.

Canada has retaliated with its own potential tariffs if US trade falls outside its own USMCA limits, although Canada and Mexico have been granted additional tariff relief.

Fed officials, on the other hand, have been outspoken in warning that the tariffs could hurt expectations of a rate cut. The probability of the Fed keeping rates on hold at its May 7 meeting has fallen from 91% to 75.4%, according to the CME Group’s Fedwatch tool, given the impact of the Trump administration’s tariff opening report.

The forex market, however, is highly sensitive to recent news update. Investors will be looking ahead to the release of US and Canadian economic data due later today, including the NFP and Unemployment Rate, as well as any subtle hints from Fed Chair Powell's speech on the outlook for US interest rates and the US economy.

 

[Zerologic]

Trump Tariff Impact, WTI Prices Plunge to Low 60.21

WTI oil prices have declined consecutively for four days, with two days of long declines. On Friday, April 4, WTI oil prices plunged, drawing a long-bodied bearish candle with a wick at the bottom of the candle. WTI oil formed a high of 66.56, a low of 60.21, and a closing of 62.03. The decline in prices for four consecutive days even managed to cross the lower band line, indicating very high volatility.

The decline in oil prices aligns with the implementation of the reciprocal tariff policy announced by the Trump administration, which has sparked concerns about a global economic slowdown.

Although the Trump administration has prohibited affected countries from retaliating against the tariff policy, a trade war may be inevitable which in turn worsens the international trade environment.

A potential tariff war between the US and China will further worsen the outlook for oil demand. China has taken retaliatory steps against Trump's tariff policy by imposing a 34% tariff on American goods starting April 10 in retaliation after President Donald Trump imposed high tariffs on goods from China.

On the other hand, Trump considered his policies to have worked effectively and was proud of the US employment, which he said had soared. The US Department of Labor said there were 228,000 jobs last month, far more than the predicted 130,000. On the other hand, the unemployment rate rose slightly from 4.1% to 4.2%, with average earnings growing 0.3% in March to USD 36, or slightly higher than February.

Meanwhile, International Monetary Fund (IMF) Managing Director Kristalina Georgieva urged the US and its trading partners to work constructively to resolve trade tensions and reduce uncertainty. She warned that the higher import tariffs announced by President Trump were clearly a significant risk to the global outlook at a time of sluggish growth.

Another reason for the decline in oil prices was that OPEC+ surprisingly announced that they would increase production by 411 thousand barrels per day in May.