Trump's commitment to tariffs

President-elect Donald Trump vowed to impose additional tariffs on China, as well as on the U.S.’s neighbors Canada and Mexico, which caused significant market fluctuations following his election win.

In a series of posts on his Truth Social network on Monday, Trump announced that he would implement a 10% tariff on goods imported from China and a 25% tariff on all products from Mexico and Canada. As a result of this announcement, the Canadian dollar fell to a four-year low, while the Mexican peso approached its weakest level since 2022. Additionally, China’s yuan dipped lower in offshore trading.

Trump justified these new levies as necessary measures to combat the influx of migrants and illegal drugs across the borders. He criticized China for not following through on commitments to impose the death penalty for fentanyl traffickers, stating, “Drugs are pouring into our country, mostly through Mexico, at levels never seen before.”

In another post, Trump reiterated his plan to impose a 25% tariff on “all products” from Mexico and Canada, stating that he would sign an executive order to that effect on his first day in office.

USDCAD reaches 4-year high

The USDCAD has reached its highest level in over four years and is on track for its largest daily gain in 20 months. This currency pair is known for its stability and has one of the lowest implied volatilities globally; as a result, it typically experiences minimal movement during Asian trading hours.

The recent surge can be attributed to remarks made by the US President-elect regarding the imposition of new tariffs on Canada and Mexico on his first day in office. However, technical indicators suggest that the pair is heavily overbought, indicating that further upward movement may be limited. A downward retracement may be forthcoming, with key support currently standing at 1.40.

Oil prices fall after cease-fire agreement

Oil prices fell as light trading before the holidays highlighted signs of reduced risks from the conflict in the Middle East. West Texas Intermediate decreased by 3.2%, settling below $69 a barrel. The Israeli ambassador to the U.S. stated that a cease-fire agreement could be reached between Israel and Lebanon’s Hezbollah “within days.” Meanwhile, Brent crude dropped 2.9%, settling around $73.

The crude market is also experiencing fluctuations ahead of the Thanksgiving holiday and an OPEC+ meeting this weekend. At this meeting, the organization will decide whether to increase production by adding extra barrels to the market. Traders and analysts surveyed by Bloomberg last week expect OPEC+ to hold off on its planned production increase for January.

Gold near $2600

The bullion is currently trading near $2,630 an ounce after experiencing a 3.4% decline in the previous session, largely due to a de-escalation of tensions in the Middle East, which reduced demand for safe-haven assets. Israel’s security cabinet is expected to vote on a cease-fire agreement with Hezbollah in Lebanon on Tuesday, and its passage is considered likely, according to an Israeli official.

Despite the recent decline, the precious metal has risen more than 25% this year, driven by central bank purchases and a shift in the Federal Reserve towards rate cuts. Many analysts maintain a positive outlook, with firms like Goldman Sachs Group Inc. and UBS predicting further gains in 2025.

Gold pulled back by 61.8% based on Fibonacci retracement from last week’s rally and is expected to stabilize above $2,600. If it does, we can anticipate another bounce towards $2,630 for the time being. However, if the $2,600 support level breaks, it could lead to a deeper retracement, potentially down to $2,580.

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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