“The ongoing tariff gridlock with China carries the risks for escalation as well, which suggests that the secondary effect of higher tariffs on China on growth will still be felt by trading partners,” he adds.
Trump said he will impose an additional 50% tariff on China if Beijing does not withdraw its retaliatory tariffs on the US, while cancelling all planned talks with China.
The markets have calmed somewhat, notes Yeap, with the VIX — which measures volatility — pulling back from its recent high.
Wall Street was met with some wild swings overnight before stabilising into the close. Nasdaq edged out a 0.2% gain, while the S&P 500 and Dow Jones Industrial Average pared losses to end -0.2% and -0.9% respectively.
See also: Market rout looks set to extend this week, STI ‘particularly vulnerable’: IG
The markets are more sensitive than ever. “Reports that the White House is considering a 90-day pause in tariffs were quickly denied, with an initial 3% knee-jerk surge to the news reflecting a deeply oversold market that could see a massive swing in sentiments on any slightest positive tariff news,” says Yeap.
Yeap previously said the Nasdaq had reached a level where both an earlier bearish flag’s projected downside target and a broader channel breakdown projection stands in place, which might give room for a near-term bounce.
However, the bounce remains a corrective one, he adds, mirroring both the reversion in its weekly relative strength index (RSI) from oversold levels seen in the 2020 and 2022 bear market.
See also: IG thinks the Nasdaq’s bear market rally will unfold ‘quickly and sharply’
According to Yeap, Fibonacci retracement will suggest the 17,700 level as an immediate resistance to overcome, followed by the 18,600 level for the Nasdaq.
USD/SGD climbs
Meanwhile, Yeap notes that the USD/SGD pair is nearing a two-month high.
“Sentiments for the USD/SGD continue to turn for the better, with the pair previously breaking out of a near-term downward channel formation, reinforced by a bullish retest of the upper channel trendline last week,” he adds.
A “bullish divergence” displayed on its Moving Average Convergence Divergence (MACD), along with a move in its daily RSI back above the midline. This seems to suggest abating downward momentum for now, says Yeap.
“One to watch if the daily Ichimoku cloud resistance may be overcome at the 1.355 level, which will likely pave the way towards the 1.367 level next,” he adds.
Charts: IG
