US President Donald Trump's proposal to impose steep tariffs on Mexico, Canada, and China has encountered opposition from fellow Republicans in Congress. The plan involves a 25% tariff on goods from Mexico and Canada, and a 10% tariff on Chinese imports. Trump aims to utilize the revenue from these tariffs to fund government programs and support promised tax cuts. This move is a key component of Trump's economic strategy, which has sparked significant debate and is closely watched by market participants.
The financial markets have been adjusting to the implications of "Trump 2.0," maintaining a positive tone towards risk this week. The ongoing tariff discussions are expected to influence risk sentiment, the US Dollar, and Gold price movements. As the week progresses, market focus will remain on Trump's tariff negotiations, despite the impending release of top-tier US economic data on Thursday. These data releases may take a backseat as traders prioritize the impact of trade policies on economic forecasts.
Gold traders are particularly attentive, as they await Thursday's economic data for insights into the Federal Reserve's interest rate-cut outlook for the year. The US Dollar has maintained its position ahead of these releases, signaling a cautious market stance. Meanwhile, the Australian Dollar has remained unaffected by the rally in Chinese stocks, spurred by fresh support measures, underscoring China's status as the world's leading Gold consumer.
In recent market developments, Gold has charted a symmetrical triangle breakout earlier this month. It currently holds above all major daily simple moving averages (SMA), bolstering a bullish outlook for the precious metal. From a short-term perspective, Gold remains poised to test its record high of $2,790 or meet the symmetrical triangle target priced at $2,785. Further supporting this bullish potential, the 14-day Relative Strength Index (RSI) sits near 67, below the overbought region, suggesting room for further gains.
Market analysts predict a total easing of 37 basis points (bps) from the Federal Reserve this year, with the first rate cut anticipated by July, according to LSEG data. As Gold traders navigate these shifting dynamics, sellers will likely target the $2,700 round level, with the 21-day SMA at $2,673 posing a significant threshold if breached. To continue its upward trajectory, Gold must secure a daily close above the November 2024 high of $2,762, setting its sights on the next resistance near $2,790.
The interplay between Trump's tariff talks and upcoming economic data releases will be pivotal in shaping market sentiment and price actions across various asset classes. Investors are poised to react swiftly as new information becomes available, adjusting their strategies to align with evolving economic conditions.