Risk appetite declines amid trade war developments

President Trump Isn’t Done Yet

U.S. stock indices declined as investor sentiment weakened, with many opting to pause buying activity amid escalating trade war developments. President Trump reaffirmed his commitment to aggressive tariff policies, confirming he would not extend the grace period that expired this week. He announced plans to impose a 50% tariff on copper imports and signaled the possibility of a 200% tariff on foreign pharmaceutical products.

According to the U.S. Commerce Secretary, the copper tariffs are expected to take effect in early August. These new measures follow previous tariffs targeting aluminum and steel imports. President Trump also cited national security concerns related to foreign pharmaceuticals, arguing that the new tariffs would encourage pharmaceutical companies to shift their production lines back to the United States. He proposed a grace period of 12 to 18 months before these tariffs are implemented.

Taiwan expressed cautious optimism about reaching a trade deal with the U.S., particularly after it was excluded from the list of countries that received official tariff notifications. As for the European Union, President Trump warned that despite progress in ongoing negotiations, frustration over European taxes and sanctions on U.S. tech companies could lead the administration to impose tariffs unilaterally within days.

Trump vs. Powell

President Trump called on Federal Reserve Chairman Jerome Powell to “resign immediately” if it is proven that he misled Congress during recent testimony regarding the cost of renovations to the Federal Reserve’s offices. The President continued his criticism of current monetary policy, reiterating his demand for an immediate rate cut.

The US president stated that he was considering several candidates to replace Powell when his term ends in May next year. Trump hinted he would appoint someone more open to rate cuts, raising concerns about the central bank’s independence.

The Federal Reserve Chairman responded to the U.S. President’s criticism over the delay in cutting interest rates by attributing the hesitation to the administration’s tariff policies. He stated that the Fed would likely have lowered rates if these tariffs had not been implemented. Although the tariffs have not yet had a substantial impact on inflation, the Chairman emphasized the importance of caution, stating that there is currently no clear justification for adjusting interest rates.

Dow Jones Industrial Average Uptrend Fades

The Dow Jones Industrial Average reached multi-month highs last week before pulling back due to profit-taking (signalled by the Relative Strength Index falling below 70) exiting overbought territory.

This week, the downward movement continued, indicating a weakening uptrend. Therefore, a daily close below the low end of the current trading zone located between 45,080 and 43,885 signals a trend reversal, potentially leading to a correction toward 43,114. In this scenario, the support level at 43,398 should be closely watched.

Levels to Watch in a Bullish Scenario

A daily close above the high end of the trading zone at 45,080 would signal renewed bullish momentum, opening the door for a potential rally toward 46,000. In this case, the psychological resistance level at 45,500 should be kept in focus.

Dow Jones – Daily Price Chart

Chart Source: ADSS Platform