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10.04.2025 09:56 AM
Trump Maneuvers in Trade War With China (Potential for Continued Recovery in #SPX and AUD/USD)

The U.S. President continues maneuvering actively, engaging in geopolitics, economics, and global financial markets.

Investors are asking: What happened on Wednesday? Why did the White House suddenly announce a truce or a 90-day pause in the tariff war, even though it had previously rejected one?

Metaphorically speaking, any Formula 1 driver would envy Trump's ability to make a sharp 180-degree turn like an acrobat—triggering a rally in U.S. stock indices that marked some of the strongest gains since the turn of the century. Equity markets in other countries also rushed to keep pace. Observing the situation, one gets the impression that the whole tariff narrative was orchestrated as a cover for the true objective: to intimidate China and inflict economic damage. Judging by Trump's words, half the world has already bowed to Washington, pleading for leniency.

However, Beijing did not flinch and responded with mirror tariffs. On the one hand, this was expected—rumors of a 90-day pause had been circulating. On the other hand, the official announcement made it a reality. Trump signaled to the countries that submitted to him that he would graciously lower tariffs to 10% during a 90-day negotiation period—but not for China.

Now, the markets are again suspended in a state of uncertainty. They don't know what the final outcome will be. From my perspective, this entire show was designed to remind the world of America's role and highlight China as its main economic rival. All the recent tariff rhetoric seems to be part of a cover operation. However, with Beijing holding firm, Trump must come up with something new to break China's resistance. A real trade war with China threatens to trigger a severe economic crisis in the U.S.—and the president knows it.

And the markets? They've been left in limbo again as the outcome of the U.S.-China standoff remains unclear. I believe Washington and Beijing will eventually have to reach an agreement. Juggling tariff rates won't lead to anything good. As I've previously mentioned, gradual de-escalation and a compromise between the two sides would be a positive development for markets, likely triggering a continued rally in equity indices and a recovery in commodity prices. The U.S. dollar may weaken if expectations grow that the Fed could cut interest rates this year due to slowing inflation—or even a downward price correction. Today's U.S. inflation data may support that view.

If the inflation report shows a decline, it would provide an additional boost for demand in equities, increase Treasury yields, and simultaneously weaken the U.S. dollar.

Overall, the current situation indicates a high probability of continued momentum in risk assets following yesterday's powerful rally and a continued decline in the dollar. Against this backdrop, interest in cryptocurrencies may also grow.

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Forecast of the Day

#SPX

After yesterday's sharp rally, the S&P 500 futures CFD is consolidating below the 5500.00 level. If the inflation report confirms a drop in consumer prices, we could see a renewed surge toward 5682.45 and then 5787.50 after breaking above the 5500.00 resistance level. A potential entry point may be at 5519.92.

AUD/USD

The pair rose significantly amid yesterday's wave of optimism. Its upward movement may continue if U.S. consumer inflation shows signs of slowing. A breakout above the 0.6200 resistance level may push the pair toward 0.6280. A possible entry point lies at 0.6207.

Pati Gani,
Analytical expert of InstaForex
© 2007-2025
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