The Week Ahead April 14, 2025

Looking at this upcoming week, the first thing that comes to mind is that Donald Trump has announced that the additional tariffs applied to China won’t affect electronics. This is, of course, something that I think will drive stock markets higher, but this isn’t the end of the problem. I think that we are likely to see the markets rally (meaning ‘risk on’) in the early part of the week, but I also think that we haven’t made a bottom. At least not yet - this will be determined soon, but right now, I think you are still going to see a lot of violent swings.

For what it is worth, Howard Lutnick, the US Commerce Secretary, has already come out and said that semiconductors, chips, etc. will see tariffs in a few months. In other words, this is just another “pause.” This is the game we are playing, waiting to see what actually will be the case going forward.

What I will be watching this week.

To begin with, we have two central bank rate decisions and, of course, the press conferences afterwards. This is Canada and the European Union, on Wednesday and Thursday, respectively, and these could be interesting as they will continue to be two main targets of Donald Trump. I think it won’t necessarily be the rate decisions - Canada is expected to hold still, and the EU is expected to cut from 2.65% to 2.40%—but it will be the statements and press conferences. What we could see this week is the reversal of the US dollar falling. I do think we are likely to see the USD strengthen again sooner rather than later, and these two central banks could make that happen.

You can see on the longer-term weekly US Dollar Index chart that the death of the US dollar is probably being prematurely reported. It seems to me that we are hearing all of the alarmists coming out in full force now, and this means we are getting close to the end. This is the pattern with most things in finance, and the USD isn’t any different. Having said that, I am not sure how much longer this lasts; it could be a few days or even weeks, but I will be looking for a reversal. The market is tilted too far in one direction at this point.

Americans buy things. It’s what we do.

Another thing I will be watching is the Core Retail Sales on Wednesday, coming out of the United States. Pundits are freaking out about how this chaos is influencing the US consumer, which I can say will continue to buy things. It’s what Americans do. I cannot tell you how many times I have heard how the consumer is “tapped out,” only to see those numbers say the opposite. While it could slow down, the 0.4% month-over-month reading expected seems about right.

Gold

I am still watching gold, but it is worth noting that we have seen a straight line up over the last three sessions. While I think it goes higher, I also expect to see a pullback in the short term. I welcome this and will be buying it at the first sign of a bounce that I see. For what it is worth, the RSI on the daily chart below is getting close to being in the overbought area.

Dollar and Gold. What’s happening?

While there is no real way to know what is happening with 100% accuracy, I find myself agreeing with Brent Johnson about the idea that the rest of the world is selling bonds in the US for one reason, and one main reason only: to raise more US dollars. This can be seen by the flood of money heading into the EU via the EUR/USD chart. Think of this: when it comes time to pay the bills, will the bondholders be okay with accepting Euros instead of the US dollars promised? I doubt it. While the dollar could continue to fall for a while, sooner or later it has to return; otherwise, everyone loses.

Gold will continue to see a lot of inflows, mainly because central banks around the world continue to buy it, and it is a safety asset in a time when there is little safety. Also, for what it is worth, it was about two months ago that gold started moving from London to the US. This is a story everyone has forgotten about already, so it might be worth paying attention to again.

Cut your position size in half and double your stop-loss distance. For all markets.

Chris