Asia Day Ahead: Trump’s ‘Day One’ keeps tariffs off the table—for now

Trump’s ‘Day One’ keeps tariffs off the table—for now

With earlier jitters over President Trump’s campaign threats on tariffs, there is undoubtedly a sense of relief for global markets that trade measures have not been an immediate focus on Trump’s ‘Day One’. Thus far, his immediate priority has centred around immigration control, increasing US oil production, withdrawing from the Paris climate treaty and rolling back Biden-era executive actions – areas with minimal direct impact on international trade. That seems to push back the timeline for any tit-for-tat global trade tensions, which extended the runway for risk sentiments in the region to recover.

Assessing trade relationships with China, Canada and Mexico will still be in the works however, with the US President highlighting his intention to create the External Revenue Service, a new agency to collect "massive amounts" of tariffs, duties and other revenues from foreign sources.

Back in 2018, the overall tariff process from investigation to implementation took around 10 months and while we believe the timeline may be expedited this time, the overnight tone for now seems to suggest that significant trade actions may come with some delay.

We may still expect tariffs to be implemented with some ‘fire and fury’, but the current dynamics may favour a more reactionary approach over a predictive one.

Asia Open

The Asian session generally saw a sense of calm at its opening, with the Nikkei up 0.51%, ASX up 1.07% and KOSPI up 0.79% at the time of writing. A relatively quiet economic calendar for the region leaves attention to Trump’s policy priorities.

The narrative around tariff relief, combined with a weaker US dollar, likely to offer room for further market gains. US equity futures are also trading in positive territory.

The US dollar has been the immediate loser amid the lack of clarity around Trump’s trade tariffs, slipping more than 1%. Expectations of inflationary pressures from trade measures have been a key driver of the dollar's strength in recent months and with positioning for the US dollar heavily leaning into extreme longs (Commodity Futures Trading Commission (CFTC) data), any unwinding has triggered an outsized market reaction.

The downside reaction in the US dollar has seen a breakdown of a rising wedge formation, following a bearish divergence displayed on its daily moving average convergence/divergence (MACD). Its daily relative strength index (RSI) is also eyeing for a dip below its midline for the first time since October 2024, which may call for some defending ahead. With current dynamics offering only a temporary reprieve in trade tariffs, the recent downside in the US dollar may be viewed as a retracement rather than a reversal. Key support to watch may be the 105.65 level, where a confluence of support lies.

US dolar basket chart

USD crosses may find an opportunity to stabilise, particularly with USD/CNH retracing as much as 1.4% from its January 2025 high. A pullback toward its Ichimoku Cloud support has prompted some dip-buying this morning, but the near-term trend appears tilted to the downside, as its daily RSI has dipped below the midline for the first time since October 2024.

USD/CNH Mini chart

Thus far, the AUD/USD has been confined to a tight range over the past weeks and while a weaker US dollar offer room for further stability, a move above the 0.630 level may be needed to signal further upside. Its daily RSI is currently back to retest its midline, with any move above the 0.630 level potentially paving the way for the pair to retest the 0.640 level next.

AUD/USD Mini chart

Hang Seng Index: Room for recovery ahead?

We keep our eyes on the Hang Seng Index (HSI), and with China being the primary target of Trump’s tariff agenda, a delay in tariff implementation may offer room for relief.

A break above a downward trendline resistance has come into focus lately, with its daily RSI reverting above its midline as a sign of renewed buyer momentum. The key now is for buyers to defend yesterday’s low at the 19,770 level.

Should this level hold, there may be room for the index to recover towards the 21,385 level, where a key horizontal resistance - consistent with previous rejections - could cap further gains.

Hong Kong HS50 daily chart