Geopolitical tensions on the rise... again!

Stocks experienced minor fluctuations following last week’s decline, which wiped out a significant portion of the equity market gains since Donald Trump’s election victory. Traders are now seeking new insights on economic growth and the trajectory of interest rates.

Europe’s Stoxx 600 index remained relatively stable, while contracts for the S&P 500 saw a slight increase. The underlying S&P 500 index has lost over half of its gains since the election as the potential for a more hawkish Federal Reserve has caused traders to become less optimistic about the so-called Trump trades. Meanwhile, ten-year Treasury yields steadied after surpassing 4.5% for the first time since May last Friday.

Concerns persist about the President-elect’s potentially inflationary economic policies, with attention now focused on his choice for Treasury secretary. Friday’s positive US retail sales data has lowered expectations for the Fed to cut interest rates.

Tesla lifts Nasdaq futures

US stock futures rose as traders awaited new indicators on growth and interest rate trajectories. Gold prices increased, while Bitcoin surpassed the $90,000 milestone.

S&P 500 contracts suggested minor gains at the open, while Nasdaq 100 futures increased by 0.4% as Tesla Inc. shares surged in premarket trading amid speculation that Donald Trump’s team will relax self-driving car regulations.

Goldman says ‘Go for Gold’

Gold is expected to reach record highs next year due to increased central bank purchases and anticipated cuts in U.S. interest rates, according to Goldman Sachs Group Inc. The firm has identified Gold as one of the top commodity trades for 2025 and noted that prices could continue to rise during Donald Trump’s presidency.

Gold has experienced a strong rally this year, reaching consecutive record highs before retreating briefly after Trump’s victory in the presidential election, which strengthened the dollar. The rise in Gold prices has been supported by increased purchases from official sectors and the Federal Reserve’s shift to a more accommodating monetary policy. Goldman Sachs also indicated that a Trump administration could be beneficial for Gold prices.

Some experts believe that an unprecedented increase in trade tensions could lead to renewed speculation in gold. Additionally, growing concerns about the sustainability of U.S. fiscal policies may further support gold prices. They also noted that central banks—especially those holding significant reserves of U.S. Treasuries—might choose to purchase more of this precious metal.

DXY remains heavily overbought

The US Dollar Index achieved its highest weekly close since November 2022, surpassing several resistance levels. However, the index is currently trading at the upper boundary of its range over the past two years. Additionally, the technical indicators are showing signs of being heavily overbought, which could lead to a short-term retracement.

The recent rally can be attributed to two key factors: first, the market is pricing in the potential risks associated with a Trump presidency, and second, there are expectations of fewer rate cuts by the Federal Reserve following recent economic reports. Consequently, traders should exercise caution in pursuing the current trend, as it reflects anticipated future events rather than actual developments at this time.

EURUSD near 1.05 key support

The EURUSD pair has declined and is attempting to hold above the 1.05 support area for the past four trading sessions. While the technical indicators remain bearish across most time frames, they are also heavily oversold. This suggests the possibility of a short-term retracement in the coming days.

A stabilization above 1.05 is likely to result in another bounce towards 1.06 for the time being. If there is a break above that resistance, it would open the path for further gains towards the 1.0660 level. On the downside, a break below 1.05 would lead to deeper declines towards 1.04.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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