Dow Jones Sinks as US Trade War Fears Trigger Broad Market Sell-Off

Market Overview

Australian

The Australian and New Zealand dollars fell on Wednesday, pressured by concerns over U.S. tariffs and lackluster Chinese stimulus. The AUD/USD dropped 0.5% to $0.6240, erasing earlier gains, while the NZD/USD slipped 0.4% to $0.5646. Despite strong Australian GDP growth of 0.6% in Q4, the Aussie remained under pressure as markets priced in further rate cuts from the Reserve Bank of Australia.

Technical analysis shows AUD/USD remains in a downtrend, with resistance at 0.63 and support at 0.6187. Sellers dominate below the  0.6254 level, while buyers await a breakout. Traders focus on U.S. tariff developments and key economic data, including ADP and NFP reports.

China

China imposed mild retaliatory tariffs on the U.S., signaling Beijing’s willingness to negotiate and avoid further escalation, according to BofA Securities. The measures mainly target U.S. agricultural products, with limited economic impact on China. However, with the U.S. effective tariff rate on China exceeding 30%, Beijing may need to prepare for additional tariffs from the Trump administration.

Meanwhile, China set its 2025 GDP growth target at around 5%, with a more proactive fiscal policy and accommodative monetary stance. The government plans to issue 1.3 trillion yuan in ultra-long-term special bonds and raise the local government bond quota to 4.4 trillion yuan. Chinese equities reacted mixed, with Hong Kong stocks rising while mainland markets saw slight declines.

XAUUSD

Prediction: Recovery but Facing Key Resistance

Gold price (XAU/USD) is in a recovery trend after bottoming near $2,833 at the end of February. Currently, the price is fluctuating around $2,905 - $2,906 but is encountering strong resistance at the $2,929 zone. If it fails to break this level, gold may pull back for a correction.

FUNDAMENTAL ANALYSIS

Monetary Policy & Fed Impact

The U.S. 10-year Treasury yield has rebounded from a 4-month low to 4.214%, reducing gold’s appeal as the opportunity cost of holding gold increases.

The Federal Reserve (Fed) has maintained interest rates with no immediate signs of a policy shift. However, markets still anticipate a rate cut in June or September 2025.

Investors will closely monitor the ADP Nonfarm report (today) and U.S. Non-Farm Payrolls (NFP) on Friday to gauge monetary policy trends.

Inflation & Market Drivers

The 25% tariffs on imports from Mexico and Canada, along with a doubled tariff (20%) on Chinese goods, could drive up inflation in the U.S.

The New York Federal Reserve has warned that these new tariffs may push consumer prices higher, adding pressure on the Fed’s policy stance.

WTI crude oil has dropped to a 6-month low of $67.83 per barrel, which could ease short-term inflation concerns.

Geopolitical & Market Sentiment

China retaliated with 10%-15% tariffs on certain U.S. imports, increasing fears of an escalating trade war.

The U.S. Dollar Index (DXY) dropped to 105.60, near a 3-month low, providing support for gold.

The EUR and GBP strengthened after Germany announced a €500 billion infrastructure investment package, putting downward pressure on the USD.

The People’s Bank of China (PBoC) continues to buy gold, signaling strong central bank demand for the precious metal.

TECHNICAL ANALYSIS

Key Resistance Levels

● $2,907: Immediate resistance; breaking above this could open the path for further gains.

● $2,929: Strong resistance level; a breakout could push the price towards $2,956.

● $2,956: All-time high.

Key Support Levels

● $2,891: First support level; holding above it could sustain the uptrend.

● $2,850: Critical support, aligning with the 200-day EMA, serving as a major long-term support zone.

● $2,833 - $2,807: Strong support zone; if broken, it could trigger a deeper downtrend.

Technical Indicators:

EMA 34 at $2,897: Price fluctuating around this level, indicating an unclear trend. EMA 89 at $2,894: Temporary support; if price stays above, chances of further recovery increase. EMA 200 at $2,850: Long-term key support.

RSI at 54.44: Neutral zone with no overbought or oversold signals. Previously, RSI formed a lower high while the price made a higher high (hidden bearish divergence), suggesting possible downside pressure.

Gold is recovering but facing resistance at $2,906 - $2,929. If it breaks through, further upside potential is likely. If rejected, a pullback towards $2,891 - $2,850 is possible. Traders should closely monitor economic data and trade war developments for informed trading decisions.

S&P 500 (SPX)

Prediction: Decrease

The S&P 500 is in a strong downtrend, forming lower highs and lower lows in recent sessions. The index has broken below the 200-day EMA at 5,913, confirming a bearish outlook. Currently, SPX is testing the key support zone at 5,738—if this level fails, further downside is likely.

FUNDAMENTAL ANALYSIS

Trade Policy & Tariff Impact

U.S. stock markets are under pressure due to trade tensions as the Trump administration imposes a 25% tariff on Canadian and Mexican imports and doubles tariffs on Chinese goods to 20%.

In retaliation, China, Canada, and Mexico have introduced countermeasures, fueling concerns about slowing global economic growth.

Investors are awaiting Trump’s speech before Congress for further insights into U.S. trade policy direction.

Impact on Financial Markets

U.S. 10-year Treasury yield has risen to 4.245%, signaling expectations of slower growth and inflationary pressure from tariffs.

WTI crude oil slightly declined to $68.25 per barrel, reflecting concerns over weaker demand amid trade tensions.

Gold rose 0.9% to $2,927.70/oz, indicating increased demand for safe-haven assets amid financial market volatility.

Stock Market Performance

The S&P 500 fell 1.22% to 5,778.15, marking two consecutive losing sessions and its lowest level since November 2024.

The Dow Jones (-1.55%) and Nasdaq (-0.35%) were also hit by trade-related uncertainties. Financial, industrial, and consumer staples sectors led the decline, while technology stocksremained resilient, driven by chipmakers and cryptocurrencies.

Top gainers: Walgreens (+5.6%) and Super Micro Computer (+8.5%) posted strong gains. Biggest losers: Best Buy (-13%) and Target (-3%) suffered heavy losses due to concerns over the impact of tariffs on retail prices.

TECHNICAL ANALYSIS

Key Resistance Levels

● 5,866: Nearest resistance, close to the 200-day EMA. A failure to break above this level will reinforce selling pressure.

● 6,004: Next resistance level, where previous strong market reactions occurred.

● 6,057 - 6,127: Critical resistance zone—SPX must clear this area to confirm a potential bullish reversal.

Key Support Levels

● 5,738: Immediate support—if broken, SPX could see deeper declines.

● 5,622: Next support level, crucial if bearish momentum continues.

● 5,468 - 5,402: Strong support zone, potentially marking a bottom if market sentiment stabilizes.

Technical Indicators:

EMA 34 & 89: Both moving averages are sloping downward, confirming that the bearish trend remains dominant.

RSI (28.37): Deep in oversold territory, suggesting a potential short-term technical rebound. Volume: Trading volume remains high, indicating strong selling pressure. However, a decrease in volume in upcoming sessions could signal a potential reversal.

The S&P 500 is currently testing critical support at 5,738. A break below this level could lead to further declines towards 5,622 or lower. However, with the RSI in oversold territory, a short-term rebound is possible. Traders should watch for potential policy signals from Trump’s speech and monitor global trade developments for further market direction.

US30 – Dow Jones Industrial Average

Prediction: Decrease

The Dow Jones Industrial Average (US30) is in a clear downtrend, breaking multiple key support levels. Selling pressure has intensified due to concerns over the negative impact of tariffs recently imposed by the Trump administration on Canada, Mexico, and China. The U.S. stock market is undergoing a sharp correction, with:

● Dow Jones down 1.6%

● S&P 500 down 1.2%

● Nasdaq down 0.4% in the most recent session.

FUNDAMENTAL ANALYSIS

Tariff Policy & Economic Impact

The Trump administration has enforced a 25% tariff on imports from Canada and Mexico while doubling tariffs on Chinese goods.

Canada and China have responded with retaliatory measures, increasing fears of a full-scale trade war.

Analysts warn that if tensions escalate, inflation could rise significantly, pressuring the Federal Reserve’s monetary policy.

Financial Market Reactions

U.S. 10-year Treasury yield has risen to 4.245%, reflecting increased risk aversion as investors shift funds from stocks into bonds and gold.

The U.S. dollar weakened, while gold gained 0.9% to $2,927.2/oz, indicating strong safe-haven demand.

Market Sentiment & Outlook

Investors are increasingly concerned as the Trump administration appears less focused on stock market stability.

Dow Jones and S&P 500 have erased their year-to-date gains, reflecting heightened uncertainty. However, some analysts believe the market could rebound if Trump signals positive policy changes in his upcoming speech before Congress.

TECHNICAL ANALYSIS

Key Resistance Levels

● 43,070 – Previous support, now key resistance. If price fails to break above, the bearish trend will likely continue.

● 43,334 – Strong resistance, aligning with the EMA 34. A crucial level to watch in case of a short-term rebound.

● 44,875 – Major resistance on the daily timeframe, previously a key support level.

Key Support Levels

● 42,521 – Immediate support; holding above this level could trigger a temporary rebound.

● 42,103 – Stronger support; breaking below could accelerate the decline.

● 41,733 – Recent session low; if breached, the downtrend is likely to extend further.

Technical Indicators:

EMA 34, EMA 89, and EMA 200: Price is trading below all three EMAs, confirming the dominant bearish trend. EMA 200 at 43,737 is a critical resistance—if price fails to reclaim this level, further downside is expected.

RSI at 34.11 – Near oversold territory, suggesting a potential short-term technical bounce. If RSI falls below 30, a minor dip-buying reaction may occur.

Volume & Price Action: High trading volume on down days indicates strong selling pressure. If price tests 43,070 - 43,334 and gets rejected, the bearish trend is likely to continue.

 

 

 

 

 

 

 

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