Hello and welcome to a new trading week, which is already off to a volatile start. Stocks are extending lower after the Trump administration reaffirmed that it will stick to its planned tariffs, fueling fears of deeper global economic fallout. And it seems that markets are beginning to price in the potential for a recession, with risk sentiment taking a hit across the board.
Interestingly, even the US dollar; —typically seen as a safe haven in times of uncertainty—is struggling to hold gains for the last week or so. This time, it’s not just about safety; it’s also a question of which region will weather the trade war storm better. Will it be the US, or could the eurozone, China, or some other country show relative strength? Central bank decisions will also play a major role here, especially as investors try to anticipate who will cut rates first and who might stay on hold.
After last week’s sharp drop in US markets, Chinese stocks are now following lower, despite China imposing its own retaliatory tariffs. President Trump remains confident these moves will ultimately boost the US economy, but he is also calling for lower interest rates—something the Fed is not yet ready to deliver as highlighted by Powell last week, saying that they are not in rush.
With markets seemingly pricing in a recession, the key question is: when will we see stabilization? In my view, markets may not find a bottom until we see hard data confirming the economic slowdown, beucase thats when CB will cut, if not earlier. The first estimate of Q1 GDP is due on April 30, followed by the Q2 release on July 30. These reports could be the catalysts that shape expectations moving forward.
For my latest Elliott wave outlook on Dollar, cryptos, gold, crude, SP500 and more check our webinar below.
Grega
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