Sheinbaum’s Strategy And Market Reactions

For traders, this is an essential development. The timing of the discussion—preceding the introduction of tariffs—means that any agreements, concessions, or shifts in policy could come swiftly. That, in turn, could affect market pricing notably. For those involved in derivatives, particularly with exposure to trade-sensitive sectors, this period requires close scrutiny. Reactions from businesses, policymakers, and markets will provide key signals, especially if signs emerge that tariffs may not proceed as planned.

If tariffs are implemented as scheduled, market responses will likely be triggered at the start of the week. But if talks lead to some form of delay or modification, price movements could begin even sooner. Markets tend to respond to expectations rather than just actions, meaning even an indication of flexibility in policy may shift investor positioning. Watching for leaks, early statements, or shifts in rhetoric could offer those trading derivatives an advantage in anticipating price fluctuations.

Trade Policy Volatility And Investor Strategy

Given the short time frame before tariffs take effect, decisions made now could affect pricing for the next several weeks. If there are sharp movements in expectations around trade policies, volatility could increase. That presents both risks and opportunities, depending on positioning. Clarity should emerge soon, but in the meantime, maintaining flexibility in strategy and monitoring developments carefully will be necessary.

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The Elliott Wave analysis of the Eurostoxx (SX5E) index indicates a bullish trend following a low on 19 November 2024. The index is currently unfolding as an impulse structure, with recommendations to buy on dips in defined price ranges.

Recent updates show that following corrections, a new high was achieved above 5544.12, suggesting further upward momentum. This trend aligns with earlier projections for a bounce after reaching the designated blue box area.

Currency Market Influences

Meanwhile, trading dynamics for currency pairs have been influenced by geopolitical tensions and tariff announcements. Notably, the AUD/USD remained choppy while EUR/USD climbed to new yearly highs amid a declining US Dollar.

The structural development in the Eurostoxx index suggests the ongoing bullish phase should persist as long as corrective declines hold within the projected retracement zones. The fact that it recently moved beyond 5544.12 confirms that the broader trajectory remains intact. Buying opportunities continue to exist when price retraces within identified support areas, as this pattern maintains its impulsive characteristics.

Attention must be placed on how each retracement unfolds. A sharp drop outside the expected levels would indicate a shift in structure, demanding a reassessment of potential targets. On the other hand, controlled pullbacks that respect Fibonacci retracement thresholds support the notion of a continuing rally. We have observed that previous corrections have been met with renewed buying pressure, strengthening confidence in the larger upward trend.

In the currency realm, recent conditions show that geopolitical factors remain key drivers of volatility. With the Australian Dollar experiencing erratic behaviour, it has provided little clarity for sustained positioning. Meanwhile, the Euro has displayed remarkable strength, benefiting from a broadly weaker US Dollar. The latest push to yearly highs underlines the advantage held by the Euro as long as the Dollar remains under pressure.

Risk Management Considerations

For traders navigating these movements, managing risk appropriately is paramount. While the current directional signals appear clear, external events, particularly those tied to tariffs and broader financial policies, have the potential to disrupt established patterns. Evaluating pullbacks carefully will be necessary, as they often present further opportunities when aligned with structural expectations.

The confluence of technical projections with fundamental influences suggests the present outlook remains constructive as long as the outlined conditions hold. That said, remaining flexible in response to new inputs will allow for adjustments if emerging price action deviates from anticipated scenarios.

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Three rate cuts by the Federal Reserve are anticipated this year. Although indications of a more accommodating Fed have been limited, St. Louis Fed President Musalem mentioned potential economic risks.

The Federal Reserve has maintained a ‘wait and see’ approach, emphasising the need for 2% inflation prior to any cuts. Meanwhile, the market has adjusted its expectations, pricing in 80 basis points of easing, a rise from 40 basis points previously.

Low Chances For March Cut

The chances of a rate cut in the upcoming March meeting remain low, while the May 7 meeting now has over a 50% likelihood. Additionally, a 50 basis points decline is projected for the terminal rate.

This suggests that while monetary easing is expected, there remains a gap between the central bank’s stance and market forecasts. Investors have grown more confident in lower rates arriving sooner, even though policymakers have not explicitly signalled the same level of urgency. Musalem’s mention of economic risks hints at growing concerns within the institution, but without definitive commitments, traders must closely monitor further statements.

Recent pricing shows a notable uptick in expectations, with projected cuts now doubling compared to previous estimates. This shift reflects a broader sentiment that the central bank will be pushed towards action, even as officials remain outwardly cautious. Inflation remains the primary hurdle, with authorities repeatedly stating that easing will only be considered if price stability is assured. Despite this, the likelihood of monetary policy adjustments later in the year has strengthened.

Market Expectations And Policy Shifts

With the upcoming March meeting, markets appear sceptical of any immediate change. However, by May, probability models suggest that more than half of market participants anticipate the first reduction. This adjustment aligns with growing views that policymakers will eventually move in response to slowing economic momentum or external pressures. Additionally, the expected decline in the terminal rate by 50 basis points further reinforces the belief that tightening measures will be reversed at a faster pace than initially forecasted.

Participants should monitor official commentary for any hints of a shift in stance. Inflation data releases and employment figures will be key in shaping upcoming adjustments. If economic conditions warrant it, policymakers may reconsider their cautious approach, accelerating the anticipated easing cycle. These developments will have direct implications for pricing, volatility, and positioning in the near term.

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On the daily timeframe, Chevron appears to have finished a corrective pattern, suggesting a bullish breakout is imminent.

Wave V Structure

The invalidation level is $51.48; maintaining above this level indicates further potential upside in the months ahead.

The analysis here highlights a strong upward move in progress, backed by historical patterns and ongoing price action. The corrective move prior to the current rise indicates that the stock has reset its positioning, allowing for a fresh bullish cycle to unfold.

With price staying firmly above the invalidation point, the structure remains intact. We’ve seen before how markets tend to respect these levels, meaning traders awaiting confirmation should watch for momentary retracements rather than assuming a trend shift.

This particular setup shows price developing through an impulsive structure, consistent with prior movements in the stock. Historically, when Wave (V) completes, markets cool off, but in the meantime, expectations lean towards further strengthening. Pullbacks may appear in the short run, particularly as smaller-degree waves complete, yet these should be viewed in relation to the broader structure.

Technical Outlook

For those monitoring short-term retracements, Wave ((4)) could bring some temporary slowing within the uptrend. However, if history is a guide, such moves have often provided renewed buying opportunities rather than full reversals. These shifts in momentum frequently allow positioning adjustments, particularly in leveraged markets.

Our view aligns with the idea that strength remains, provided price does not slip below the key structural level. Past instances of similar behaviour suggest the current motion is still developing rather than nearing the end. The presence of an impulsive sequence further reinforces this perspective, as it typically signals continuation rather than exhaustion until a full cycle resolves.

Traders relying on derivatives should be assessing risk in line with where price sits within the wave count. If Wave ((4)) develops as expected, entries may be more favourable during dips rather than chasing after extended upward sequences. Care should be taken around potential pullbacks, given their tendency to form quickly within ongoing trends.

Momentum indicators can offer further confirmation. If Wave ((3)) continues extending, waiting for early signs of exhaustion before entering fresh positions may be prudent. Conversely, if strength remains, upside may continue surpassing intermediate resistance levels before any notable retracement occurs.

Looking ahead, there is evident room for price discovery at higher levels. The structure remains constructive, leading to expectations of follow-through action, particularly if market conditions align with historical trend behaviour. With control still resting on the bullish side, retracements should be assessed not as standalone events but as components within a broader pattern.

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The US Federal Register has announced that it will publish information on the implementation of tariffs on Canada on Thursday. Currently, there is a lack of clarity regarding how these tariffs will be enforced at the northern border.

Traders are sharing a page from the US Federal Register that fails to detail the procedures for collecting and paying duties. This uncertainty creates confusion for those affected by the tariffs, especially with the upcoming publication possibly indicating changes or exceptions.

Bureaucratic Uncertainty

The availability of the unpublished document may appear to be bureaucratic in nature, but it contributes to the overall confusion surrounding the situation.

We now find ourselves in a position where information remains incomplete, yet market participants must prepare for possible shifts in expectations. With the US Federal Register set to publish tariff details on Thursday, the uncertainty surrounding enforcement mechanisms at the northern border leaves room for speculation. The lack of procedural clarity in the shared document suggests that those directly impacted still do not have a defined framework to rely upon. That, in turn, raises questions about how these duties will be applied in practice.

For those analysing potential outcomes, the immediate concern is how this uncertainty will translate into market movements. If the final version of the implementation details introduces unexpected restrictions or exemptions, there will inevitably be a recalibration in expectations. This could lead to price fluctuations as traders price in new information. Mason noted earlier this week that any deviation from the anticipated structure could create opportunities or risks, depending on positioning. Given that reasoning, a close watch on Thursday’s release is essential.

Compounding the matter is the fact that unofficial versions of the document are circulating without a clear enforcement mechanism. Without a confirmed structure for collection and payment, uncertainty will persist until the official publication. This gap between available information and confirmed policy invites speculation, which can be reflected in short-term volatility.

Retrospective Concerns

Moreover, questions remain regarding retrospective application. If any of the measures are backdated, adjustments will need to be made quickly, potentially disrupting ongoing arrangements. Robinson pointed out last month that if previous decisions continue to affect current strategy, then any policy shift could cause ripple effects, especially for those with exposure to cross-border agreements.

By Thursday, expectations will meet reality. The ambiguity surrounding these tariffs has already caused debate, and once the final regulatory language is made public, the market will react accordingly. Any exemptions or adjustments introduced in the published version may reward those who remained flexible while putting others at a disadvantage.

If collection mechanisms prove more complex than expected, administrative burdens may increase. Should procedures require additional compliance efforts, costs could rise for those needing to adjust workflows. This logistical component deserves just as much attention as the tariff rates themselves.

What remains clear is that a period of short-term uncertainty will continue until the final details are confirmed. With incomplete information in circulation, misinterpretation becomes a risk in itself. Those monitoring Thursday’s release must be prepared to act swiftly, depending on how enforcement is structured.

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GBP/USD rose around 1% on Monday, driven by the weakening of the US Dollar (USD). The currency pair trades above 1.2700, marking its highest point since mid-December.

Disappointing macroeconomic data and news of tariffs from US President Donald Trump dampened market sentiment towards the USD. The pair previously experienced daily losses at the end of last week, closing around 1.2600.

Usd Weakness Supports Sterling

The USD displayed strength during the latter half of last week, impacting GBP/USD negatively. Tariff confirmations and political tensions contributed to a cautious approach among market participants before the weekend.

Sterling began the week strongly, benefitting from a weaker greenback after data releases from the United States failed to meet expectations. As a result, GBP/USD climbed past 1.2700 for the first time in months, setting the stage for traders to assess whether this momentum has further to run.

Market sentiment shifted as concerns grew over economic conditions in the US. Fresh tariff announcements from the White House unsettled investors, adding to the pressure on the dollar. At the end of the previous week, traders had been more inclined towards the US currency, with GBP/USD slipping to around 1.2600. However, with weaker economic figures emerging, that pattern reversed at the start of the new trading week.

The latter half of last week had been marked by a more defensive approach among traders, as political developments and fresh trade policies encouraged a move towards stability. This generally favoured the dollar, but those gains proved short-lived once investors reassessed the broader economic picture.

Outlook For Gbp Usd

With GBP/USD now at levels not seen since December, the focus shifts to whether the British currency can sustain its recent advance or if the dollar might regain traction. Economic data releases will continue to shape expectations, especially as traders determine whether policy responses from central banks could alter momentum in the short term.

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Shares of Tesla reached $272 in pre-market trading, reverting to their previous position before the election. Sales in North America and Europe have declined, while expectations for strong sales in China seem unfounded.

According to the China Passenger Car Association, Tesla sales in China dropped to 30,688 in February, marking a 49% decrease from 63,238 in the same month last year. Additionally, sales in Australia fell dramatically by 71.9% in February, totalling only 1,592 units sold.

Tesla Faces Declining Demand

This data signals a downturn in demand, one that aligns with the broader slowdown observed across multiple regions. Tesla’s declines in North America and Europe are now reinforced by underperformance in China, a market where robust growth had been widely expected. The latest figures from the China Passenger Car Association point to a near-halving of sales compared to a year ago, an outcome that will weigh on overall revenue. A similar pattern has emerged in Australia, where deliveries have tumbled, reinforcing concerns that demand outside of Tesla’s core U.S. market is weakening.

With shares recovering to levels seen before the election, the market appears to have factored in these trends, at least for now. However, a key issue is whether expectations have sufficiently adjusted to reflect recent sales figures. If demand in China continues to disappoint following a period of aggressive price reductions, further downgrades to revenue forecasts may follow. Such developments would make any sustained recovery in share price more challenging.

Beyond immediate sales figures, attention must also be directed towards production and delivery numbers in the coming weeks. Factory output adjustments could reveal Tesla’s own expectations for demand going forward. If further production cuts become necessary, markets will have to re-evaluate growth expectations once again.

Economic Conditions And Market Sentiment

Another element influencing sentiment will be broader economic conditions. Consumer appetite for electric vehicles remains sensitive to interest rates and overall financial confidence. Any signs of slowing consumer credit growth or weaker economic activity could further weigh on projections. Recent sales figures already reinforce the idea that Tesla’s pricing power is under pressure, making any further deterioration in demand a potential trigger for additional adjustments from analysts.

Ultimately, it will be necessary to monitor whether China’s downturn represents a short-term fluctuation or a more drawn-out shift in buying patterns. If sales fail to stabilise in key international markets while competitors maintain or expand their foothold, the pressure on Tesla’s valuation may intensify.

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The Germany 5-year note auction yield decreased from 2.17% to 2.15%.

In related market movements, EUR/USD pulled back from yearly peaks around 1.0560 to approximately 1.0520. GBP/USD also saw a decline after reaching three-month highs near 1.2750.

Gold And Crypto Market Trends

Gold prices rose above $2,920 per troy ounce amidst a backdrop of risk aversion and ongoing trade tensions. Cryptocurrencies such as Bitcoin and Ethereum experienced declines following a speculative spike linked to US crypto announcements.

The US introduced new tariffs, imposing a 25% rate on Canada and Mexico and 10% on China, while ceasing military aid to Ukraine.

A modest dip in the yield for Germany’s 5-year note suggests a slight shift in sentiment towards safer assets. Investors appear to be factoring in lower inflation or slowing growth expectations, though the margin of change remains narrow.

We observed a pullback in the euro against the dollar from its highs for this year. Similarly, sterling retracted after hitting its best level in months. These moves suggest traders locking in profits and reassessing momentum. However, the broader positioning remains bullish unless we see deeper consolidation.

Impact Of US Tariffs And Trade Policy

Meanwhile, gold moved above $2,920 per troy ounce as safe-haven demand increased. Heightened trade concerns are likely fuelling this, as escalating tensions often push investors towards assets that hold their value in uncertain times.

In the crypto market, Bitcoin and Ethereum retraced following prior enthusiasm. The previous surge was fuelled by US regulatory updates, but with traders now selling into strength, the market remains highly reactive.

The US decision to heighten tariffs adds more strain to international trade, particularly with key partners. This, combined with the halting of military support for Ukraine, introduces further complexity in global markets. The next few weeks may see traders adjusting positions as the ripple effects of these developments become clearer.

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Canadian Prime Minister Justin Trudeau announced retaliatory tariffs on the US following its recent tariff imposition. He stated that these tariffs would lead to increased costs for American consumers and threaten jobs.

Trudeau’s statement suggests looming legal and congressional disputes regarding tariff policy. The US Constitution grants Congress the power to levy taxes and duties, with exceptions for special circumstances.

Economic Impact On Border States

Concerns regarding the appropriateness of tariffs on goods from a country with a congressional-approved trade agreement have been raised. Border states may experience significant economic impacts, prompting discussions about control over tariff policies.

Trudeau’s announcement underlines a deepening trade rift, one that will not only weigh on industries directly affected by tariffs but also shape policy disputes in the United States. The mention of congressional authority in tax and trade matters hints at legal battles that are likely to emerge, particularly among lawmakers who disagree on the President’s ability to bypass legislative approval for such measures. Given that trade agreements undergo scrutiny before receiving congressional approval, raising duties on imports from a partner nation could create conflicts within the US government.

Industries reliant on cross-border commerce, particularly those concentrated in states near Canada, now face an uncertain pricing environment. When tariffs rise, not only does the cost of imported goods increase, but businesses frequently adjust supply chains in response. States with deep trade ties will feel the ripple effects first, with manufacturers and retailers forced to factor in higher expenses. Some may absorb the added costs, while others could pass them on to consumers. This scenario often leads to pressure from local industries on policymakers, urging them to reconsider restrictive trade measures.

Reaction from US lawmakers will be worth watching. If Congress pushes back, citing its constitutional role in setting trade policies, legal confrontations could follow. The economic disruption that accompanies tariffs is rarely contained to the industries directly targeted. Once retaliatory measures are introduced, companies assessing their long-term operations will have to adapt swiftly.

Uncertainty For Businesses

For businesses that operate on both sides of the border, uncertainty is likely to become a major point of concern. Short-term cost fluctuations could be one issue, but broader concerns about stability in trade policies may now take precedence. When businesses cannot foresee pricing structures with confidence, large-scale strategic decisions become harder to make. Some firms may respond by sourcing goods differently, while others may seek policy reassurances before making investment decisions.

Trudeau’s countermeasures will not exist in isolation. If these tariffs affect industries with political influence in Washington, pressure could mount for a reassessment of the initial trade restrictions. Trade disputes do not operate in a vacuum. As Canadian tariffs begin taking effect, lobbying efforts may concentrate on mitigating lasting damage. The coming weeks, therefore, will not just determine outcomes at the policy level but are likely to shape business responses as well.

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The AUD/USD pair is trading slightly lower, holding above 0.6200, amid pressure from the announcement of additional 10% tariffs on China by US President Trump. The Australian Dollar is under selling pressure despite the US Dollar weakening, suggesting underlying issues for the AUD.

During European trading hours, Audi’s value declined 0.1% to around 0.6220 as the US Dollar Index approached an 11-week low of 106.15. Rising tariffs may hinder Australia’s trade competitiveness with China, which is its largest trading partner.

Australian Retail Sales Outlook

An anticipated rise in Australian Retail Sales could help support the AUD. Retail Sales improved by 0.3% in January after a 0.1% decline in December.

Meanwhile, expectations have grown that the Federal Reserve may initiate monetary expansion, increasing the likelihood of interest rate cuts in June to 87%. This is up from the previous week’s 69%, indicating increasing pressure on the US Dollar.

The Australian Dollar continues to struggle despite broader weakness in the US Dollar. This suggests that concerns for the currency are not solely linked to external pressures but may also be tied to internal economic factors. For those tracking short-term movements, this divergence is something that cannot be ignored.

Tariff announcements have once again unsettled markets. With further levies on Chinese goods, the indirect impact on Australia becomes apparent. The country’s heavy reliance on trade with China means any barriers to growth in Beijing could trickle down. The marginal slip in value during European hours reinforces the view that traders remain cautious.

Federal Reserve Rate Cut Expectations

Retail Sales figures in Australia provide some optimism. A shift from negative to positive monthly growth could support sentiment. But one data point does not dictate a trend. Whether consumer spending maintains momentum in the months ahead will determine if this recovery is sustainable or merely a short reprieve.

On the other side of the equation, the Federal Reserve’s stance appears to be adjusting. A rising probability of interest rate reductions shifts expectations. A cut in June now seems priced in more heavily than it was just a week ago. The implications for the Dollar are straightforward: a looser policy stance could apply further downward pressure.

For those analysing derivatives, balancing these signals becomes essential. If US Dollar softness persists while concerns around tariffs continue to weigh on the Australian currency, movements may become choppy. Adjusting positions based on shifts in interest rate expectations and trade-related developments will be key in the coming sessions.

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