Return of the tariff man

• Trump threatens 25% tariffs on European countries
• EU threatens to bite back
• Markets kick off new week on a negative note but metals shine
• FXTM's EU50 hit by risk-off mood
• Copper retreats from all-time high

Over the weekend, Trump threatened up to 25% tariffs on a slew of European countries until Denmark sold Greenland.

In response, European nations are preparing to impose tariffs worth €93 billion on American goods.

This marks an aggressive escalation from Trump, essentially throwing mud on the US-EU trade deal reached only six months earlier.

Increasing tariffs on European countries could hit growth, weakening the Euro and European stocks.

Markets have kicked off the new week on a negative note with:

(Note: US markets closed for Martin Luther King, Jr. Day)

• CHINAH: -1.0%
• USDInd: -0.5%
• XAUUSD: +2% (New all-time high)
• XAGUSD: +4% (New all-time high)
• EU50: -1.2%

Speaking of European equities, FXTM’s EU50 is under pressure with prices wobbling above 5950.

Despite hitting an all-time high last week, the recent developments have brought bears back into the game.

WHAT COULD MOVE EU50 THIS WEEK?

Tuesday 20th January

• Eurozone ZEW Economic Sentiment Index (Jan) – (10:00 AM GMT)

EU50 is forecasted to move 0.4% up or 0.5% down in a 6-hour window after the Eurozone ZEW report.

Thursday 22nd January

• Eurozone Consumer confidence (Jan) – (10:00 AM GMT)

EU50 is forecasted to move 1.0% up or 0.7% down in a 6-hour window after the Eurozone ZEW report.

POTENTIAL SCENARIOS:

BULLISH – Should prices break above 6060, this may open a path toward 6100 and 6150.

BEARISH – Weakness below 5950 could see a decline toward 5900 and 5810.  

COPPER RETREATS FROM ALL-TIME HIGH

Copper futures jumped to around $6.1 per pound last Wednesday – setting new record highs.

The industrial metal was initially boosted by fears of potential new US tariffs on refined copper.

HOWEVER

Washington's decision to postpone the introduction of tariffs on critical minerals in addition to a major regulatory crackdown in China on HFT sparked a selloff.

Copper has slipped from an all-time high, as markets took stock of a record rally that could hit physical demand for the crucial industrial input.

Note: Analysts at Goldman Sachs Group Inc. cautioned that the copper price is increasingly vulnerable to a correction and expect LME copper to fall to $11,000 a ton by year-end.

POTENTIAL SCENARIOS:

BULLISH – Should $5.6, prove to be reliable support – prices may rebound toward $6.10.

BEARISH – Weakness below $5.6 could open a path toward the 50-day SMA.