Fed Under Fire: Trade Deadline & Policy Showdown Shake Markets

Market Sentiment Overview

Markets brace for a critical week as the August 1st trade deadline collides with the Fed’s policy decision amid unprecedented political pressure on Chair Powell. Trump’s escalating feud with the Fed intensifies as Rep. Anna Paulina Luna refers Powell for criminal charges, while the US-Japan deal ($550B investment, 15% tariffs) provides some optimism. Risk sentiment remains fragile, with Apple earnings highlighting the impacts of tariffs and Bitcoin showing technical weakness despite record institutional interest.

Currencies

EUR/USD: Bullish Momentum Above 1.1700 (1.1739)

Current Trend: Bullish Market Sentiment: Cautiously Positive

EUR/USD resumed its bullish trend at 1.1739 after recovering from July’s low at 1.1555. The pair benefits from broad Dollar weakness amid Trump-Powell tensions and progress in US-EU trade negotiations. Market talks suggest a 15% tariff deal with the EU is “within reach,” though Brussels maintains €93 billion in retaliatory measures ready. The ECB’s on-hold decision and Lagarde’s hawkish tone about inflation being behind them support the Euro. Immediate resistance at 1.1885 and 1.1994, with support at 1.1560 and 1.1456.

GBP/USD: Correction from Multi-Year Highs (1.3429)

Current Trend: Bearish (Correcting) Market Sentiment: Mixed

GBP/USD pulled back from 39-month highs of 1.3593 to current levels at 1.3429, though maintaining weekly gains. The Pound’s retreat followed the USD’s recovery mid-week and disappointing UK data, including the services PMI dropping to 51.2 from 52.8 and retail sales missing expectations (0.9% vs. 1.2% expected monthly). However, the US-UK trade deal benefits continue to support underlying strength. The daily RSI turned bearish, falling below the midline, suggesting that sellers retain control. Immediate resistance at 1.3516 and 1.3655, with support at 1.3276 and 1.3139.

USD Index: Political Pressure Weighs (97.23)

Current Trend: Bearish Market Sentiment: Negative

The Dollar Index struggles at 97.23, marking its fourth consecutive monthly decline despite brief recoveries. Trump’s war with Powell escalated dramatically with criminal charges referral and threats to replace him, undermining Fed independence. The US-Japan trade deal and potential EU agreement offer some support, but political uncertainty remains the dominant factor. Fed Fund Futures show a 97% probability of unchanged rates on Wednesday, with expectations for a September cut rising. Technical resistance at 98.54 and 99.80, with support at 96.21 and critical level at 95.05.

Stocks

Apple: Earnings Under Tariff Cloud ($213.96)

Current Trend: Range-bound Market Sentiment: Cautious

Apple trades at $213.96 ahead of Thursday’s Q3 earnings, down 14.5% year-to-date. The company faces mounting pressure from Trump’s 25% tariff threats on non-US-manufactured iPhones, with analysts estimating US production would push prices to $3,500. Q3 expectations: EPS $1.42 vs $1.40 prior year, revenue $89.1B (+3.9%). Key focus areas include $900M tariff cost impact, iPhone performance amid China competition, and Apple Intelligence progress. Technical resistance at 216.21 and 220.35, with support at 211.18 and 206.89.

Commodities

Gold: Failed Breakout Tests Bulls ($3,337.11)

Current Trend: Neutral/Corrective Market Sentiment: Uncertain

Gold retreated from brief highs above $3,400 to $3,337.11 after failing to sustain the bullish breakout. Initial strength came from Trump-Powell tensions and safe-haven demand, but improving trade sentiment and strong US data triggered selling. The RSI below 50 and struggle around 20/50-day SMAs highlight buyer hesitancy. The Fed decision and NFP report will likely determine the next major move. Resistance at 3,396.77 and 3,448.86, with support at 3,294.57 and 3,244.46.

Crude Oil: Supply Concerns Persist ($66.08)

Current Trend: Bearish Market Sentiment: Negative

WTI Crude trades at $66.08, maintaining pressure from concerns about oversupply and weak global demand indicators. China’s manufacturing PMI below 50, along with the Eurozone’s contraction, reinforces demand pessimism. Trump’s pro-energy stance continues to support expectations for increased domestic production, limiting upside potential despite the summer driving season. Technical resistance at 69.27 and 72.02, with support at 63.41 and 60.35.

Cryptocurrencies

Bitcoin: Technical Weakness Emerges ($118,130.35)

Current Trend: Bearish Market Sentiment: Cautious

Bitcoin slipped to $118,130.35 after breaking below the $116,000 consolidation support following 10+ days of range-bound trading. US spot Bitcoin ETFs recorded their first weekly outflow ($58.64M) since mid-June, breaking the six-week inflow streak. Open Interest reached a record $44.5B amid falling prices, suggesting new short positions. RSI at 54.7 shows some stability, but the break below key support suggests further downside risk. Resistance at 123,390.12 and 128,942.08, with the critical backing at 112,076.67 and 105,791.42.

Key Events This Week (July 29 – August 1, 2025)

Major Central Bank Meetings

• Wednesday: Fed Rate Decision (4.25%-4.50% expected unchanged), Powell Press Conference
• Wednesday: Bank of Canada Rate Decision (2.75% expected unchanged)
• Thursday: Bank of Japan Rate Decision (0.50% expected unchanged)

Critical Economic Releases

• Tuesday: US Consumer Confidence, JOLTS Job Openings
• Wednesday: US Q2 GDP Advance (2.5% expected vs -0.5% Q1), ADP Employment
• Thursday: US PCE Inflation for June (Core 2.7% expected), Initial Jobless Claims
• Friday: US NFP Report for July (102k expected), ISM Manufacturing PMI

Trade Deadline Drama

• Thursday, August 1st: Trump’s tariff deadline for remaining partners
• EU-US negotiations continue with 15% baseline tariff scenario

Major Earnings

• Tuesday: $V (Visa) $PG (Procter & Gamble Company) $MRK (Merck & Company) $BKNG (Booking Holdings Inc) $SPOT (Spotify Technology S.A.)
• Wednesday: $MSFT (Microsoft Corporation) $META (Meta Group)
• Thursday: $AAPL (Apple Inc) $AMZN (Amazon.com Inc) $MA (Mastercard Inc)
• Friday: $XOM (ExxonMobil Corporation) $CVX (Chevron Corporation)

Week Ahead Outlook

The confluence of Fed decision, trade deadline, and major earnings creates exceptional volatility potential. Powell faces the delicate task of maintaining Fed independence while managing Trump’s pressure for rate cuts. The August 1st deadline adds urgency to trade negotiations, with prospects for an EU deal improving but uncertainty remaining. Apple’s earnings will test the resilience of the tech sector amid tariff pressures, while NFP data could shift September rate cut expectations. Bitcoin’s technical breakdown and Gold’s failed breakout suggest risk-off sentiment may intensify if geopolitical tensions escalate.

Traders should exercise extreme caution, given the convergence of multiple high-impact catalysts within a single week, with position sizing and risk management being paramount.