Tactical view for April – Trade tariffs woes back. Impact on markets.

For April, we will highlight three relevant instruments - the Hong Kong 33, Germany 30, and CAD/JPY to note in the medium-term horizon (multi-week) according to the latest developments in macro (fundamentals) and momentum factors (technical analysis).

The Hong Kong 33 CFD stock index has rallied towards the 25,080 medium-term resistance (it printed a 52-week high of 24,905 on 19 March), reinforced by the emergence of the Chinese Artificial Intelligence (AI) bullish theme play.

Meanwhile, the Germany 30 CFD stock index skyrocketed towards the first medium-term resistance of 23,140 (printed a fresh all-time closing high of 23,355 on 18 March), supported by the implementation of a more aggressive expansionary fiscal policy from Germany’s newly elected Chancellor Friedrich Merz of the centre-right CDU/CSU) conservative party.

However, the upcoming new trade tariffs from the US White House administration have seen the recent three-month rolling high-flying performances of the Hong Kong 33 and Germany 30 CFD stock indices dwindle from their recent peak of 24% on 19 March and 17.5% on 18 March, respectively (see Fig 1).

Foreign trade accounts for about 80% of Germany's economy, and automobiles are Germany’s key exports. Based on the data from the United States Census Bureau, the annual import value and used passenger cars by Germany stood at US$25.32 billion in 2024, making it the 5th largest auto-exporter to the U.S, behind Mexico, Japan, South Korea, and Canada.

US President Trump’s latest salvo of 25% tariffs on all automobile imports is set to be effective on 3 April, which is likely to stall Germany’s export growth in the near-term, and in turn may trigger a multi-week negative feedback loop into the performance of German stocks.

Meanwhile, the US Commerce, Trade, and Treasury departments are set to release consolidated trade and currency policy review reports on China, Canada, and Mexico on 1 April. These reports are likely to be used as a framework to determine future trade tariffs on these countries.

Since the start of Trump’s second tenure in the White House, he has implemented a total of 20% tariffs on Chinese imports (still below the 60% tariffs on all Chinese goods proposed by Trump during his presidential campaign trial).

There is a growing risk that after 1 April, when the findings of the trade review report on China are made public, Trump may enact further trade tariffs on China, further escalate a trade and high-tech war between the two largest economies in the world.

After a swift rally that propelled the Hong Kong stock market to be one of the outperformers in the past three months, an increase in systematic risk arising from trade tariffs may trigger a multi-week corrective decline in the Hong Kong 33 CFD stock index.

The recent rally seen in the past two weeks on the Hong Kong 33 CFD stock index (a proxy of the Hang Seng Index futures) has hit the upper boundary of a major ascending channel from the 22 January 2024 swing low on 19 March.

Subsequently, a bearish divergence condition has been flashed out on the daily RSI momentum indicator at its overbought region. These observations suggest a potential mean reversion corrective decline may occur on the Hong Kong 33 after a swift rally of 33% from its 13 January low to 19 March high from a technical analysis standpoint (see Fig 2).

Watch the 25,080 key medium-term pivotal resistance, and a break below the 22,500 support (also the 50-day moving average) sees the next medium-term support coming in at 21,225. Failure to hold above 21,225 exposes the major support zone of 19,780/18,955 (also the 200-day moving average and the lower boundary of the major ascending channel).

On the other hand, a clearance above 25,080 invalidates the bearish scenario for a continuation of the bullish impulsive sequence for the next resistances to come in at 26,200 and 27,500 (also the long-term secular descending trendline in place since January 2018 high).

The recent up move seen on the Germany 30 CFD stock index (a proxy of the DAX futures) from 11 March to 18 March has retested but failed to break above its previous 6 March all-time intraday high of 23,482.

In addition, the daily RSI momentum indicator has flashed out a bearish divergence condition over the same period, and subsequently on 27 March staged a bearish breakdown below a key parallel ascending support and its 50 level.

In conjunction with the latest bearish observations seen in the daily RSI momentum indicator, the price actions of the Germany 30 are likely to be at the tail-end of the completion for a medium-term bearish topping formation (see Fig 3).

A break below the medium-term top neckline support of 22,120 may expose further weakness for the medium-term supports to come in at 21,270, and 20,430 (also close to the 200-day moving average).

However, a clearance above 23,480 key medium-term pivotal resistance invalidates the bearish scenario and shifts the focus back to the bulls to expose the next medium-term resistances at 24,100 and 24,670.

Weakness in major G-10 yen crosses has resurfaced for the past week, driven by a narrowing of the 2-year sovereign yield premium spread between US Treasuries and Japanese Government Bonds (JGBs), and rising systematic risk from US trade tariffs woes.

Based on a rolling three-month performance as of 28 March, the CAD/JPY is the second-worst performing (-4.5%) major yen cross pair, almost on par with the worst hit USD/JPY (-5.1%) (see Fig 4).

In the lens of technical analysis, the recent rebound of 4.4% seen in the CAD/JPY from its 11 March low to 26 March high is likely a corrective rebound sequence, aka dead cat bounce, within an ongoing medium-term downtrend phase from the 10 July 2024 high of 118.86.

The corrective rebound may have reached its terminal point on 26 March as price actions of the CAD/JPY have shaped a bearish reaction candlestick after a retest on its downward sloping 50-day moving average, and the former long-term secular ascending channel from the March 2020 low now turns into a pull-back resistance after price actions breached below it on 21 February 2025 (see Fig 5).

In addition, the daily RSI momentum indicator has flashed out a bearish momentum reading which supports the start of a potential impulsive down move sequence.

Watch the 108.30 key medium-term pivotal resistance (also the 200-day moving average), and a break below 101.80 exposes the next medium-term support at 99.60.

On the flipside, a clearance above 108.30 invalidates the bearish scenario for the next medium-term resistances to come in at 111.45 and 115.90 next.

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