Asia Open: Tariff flip-flop highlights a headlines-driven market

Tariff flip-flop highlights a headlines-driven market

A headlines-driven market seems synonymous with Trump 2.0, much like in 2016. Just as trade tensions seemed poised to escalate into a tit-for-tat trade war, tensions quickly eased as Mexico and Canada managed to secure a one-month delay in tariffs in the brink of time. While this is merely a postponement rather than a cancellation, the extended timeline is able to provide immediate relief for risk sentiments and more importantly, it underscores President Trump’s willingness to negotiate, potentially with tariff moves as bargaining chips rather than firm policy decisions.

Return of risk appetite

A temporary tariff reprieve translates to a return in risk appetite, driving a sharp intraday reversal across US markets as equities trim losses. The most notable move is seen in the US dollar, which erased all of Monday’s tariff-driven gains, triggering sharp reversals in USD pairs. The AUD/USD, which briefly dipped to 0.6088, is now climbing above 0.6214, while USD/CAD and USD/MXN have fallen back below last Friday’s close. No doubt we are treading in a highly dynamic environment, where market volatility and policy flip-flops are likely to dominate.

US Treasury yields were largely stable, while gold prices extended further into record-high territory, highlighting ongoing traction for the yellow metal as a hedge against tariff uncertainties. A break of range in late January this year seems to leave near-term price projection target at the US$2,874 level, followed by the psychological US$3,000 level which coincides with a broader upper channel trendline resistance.

What’s next?

China now heads to the negotiating table with Trump, and with Mexico and Canada successfully delaying tariffs, hopes are high that China can do the same as well. Of course, there are still room for surprises and Trump could still come down hard, given that China is viewed as a prominent threat to US national security and economic competition, while the tech rivalry between the two has become even more pronounced in recent days with DeepSeek. But if China can pull it off, risk sentiments may find further recovery momentum, at least in the near term.

Tariff risks still ought to be monitored however, with the EU most likely next in line and they have vowed to ‘respond firmly’ if US tariffs were imposed. The order in which whether negotiations or tariff implementation come first, will be key in shaping market movements ahead. This will be the uncertainty that markets may have to deal with for now.

Asia Open

Tariff relief brought a sea of calm across Asia, with the Japan’s Nikkei +1.67%, ASX +0.52% and KOSPI +1.59% at the time of writing. The sharp pullback in the US dollar, along with tariff relief hopes, are likely to see markets retain their gains, barring any unexpected souring in US-China talks ahead. Downside in the Singapore Blue Chip Index has been relatively contained despite earlier tariff jitters, with the index generally viewed as a more defensive play in the region.

Technically, a lower channel trendline seems to serve as near-term support, with the defending of a new higher low at the 381.73 level potentially reinforcing the prevailing upward trend. Riding on the trend may leave the 410.95 as eventual price target, with one to watch for any move above last Friday’s high at the 392.58 level for further bullish validation.