Trump’s Trade War Escalates: Markets Retreat as Tariff Threats Intensify | Weekly Analysis (July 14-18, 2025)

Market Sentiment Overview

Risk sentiment has deteriorated sharply as President Trump’s trade war escalates dramatically beyond the August 1 deadline. After briefly calming markets, Trump unleashed a barrage of new tariffs: 35% on Canada (citing fentanyl), 50% on Brazil and copper imports, 25% on Japan and South Korea, and threatened 15-20% blanket tariffs on remaining partners. Markets finally showed cracks after months of resilience, with the Dow falling 280 points Friday and all major indices posting weekly losses. The Dollar recovered to near 98.00 as safe-haven flows returned, while Bitcoin exploded to a new all-time high above $118,000.

Currencies

USD Index: Recovery Stalls Below Key Resistance (97.43)

Current Trend: Consolidative Market Sentiment: Cautious

The US Dollar Index has paused its recovery at 97.43, struggling to break above the key 98.56 resistance level despite safe-haven flows from trade tensions. The DXY remains trapped between 98.56 resistance and 96.63 support, showing indecision after the sharp reversal from multi-year lows. The Stochastic oscillator at 73.95 indicates potential exhaustion of the recent bounce, while the 20-day moving average continues to decline. Critical resistance at 98.56 and 99.57 must be cleared for sustained recovery, while support lies at 96.63 and deeper at 95.56. Tuesday’s CPI data could be the catalyst for the next directional move.

EUR/USD: Pullback Within Broader Uptrend (1.1686)

Current Trend: Bullish (Correcting) Market Sentiment: Cautious

EUR/USD has retreated to 1.1686, trading between the key support at 1.1521 and resistance at 1.1871 as markets digest Trump’s escalating tariff threats. The pair remains well above the rising 20-day moving average, maintaining its longer-term bullish structure despite recent weakness. The Stochastic reading of 36.52 suggests oversold conditions with potential for a bounce. Strong resistance levels are positioned at 1.1871 and 1.1994, while support sits at 1.1521 and 1.1391. The correction appears healthy within the broader uptrend, with Tuesday’s US CPI data likely to determine whether the pullback continues or reverses.

GBP/USD: Testing Critical Support Zone (1.3486)

Current Trend: Bearish (Near Support) Market Sentiment: Negative

GBP/USD continues its sharp decline, now testing the critical 1.3486 level after breaking below the 1.3500 psychological barrier. The pair has fallen from recent highs near 1.3791 amid disappointing UK economic data and renewed USD strength. Support at 1.3372 and 1.3220 provides downside protection, while resistance has formed at 1.3651 and 1.3791. The 20-day moving average has turned lower, confirming the bearish momentum shift. Wednesday’s UK CPI data will be crucial for determining if the support zone holds or if further weakness toward 1.3372 develops.

Stocks

S&P 500: Consolidation After Record Highs (6,253)

Current Trend: Consolidative Market Sentiment: Cautious

The S&P 500 trades at 6,253, consolidating within a tight range between 6,140 support and 6,320 resistance after hitting record highs earlier in the week. The index shows signs of exhaustion following the dramatic trade war escalation, with the Stochastic oscillator at 72.09 indicating potential for further consolidation. Despite the pause, the broader uptrend remains intact with the 20-day moving average providing dynamic support. Key resistance levels at 6,320 and 6,419 will determine if the record-setting rally can resume, while support sits at 6,140 and 6,039. Earnings season starting this week could provide the next catalyst for direction.

Netflix: Approaching Earnings with Technical Weakness (1,245)

Current Trend: Bearish (Short-term) Market Sentiment: Cautious

Netflix has declined to 1,245 ahead of Thursday’s Q2 earnings, showing technical weakness as it trades below the 20-day moving average. The stock faces resistance at 1,287 and 1,338, while support is established at 1,192 and 1,139. The Stochastic reading of 38.86 suggests oversold conditions that could lead to a bounce if earnings exceed expectations. With analysts expecting $7.05 EPS and $11.04 billion revenue, the streaming giant needs to show strong subscriber growth and content ROI to break above resistance. The earnings reaction will likely determine if the stock can reclaim the 1,287 resistance or test deeper support levels.

Crypto

Bitcoin: New Highs in Price Discovery Mode (119,049)

Current Trend: Extremely Bullish Market Sentiment: Euphoric

Bitcoin continues its explosive rally to 119,049, entering uncharted price discovery territory with massive institutional backing. The cryptocurrency shows no signs of exhaustion with the Stochastic at 91.09, though this indicates extremely overbought conditions. Strong resistance zones are emerging at 123,390 and 128,942, while support has been established at 112,077 and 105,791. Despite the parabolic move, on-chain metrics suggest sustainable institutional demand rather than retail FOMO. The break above 119,000 opens the path toward the psychological 120,000 level, with potential for further acceleration toward 125,000 if institutional flows continue.

Commodities

Gold: Testing Key Resistance Zone (3,356)

Current Trend: Bullish Market Sentiment: Positive

Gold has advanced to 3,356, testing the critical resistance zone at 3,397 as safe-haven demand intensifies amid escalating trade tensions. The precious metal finally responds to traditional safe-haven logic, moving decisively above both the 20-day and 50-day moving averages. The Stochastic oscillator at 65.58 indicates moderate momentum with room for further gains. Key resistance levels at 3,397 and 3,449 will determine if Gold can break to new highs, while support sits at 3,268 and 3,210. Tuesday’s US CPI data will be crucial for direction, with higher inflation potentially driving further safe-haven flows into the precious metal.

WTI Crude Oil: Bullish Momentum Continues (69.17)

Current Trend: Bullish Market Sentiment: Optimistic

WTI Crude Oil has surged to 69.17, approaching the key 71.64 resistance level as speculative buying intensifies on improving US economic indicators. The commodity shows impressive momentum above the 20-day moving average, with the Stochastic at 68.26 indicating sustained bullish pressure. Strong resistance at 71.64 and 74.60 could cap gains, while support is established at 65.79 and 62.86. The move above 69.00 puts oil at multi-week highs, driven by optimism around US economic resilience and potential demand recovery. Energy sector outperformance in equity markets supports the bullish narrative, with Tuesday’s inflation data potentially providing the next catalyst.

Key Events This Week (July 14-18, 2025)

Major Data Releases

Tuesday, July 15: US CPI for June (week’s highlight), China Q2 GDP and Retail Sales, Germany ZEW Economic Sentiment, BoE Governor Bailey speech
Wednesday, July 16: UK CPI for June, US PPI, Industrial Production, Fed Beige Book, Bank Indonesia Rate Decision
Thursday, July 17: US Retail Sales, Initial Jobless Claims, Australia Employment, UK Employment, Japan Trade Balance, Eurozone Final HICP
Friday, July 18: Japan CPI, US Housing Starts, University of Michigan Consumer Sentiment

Fed Speakers & Central Bank Officials

Monday: ECB’s Cipollone
Tuesday: ECB’s Buch, Fed’s Barr, Bowman, Collins, BoE’s Bailey
Wednesday: Fed’s Logan, Hammack, Barr
Thursday: Fed’s Williams, Daly, Kugler, Cook
Friday: Fed’s Waller, ECB’s Nagel

Central Bank Meetings

Wednesday, July 16: Bank Indonesia Rate Decision (5.25% expected cut from 5.50%)

Week Ahead Outlook

The week ahead is dominated by Tuesday’s US CPI report for June, which could significantly impact Fed rate cut probabilities. With “a couple” of Fed officials open to July cuts per recent Minutes, any acceleration in inflation could shift the narrative. Markets are pricing virtually no chance of a July cut and only 30% probability for September.

Trump’s tariff barrage has fundamentally altered market dynamics. The escalation from August 1 deadline extensions to immediate threats against major partners (35% Canada, 25% Japan/South Korea, 50% Brazil/copper) suggests negotiations have broken down. Vietnam was reportedly “surprised” by the 20% rate announcement, undermining the “trade deal” narrative.

Key themes for the week include whether markets can maintain resilience to tariff shocks, the Dollar’s newfound safe-haven status despite fundamental weakness, and Bitcoin’s historic surge amid institutional adoption. The dramatic shift in correlations – Gold finally responding to safe-haven logic while stocks retreat – suggests a new regime taking hold.

Risk management remains critical as traditional relationships reassert themselves amid escalating trade tensions.