Nasdaq 100, WTI drop amid heightened tariff tensions while EUR/USD recovers

Macro update

​Tariffs tied to geopolitics:

Donald Trump threatened new tariffs on eight European countries in an effort to pressure Denmark over Greenland, explicitly linking trade policy to sovereignty issues and raising fresh uncertainty around existing United States (US)-European Union (EU) and US-United Kingdom (UK) trade agreements.

​Trade policy uncertainty rises:

The escalation reinforced concerns that trade could again become a geopolitical lever, unsettling assumptions around the stability of transatlantic economic relations. 

Risk appetite softens:

Market sentiment deteriorated modestly, with S&P 500 futures falling close to 1% and European equity futures down around 1.1% as investors trimmed exposure to risk assets.

​Safe havens in demand:

Gold and silver surged to new record highs as investors sought protection against rising geopolitical and trade-related uncertainty.

​Dollar weakens on political risk:

The US dollar fell broadly against the euro, Japanese yen and Swiss franc, with investors demanding a higher political risk premium for US assets given Europe’s roughly $8tn exposure to US equities and bonds.

​Europe under pressure:

Euro STOXX 50 and DAX 40 futures slid about 1.1%, defence stocks continued to outperform on geopolitical tensions, and Denmark’s krone remained near the weaker end of its euro peg.

​Nasdaq 100 comes off 25,873 high

​The Nasdaq 100 is seen coming off last week's 2 1/2 month high amid heightened tariff tensions with the early January low at 25,087 being back in sight.

​A fall through it and daily chart close below this level would likely put the mid-December trough at 24,648 on the map.

​Minor resistance can be spotted between the 25,400-to-25,444 resistance zone  with further resistance sitting at the early January 25,597 high.

​Short-term outlook:

Toppish while below the 13 January 25,873 high.

​Medium-term outlook:

Bullish while above the 17 December low at 24,468.

Nasdaq 100 daily candlestick chart

EUR/USD recovers from six-week low

EUR/USD found support around its late August $1.1574 low amid heightened tensions between the US and Europe and is seen rallying towards its 55-day simple moving average (SMA) at $1.1663.

​Other potential upside targets are the 14 December $1.1690 high and the December to January resistance line at $1.1702. This will need to be bettered for the $1.1800 region to be back in sight.

​Were support at $1.1573 to give way, the $1.1491 - $1.1454 region may be hit. This scenario currently looks less probable than a further advance, though.

​Short-term outlook:

Bullish while above $1.1573, targeting the $1.1700 area.

​Medium-term outlook:

Neutral while above $1.1573, failure there on a daily chart closing basis may put the $1.1500 region on the cards.

EUR/USD daily candlestick chart

​WTI topped out

West Texas Intermediate's (WTI) swift geopolitically driven rally from its $55.76 per barrel early January low has taken it all the way to Wednesday's $62.36 peak before giving back around half of its recent gains.

​The late December to early January highs at $58.88 - $58.87 currently offer support. Were they to be slipped through, the mid-November low at $58.12 would be next in line, followed by the 25 November low at $57.10.

​Resistance sits between the 55-day SMA at $60.14 and the early December high at $60.50.

​Short-term outlook:

Toppish while below $62.36, targeting the $58.00 region and below.

​Medium-term outlook:

Given the recent strong surge higher, we decided to neutralise our outlook and expect range trading between $62.36 and $55.76 to occur.

WTI daily candlestick chart