Photo by Colin Watts on Unsplash 
 

GBP/USD holds over 1.29 ahead of Liberation Day tariff announcements

• The UK will not likely be exempt
• GBP/USD downside limited by USD weakness
• GBP/USD trades in a holding pattern

GBP/USD trades cautiously above 1.29 as traders await President Donald Trump's reciprocal trade tariff announcements at 20:00 GMT today.

Investors are broadly opting to sit on the sidelines amid growing risks of an escalating global trade war, particularly after Trump dashed optimism that the tariffs would be limited.

The UK is expected to be hit by US trade tariffs as the deal to exempt British goods will not be reached in time.

However, the downside does seem supported, given subdued U.S. dollar demand. The US dollar has not attracted safe-haven flows, given the expectations of a tariff-driven slowdown in U.S. economic activity, which could force the Fed to resume its rate-cutting cycle after pausing at the start of this year.

Data yesterday saw the raised the chances of a rate cut in June. The ISM manufacturing PMI data indicated that the sector contracted for the first time in three months, while the employment subindex fell.

There is no UK economic data today. On the US economic calendar, ADP private payroll and factory order data will be in focus. The ADP payroll is expected to show a 105k job increase in March, up from 77k in February.

Weaker-than-expected data could fuel concerns over the US economic outlook, potentially pulling the USD lower.
 

GBP/USD forecast – technical analysis

The GBP/USD is trading in a holding pattern, capped on the upside by 1.30 and on the downside by 1.2860. The RSI is above 50 but points lower, suggesting that bullish momentum is weakening.

Immediate support is seen at 1.29, with a break below here opening the door to 1.2860. Should sellers break down the holding pattern, this creates a lower low towards the 200 SMA at 1.2810.

Meanwhile, buyers will need to rise above the 1.30 psychological level, which looks challenging. Above here, a higher high is created, bringing 1.3050 into focus.

(Click on image to enlarge)

DAX falls ahead of Trump’s trade tariff announcement

• DAX falls after choppy trade this week
• DAX rose 11% in Q1 vs S&P500 -5%
• All eyes are on the trade tariff announcement
• DAX in holding pattern, down from record high

The DAX is falling modestly, with tariffs in focus, and is giving up gains from yesterday.

Although the DAX has fallen over the past two weeks, Q1 was still a strong quarter for the German index which rose 11%, outperforming 5% losses on the S&P 500.

Optimism surrounding the political picture in Germany and increased spending on infrastructure and defense drove the German stock market sharply higher in the first three months of the year. Investors rotated out of U.S. stocks towards Europe.

Whether this optimism and relocation continue in Q2 will depend largely on the tariff announcements made today and any potential retaliatory moves from the European Union. Tomorrow 25% US auto import duty will kick in and could reverse DAX gains as it hit German exporters hard.

Aggressive tariffs on the European Union could raise growth concerns in Europe, which is already stagnating. However, aggressive tariffs worldwide could raise concerns about the US economic outlook and fuel further rotation.

The eurozone economic calendar is quiet today. Data yesterday showed that eurozone inflation stood at 2.2%, in line with forecasts, down from 2.3%. The prospect of continued easing from the ECB in the April meeting could help support stocks.

Meanwhile, U.S. data yesterday showed that job openings declined to 7.56 million in February, down from 7.7 million in January. The ISM manufacturing PMI dropped from 50.3 to 49 in March, with the employment index sliding from 47.6 to 44.7. The data support a more dovish outlook from the Fed.
 

DAX forecast - technical analysis

The DAX fell from its record high of 23,190 in mid-March to 21,970 before recovering higher back to the 50 SMA. After a strong uptrend since August, the picture is neutral, although momentum is weakening with the RSI below 50.

Sellers would need to take out support at 22,150, the late February low and the mid-point of the rising channel. Below here 21,800, the January high comes into focus ahead of 21,500 round number.

Should the 50 SMA support hold, buyers could look to rise towards 22,900 the mid- February high.

(Click on image to enlarge)

More By This Author:

Two Trades To Watch: EUR/USD, FTSE 100 Forecast - Tuesday, Apr. 1
Two Trades To Watch: DAX, USD/JPY Forecast - Monday, March 31
Chancellor's Spring Statement Comes As Inflation Cools