Donald J. Trump and his favourite word in the dictionary, “tariffs”

President Trump according to Bloomberg, stated yesterday that the Government is considering a tariff of about 10% on China, with the date of implementation potentially being February 1^st . The President also signaled for a possible 25% tariff on Canada and Mexico which may also begin on the 1^st of February. We would like to note that the hypothetical 10% tariff on China, would be lower than the 60% that was being floated around during the President’s election campaign. The possible implementation of tariffs could lead to retaliatory measures by China, which could target American companies such which may be dependent on China as part of their supply chain logistics. Moreover, the EU does not appear to have been spared by criticism from the new President, with Trump stating per Bloomberg that “We have a $350 billion deficit with the European Union. They treat us very very badly, so they’re going to be in for tariffs”. The possibility of tariffs against the EU could weigh on the common currency.In the geopolitical sphere, various media outlets have touted that President Trump stated yesterday that he may impose sanctions on Russia if they do not come to the negotiating table with Ukraine. For the Eurozone on a monetary level, ECB Stournaras implied that the rates could come close to 2% by the end of the year. The comments by ECB Stournaras could imply that the bank may continue with its monetary easing cycle up until the end of the year which in turn could weigh on the EUR. Over in Asia, Japan’s trade balance figure is set to be released during tomorrow’s Asian session. Of particular interest may be the nation’s export rate which is set to come in at 2.3% and thus could weigh on the JPY, when considering last month’s figure.

EUR/USD appears to be moving in a sideways fashion, after breaking above our downwards-moving trendline which was incepted on the 6 of December 2024. We opt for a sideways bias for the pair and supporting our case is the aforementioned breaking of our downwards-moving trendline, in addition to the RSI indicator below our chart, which currently registers a figure of 50, implying a neutral market sentiment. For our sideways bias to continue we would require the pair to remain confined between the 1.0330 (S1) support level and the 1.0450 (R1) resistance line. On the flip side for a bearish outlook, we would require a clear break below the 1.0330 (S1) support line with the next possible target for the bears being the 1.0195 (S2) support level. Lastly, for a bullish outlook we would require a clear break above the 1.0450 (R1) resistance line, with the next possible target for the bulls being the 1.0595 (R2) resistance level.

WTICash appears to be moving in a downwards fashion. We opt for a bearish outlook for the commodity’s price and supporting our case is the break below our support now turned back to resistance at the 76.80 (R1) level. Moreover, the RSI indicator despite currently reading a figure close to 60, appears to have steeply moved lower from the reading of 70, which may imply that the bullish momentum may be fading. For our bearish outlook to continue, we would require a clear break below the 71.75 (S1) support level with the next possible target for the bears being the 66.20 (S2) support level. On the flip side for a sideways bias we would require the commodity to remain confined between the 71.75 (S1) support line and the 76.80 (R1) resistance level. Lastly, for a bullish outlook, we would require a clear break above the 76.80 (R1) resistance line with the next possible target for the bulls being the 81.60 (R2) resistance level.

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Today we note the release of Canada’s producer prices rate for December and the API weekly crude oil inventories figure. In tomorrow’s Asian session, we note Japan’s trade balance data for December and Japan’s chain store sales rate for December as well. On a monetary level, we note the speeches by ECB Villeroy, ECB Knot, ECB President Lagarde and ECB Nagel during the day.