Global Head of Macro Strategy
Summary: Much of Trump’s tariff regime was rejected by the US Supreme Court, but this is far from the last chapter of Trump’s restrictive trade policy as it brings new twists and already new tariffs. The US dollar has gone full circle from weakness and then back to strength since the announcement.
The latest
US dollar goes full circle after Supreme Court rejects much of tariff legality. On Friday, the US Supreme Court ruled against the legality of those of Trump’s tariffs that were based on IEEPA (International Economic Emergency Powers Act of 1977). This triggered an immediate, if restrained slide in the US dollar on the notion that this would be bad for US fiscal stability as the treasury would have to repay the tariffs collected and wouldn’t enjoy future revenue from these tariffs. It was widely flagged, however, that Trump would likely move with some other tariff approach in such an event, which he promptly did late Friday and over the weekend with so-called Section 122 universal tariffs of 10% that were revised up to 15% on Sunday, and yet these will only last 150 days and Congress is unlikely to make them permanent as there enough Republican dissenters to block. On top of this we get the confusing news from those parsing through the Supreme Court decision and from Trump himself via a Truth social post that the decision could be seen as still offering President Trump considerable powers to outright block imports or assign quotas on them, just not to charge tariffs. The US dollar found a floor in Monday’s Asian session and rallied for much of the European session as risk sentiment suggests. A strong close on the day and this keeps the US dollar on the comeback trail
State of the Union incoming. Trump will deliver the first State of the Union speech of his second term late Tuesday in the US. We can be sure that he will continue to tout protectionist moves, industrial policy initiatives and may state an aggressive case against Iran’s regime or on the “Donroe Doctrine”.
Chart focus: EURUSD
EURUSD was kept in limbo late last week after the break of the 1.1766 pivot lows only triggered minor follow through lower to a 1.1742 low water mark. Later, the price action backed up on the announcement that the US Supreme Court had ruled that Trump’s IEEPA tariffs are illegal, and the pair rallied to 1.1830+ in Monday’s Asia session. Alas, Trump has been quick to announce new tariffs on a different, if temporary, basis to replace the overruled ones announced at the weekend. We’ve also seen follow-up posturing from US President Trump that the decision won’t stop his protectionist agenda and could even open up new protectionist avenues to pursue. This, together perhaps with weak risk sentiment Monday, sent EURUSD back lower. If the pair needs to erase today’s sell-off and close sharply back above 1.1850 or even higher to suggest that the up-trend remains viable. Otherwise today’s candle is taking on a rather bearish “shooting star” like appearance that will turn more bearish still if we close back toward the sub-1.1750 lows or lower. The outlook very pivotal here.
FX Board of G10 and CNH trend evolution and strength.
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While we await the US dollar to show us more forcefully what it wants to do after recent churning, we also await the next clue from the JPY, where there is no real trend after the recent sell-off yielded to sideways action. Global risk off might help the case for another wave of JPY strength. Silver momentum has turned aggressively higher over the last couple of sessions.
Table: NEW FX Board Trend Scoreboard for individual pairs.
EURSEK is bouncing for a second time, and its downtrend is theoretically in danger as we can see with the , although there is still a lot of space if we zoom out on the chart for a squeeze even higher still without reversing the big picture downtrend that started from above 11.33 last summer. GBPUSD triggered a new downtrend on the Thursday close, but needs a follow through move lower after so far only having rejected the action above 1.3568 locally and before that, the attempt at multi-year highs above 1.3789. EURUSD is very close to sliding into a downtrend if it closes near 1.1750 and lower today and/or tomorrow.
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Chief Investment Strategist
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Global Head of Investment Strategy
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Global Head of Macro Strategy
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Saxo Group
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Global Head of Macro Strategy