Tariff Volatility Risks
The US Dollar is rising on Monday as trader brace for a potentially volatile week. The US tariff suspension window is due to end on Wednesday, and Trump has returned to his typically aggressive rhetoric, threatening a steep increase in tariffs for some trading partners. As such, countries have until Wednesday to meet Trump’s demands on trade or risk incurring steep new levies. These new rates will come into effect as of August 1st and are expected to be most severe against countries where trade negotiations have been least fruitful.
Bullish USD Outlook
For now, the baseline market view is that USD will rally again as reciprocal tariffs are reactivated, with risk assets set to fall across the board. The scale of the moves will depend on what is announced. If Trump simply returns tariffs to prior levels, this might cause some short-term, volatility but avoid a bigger reaction. However, if tariffs are set at higher levels than anticipated, this could fuel a sharp reaction across asset classes this week. For USD, the view that tariffs will increase inflationary pressure is set to drive the greenback higher causing some weakening of near-term Fed easing expectations.
Last Minute Deals
However, given the way these proceedings have played out before, traders are aware of the possibility that some last minute deals could be agreed, or deadline extensions granted for some countries. If seen, this should be met with a rally in risk assets and a weakening of the Dollar near-term.
Technical Views
DXY
The sell off in DXY has stalled for now into the 96.89 support. Price is holding here and with momentum studies turning higher, focus is on a potential channel break with 98.03 the first key resistance to watch. To the downside, 94.85 will be key support if we turn lower.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.