The trade: US-China tariffs and Nasdaq correction impact market trends
IG's Tony Sycamore explains how US-China tariff tensions are causing volatility in both the Nasdaq and ASX 200, prompting investors to monitor these indices and the Australian dollar's recovery.
(AI video summary)
This video was created on 5 February for IG audiences by ausbiz.
US-China tariff tensions impact global markets
The start of the year has been marked by significant market movements, primarily driven by United States (US)-China tariff tensions. Recently, China retaliated against US tariffs by imposing a 10% tariff on A$20 billion worth of US goods. In contrast, the US has targeted A$450 billion of Chinese imports.
Despite these tensions, US stock markets rebounded, buoyed by positive earnings reports and cooler economic data. However, the sustainability of this rebound remains uncertain. For instance, Alphabet's shares fell over 7% after announcing a capital expenditure (CapEx) forecast of A$75 billion for 2025, a 42% increase from the previous year. This highlights the ongoing volatility in US equity futures, particularly in the technology-heavy Nasdaq 100.
Nasdaq correction reveals market vulnerabilities
The Nasdaq 100 index has been experiencing a correction since reaching a high of 22,133 in mid-December. This correction has persisted for six to eight weeks, with the index trading sideways but showing resilience. Investors remain heavily weighted in US technology stocks, leaving room for potential downside movement.
Technical indicators suggest that the Nasdaq could test the 200-day moving average (MA), which sits just below 20,000. A break below this level could signal further declines, while holding above it might pave the way for a rebound. Traders should watch for signs of a shift towards risk-off sentiment in the coming months, which could influence market dynamics.
ASX 200 shows strength amid fluctuations
The ASX 200 has shown resilience despite recent tariff-related volatility. The index has been trading within a bullish trend channel for over a year, with a key support level between 8380 and 8360. Maintaining this support could allow the ASX 200 to test the upper bounds of its trend channel.
Australian dollar's recovery signals resilience
Meanwhile, the Australian dollar (AUD) recently hit a five-year low due to tariff implications but has since rebounded. Traders should monitor the currency's movement against resistance levels around 6350 to 6370, which could indicate a medium-term low if surpassed. These developments underscore the importance of technical analysis in navigating market trends.
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