Markets fret over Trump-Fed tension, “death cross”

• US stocks sink as Trump’s criticism of Fed Chair worries investors
• Death cross in play on S&P 500, Nasdaq and Dow Jones stock indices
• Dollar tumbles on concerns over Fed independence
• Gold hits afresh all-time high on continued haven demand, de-dollarisation

FX: USD broke to the downside after consolidating near recent and long-term support around 99.57. The buck posted a three-year low at 97.92 before paring some losses late in the US session. Concerns over Fed independence and the firing of Fed Chair Powell escalated and spooked investors. Trump interference in monetary policy is just one more issue for markets to worry about. CFTC positioning data from Friday shows significant weakening in USD sentiment in recent weeks. The only surprise in the figures is perhaps that there are still pockets of the market that are clinging on to net USD longs, and that the market is not actually a lot shorter USD at this point.

EUR broke higher after recent tracking sideways around 1.14. The euro hit levels last seen in April 2022, with a high at 1.1572. CHF and NZD were the only majors that beat the single currency. Flows away from the dollar are benefitting the highly liquid EUR, with an obvious apolitical central bank. The nest major upside level is 1.1747, with initial resistance around 1.16.

GBP popped higher tracking all major currencies versus USD. But it lagged its European peers. Bulls are targeting the September 2024 top at 1.3434. there is little on the calendar this week apart from PMIs and BoE Governor Bailey speaking on Wednesday. Money markets are currently pricing in around 21bps of easing at the BoE May meeting.

USD/JPY declined from a bearish continuation pattern, falling to a new cycle low at 140.64. The long-term bottom from September 2024 sits at 139.57. there is also a low from December 2023 at 140.24. Japan’s trade negotiations are in focus, having failed to achieve an agreement over the weekend and last week. Representatives are planning to hold their second round of negotiations on April 24.

AUD continued higher to the midpoint of the October 2024 to recent low at 0.6427. The 200-day SMA is at 0.6474. CAD underperformed even if it did briefly move below 1.38. Weak global growth prospects will weigh on commodity prices and not help the loonie.

US stocks: The S&P 500 lost 2.36% to settle at 5,158. The tech-laden Nasdaq finished down 2.46% at 17,808. The Dow closed 2.48% lower at 38,170. The August spike low is 5,119 on the S&P 500 and 17,435 on the Nasdaq. There is also a long-term Fib level at 5,132 and 17,734 respectively. A death cross, when the 50-day moving average crosses down below the 200-day moving average is in full effect. The benchmark S&P 500 index is off 16.05% since its record close at 6,144 in mid-February. All sectors were in the red with consumer discretionary and tech posting the steepest declines. Losses were driven by UnitedHealth again (-6.54%) and Nvidia (-4.51%), while Tesla lost 5.75% ahead of its earnings release after the US closing bell tonight.

Asian stocks: Futures are mixed. Many markets were closed for holidays. The Nikkei 225 dropped 1.3% snapping a two-day rally. A stronger yen weighed heavily on Japan’s export-orientated sectors. Sentiment was also dampened by uncertainty over US-Japan trade talks. The Shanghai Comp started the week in the green, and the highest since 3 April, just ahead of the market slump triggered by President Trump’s “reciprocal” tariffs.

Gold soared higher making another all-time high at $3430. Bullion added over 2.5% as its haven qualities continued to shine. A collapsing dollar helped bugs.

Day ahead – Trump/Powell, Tesla’s earnings (after US close)

We got just another market concern to add to the list of issues driving investors away from US assets. Interference in US monetary policy by politicians is a no-no, so Trump’s blasting of Jerome Powell is obviously not a good look. There is much research pointing to a high correlation between central bank independence and low and stable inflation. It is highly unlikely that Trump could go through with his threats to fire the Fed Chairman, but he could name his successor early to put pressure on the incumbent.

Away from tariffs, Tesla, Elon Musk’s electric vehicle maker is the first of the “Magnificent Seven” companies to report quarterly results, with the stock down close to 40% year-to-date. Consensus expects earnings per share (EPS) of $0.43, on revenues of $21.8bln, both lower than the prior quarter. Softening demand and production disruptions are hurting the stock price, along with increasing competition and brand damage due to CEO Musk’s involvement with the Trump administration. In five of the past 10 reporting periods, TSLA stock has moved at least 11% the next day.

Chart of the Day – Tesla hoping to find support

Tesla stock is down over 53% from its record intraday high in mid-December. That was around the peak of the Trump trade when his resounding election victory was set to see markets continue to boom on tax cuts and deregulation, among other favouralbe policies. Fast forward, and investors await Tesla’s Q1 earnings release with some trepidation. There is a major support zone around $212 to $217, the October 2024, March and April 2025 lows. This also tallies quite closely with a minor Fib retracement level (23.6%) of the April 2024 bottom after results to the record top, at $221. Support below is at $202 and $182, while initial resitance is $272. The 50-day SMA has just dropped below the 200-day SMA which denotes a bearish death cross signal.

Disclaimer: The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our client. No representation or warranty is given as to the accuracy or completeness of this information and therefore it shouldn’t be relied upon as such. Any research provided does not have regard to specific financial situations, needs or investment objectives. Vantage accepts no responsibility for any use that may be made of these comments and for any consequences that result. Consequently, any person acting on it does so entirely at their own risk. We advise any readers of this material to seek professional advice where necessary. Without the approval of Vantage, reproduction or redistribution of this information isn’t permitted.