The markets are setting up for big moves on April 2nd

The key date for the markets is next Wednesday when the US will finally unveil the tariffs plan. Trump has been calling it “Liberation Day” and that will likely be the same for the markets as uncertainty has been historically high.

The expectations for tariffs rates is around 9% for universal and 50% on China. Q1 has been a tough quarter for the markets as the tariffs noise increased the volatility and sent markets into a spin. Uncertainty is not a good thing for the economy and we’ve been seeing that cited a lot across many business surveys.

Taking out that uncertainty will be a very good thing for the markets but the potential for nasty surprises is still there. Scanning through different charts, it feels like the markets are reaching key levels right ahead of the key date and that’s going to be the catalyst for the next big moves.

Therefore, the best approach from a risk management perspective would be to just wait for the key date and start taking positions after the tariffs plan announcement as we will likely get some long lasting trends from there.

On the S&P 500 daily chart, we can see that we have now almost erased 50% of the selloff and the price is close to a key resistance zone around the 5855 level that previously acted as support. If we were to get good news on the tariffs front, the market will likely break to the upside and a new all-time high would be eyed. Conversely, harsher than expected tariffs could weigh on the market considering also the lack of Fed support and sinking consumer sentiment.

The 10 year Treasury price chart is also looking like it’s setting up for something big. We’ve been just consolidating for the entire month waiting for the key catalyst. What follows after such consolidations is generally strong and sustained moves. The bond market response to negative news would be the opposite (bonds up) of the stock market as recession fears would start to increase again especially on a potential stock market selloff and the Fed being constrained by high inflation expectations.

Bitcoin is also in an interesting spot as the price is pulling back into a key resistance zone around the 90K level that acted as support before being broken. We can also see that there’s a major trendline adding confluence to the resistance, which makes it more compelling. Bitcoin is generally correlated to the stock market being a risk asset and being influenced by similar macro drivers. Therefore, we can expect it to move in line with the stock market.

Finally, the US Dollar index hasn’t been doing much lately. We just got the strong downward push triggered by the German defence spending news which saw EU-US yield differentials jumping in favour of the Euro. As a reminder, the US Dollar Index (DXY) is basically EUR/USD upside down as the Euro makes up for 60% of the index.

This is harder to square but the greenback will most likely be influenced by the risk sentiment following the catalyst as positive news should keep rate cuts expectations around two for this year, while negative news could push those to four or more.

This article was written by Giuseppe Dellamotta at www.forexlive.com.