Markets to watch this week

Reassessing US tariff risks

Market participants are reassessing US tariff risks as the new week begins, following US President Donald Trump's proposal of a 25% tariff on steel and aluminium. Ironically, Canada and Mexico—two of the largest exporters of these metals to the US—are expected to receive a 30-day exemption from the previous 25% import tax, which leaves investors debating whether this is just typical Trump rhetoric aimed at pressuring trade partners into negotiations. The US President has also brought up a "reciprocal" tariff that could leave the EU, China, India, Japan, and Vietnam in its crosshairs.

Historically, tariff announcements have triggered short-term market volatility, and while further escalation remains a risk, market sentiments have managed to stabilise somewhat.

Could history repeat itself?

Given that Trump's previous tariff measures on steel and aluminium during his first term were later softened through exemptions for key allies, expectations are high that a similar outcome could be reached this time as well. There are also hopes that Trump’s focus on "trade imbalances" could prompt countries to make concessions—such as increasing purchases of US goods—potentially reducing the risk of retaliatory trade tensions. Whether this scenario unfolds remains to be seen, and if the 2018 US-China trade war is any indication, trade dynamics can be volatile with Trump and subject to sudden shifts.

Asset class performance chart

US dollar index (bullish): tariffs headlines to drive US dollar

The US dollarhighly sensitive to tariff-related developments, with risks of escalation on the EU and China fronts. While Canada and Mexico’s tariff delays have pressured the dollar last week, the US dollar has since stabilised at a near-term key technical support—a confluence of its upward trendline and daily Ichimoku Cloud. Crowded long-dollar positioning, as reflected in the Commodity Futures Trading Commission (CFTC) data, remains a key headwind for bulls. However, a break below 106.88 may be needed to suggest a rising wedge breakdown and signal a bearish shift.

Key levels:

• R2: 109.82
• R1: 108.26
• S1: 106.88
• S2: 105.80

US dollar index daily chart

Brent crude (bullish): back at key trendline support confluence

Brent crude have steadied into the new week after nearly a 9% retracement since mid-January this year. Multiple trendlines converge around the $74 level for now, aligning with the daily Ichimoku Cloud and increasing the likelihood of a technical rebound. Any move above the $76 level could offer further bullish confirmation. However, recovery in oil prices may be largely technically driven, as fundamentals remain mixed amid tariff risks and rising supply prospects from the US and OPEC+.

Key levels:

• R2: 81
• R1: 76
• S1: 73.50
• S2: 70

Brent crude oil daily chart

GBP/JPY (bearish): new lower high reinforces broader bearish bias

Downside risks to the UK economy could necessitate greater monetary easing than the 50 basis points (bp) of cumulative rate cuts currently priced in by markets by year-end. his may further narrow yield differentials with Japan, where monetary policy is shifting toward rate hikes, potentially weakening GBP/JPY further. A recent breakdown of trendline support reinforces the broader downtrend, while the daily relative strength index (RSI) remains below its midline, signalling persistent bearish momentum. Similarly, the daily moving average convergence/divergence (MACD) continues to struggle to turn positive, underscoring the bearish bias.

Key levels:

• R2: 1.272
• R1: 1.253
• S1: 1.236
• S2: 1.225

GBP/JPY daily chart

EU Stocks 50 (bearish): potential for near-term bearish divergence?

The Euro Stoxx 50 index has surged 4% over the past week, reaching its highest level since August 2020. However, recent higher highs have been accompanied by lower highs on the daily RSI, signalling a potential bearish divergence. Meanwhile, the daily MACD has been flatlining, suggesting waning upward momentum. This week, US tariffs could pose a headwind for European equities, with any trade-related uncertainties potentially triggering profit-taking after the index’s strong run since the start of the year.

Key levels:

• R2: 5450
• R1: 5360
• S1: 5255
• S2: 5131

EU Stocks 50 daily chart

Singapore Blue Chip (bullish): rising channel pattern reinforced

Singapore bank earnings have started on a strong note, with DBS results providing a boost to bank stocks to start the week. While concerns over US tariffs persist, Singapore may remain relatively insulated, given the US's trade surplus with the country—though indirect effects will still be felt. On the technical front, the lower trendline of the rising channel has once again acted as near-term support, reinforcing the prevailing uptrend. Looking ahead, buyers may potentially target the key psychological 400 level next.

Key levels:

• R2: 415.11
• R1: 400.00
• S1: 381.73
• S2: 367.19

Singapore Blue Chip daily chart