Markets to watch this week

Wall Street stumbles into new week on lingering tariff uncertainties

After another losing week on Wall Street, major US indices appear poised to extend their weakness into the new week, with US equity futures down more than 1% at the time of writing. The recent bounce in equities—partly driven by short-covering—has proven short-lived, as investors refocus on tariff uncertainties and their implications for economic growth. While the initial wave of tariff-related panic has subsided, ongoing market volatility is likely to remain a key theme in the coming weeks, especially with more corporate earnings on deck and ongoing trade negotiations—both potential sources of fresh surprises. The task of brokering 75 trade agreements in under 90 days appears daunting, casting doubt on how much meaningful consensus can realistically be reached. Increasingly, these trade talks are evolving into a deeper geopolitical realignment, as nations are pushed to choose sides between the US and China, further complicating the global trade landscape.

Looking ahead, flash global Purchasing Managers' Index (PMI) data will be closely watched this week, with both manufacturing and services activity expected to soften amid ongoing tariff uncertainty. In the US, manufacturing PMI is forecast to slip into contraction territory at 49.3, down from 50.2 previously, while services PMI is expected to ease to 52.9 from 54.5. Much will hinge on whether tariffs are being viewed as short-term or symbolic, which will help determine if the PMI softness proves transitory.

US Dollar Index: Eyeing longer-term trendline support?

Downside momentum in the US dollar shows little sign of easing, with the index dragged to a one-year low after breaching the key psychological 100.00 level. Sellers now appear to be targeting the multi-year channel trendline support around the 96.70 mark. Fundamentally, persistent headwinds for the dollar include US growth concerns and the unwinding of US assets on trade de-coupling and central banks’ move to support their domestic currencies. Meanwhile, the latest Commodity Futures Trading Commission (CFTC) data reveals that net short positioning on the US dollar against other G10 currencies has reached its highest level since October 2024.

Key levels:

• R2: 102.93
• R1: 100.26
• S1: 96.70
• S2: 93.50

US Dollar Index chart:

US Tech 100: Downtrend risks persist amid lower highs

Recent bounce in the Nasdaq has stalled with the formation of a lower high, reinforcing the risk of a continued downtrend. The daily relative strength index (RSI) has also retreated from its midline, indicating that sellers still hold the upper hand. On the macro front, US economic data continues to soften more than expected amid tariff uncertainties, which could drag on corporate earnings. With technical indicators reverting to more neutral territory, the setup appears conducive to another leg lower—especially as we move into a seasonally weaker part of the year.

Key levels:

• R2: 19,830
• R1: 19,224
• S1: 18,000
• S2: 17,650

US Tech 100 chart:

Coffee Arabica: Upper channel trendline resistance in focus

After nearly doubling over the past year, prices have entered a cooling phase, marked by a descending channel since February this year which signals waning bullish momentum. The pattern of lower highs and lower lows suggests a near-term bearish bias. Currently, prices are retesting the upper boundary of the channel, which may act as resistance in the near term. Similarly, the daily RSI is retesting its midline, where it could also encounter some resistance.

Key levels:

• R2: 4.0510
• R1: 3.8280
• S1: 3.3551
• S2: 3.1146

Coffee Arabica chart:

Volatility Index: Stabilising for another move higher?

After sliding nearly 30% from its April 2024 high amid initial tariff-driven panic, the VIX has stabilised lately as investors reassess the market’s next direction. The daily RSI has undergone a technical reset, pulling back to retest its midline after reaching overbought levels. Ongoing trade negotiations and the upcoming corporate earnings season—both clouded by tariff uncertainty—pose potential catalysts for volatility, while markets entering a seasonally weaker period may set the stage for increased hedging activities.

Key levels:

• R2: 32.47
• R1: 28.21
• S1: 24.50
• S2: 21.10

Volatility Index chart:

USD/JPY: Pressured to fresh multi-month lows

Weakness in the US dollar has dragged the USD/JPY to its lowest level since September 2024. On the weekly chart, a potential head-and-shoulders (H&S) pattern appears to be unfolding, with the 138.00 level in focus as a key neckline support, which aligns with the 200-week moving average (MA). Fundamentally, the pair remains weighed down by narrowing bond yield differentials, US-Japan monetary policy divergence, and contrasting economic surprises. A decisive break below the 200-week MA could confirm the H&S breakdown, opening the door for further downside towards the 133.60 level.

Key levels:

• R2: 150.75
• R1: 145.00
• S1: 138.00
• S2: 133.60

USD/JPY chart: