Markets stabilise, but memories of chaos linger
After a whirlwind of volatility sparked by US tariff reversals and geopolitical crossfire, financial markets are slowly settling into calmer conditions. Traders are cautiously returning to risk, but the psychological scars of the recent flush are shaping strategy and sentiment alike.
The S&P 500 and NASDAQ have clawed back lost ground. Major FX pairs are unwinding exaggerated moves. But beneath the surface, portfolio managers and retail traders alike are asking the same question: do we trust this calm?
Tariffs, tantrums – and tactical reversals
The rollercoaster was triggered by abrupt US policy shifts. First came tariff threats – 15% market slides, tumbling yields, and risk aversion. Then came the backflip. Now, a broad-based 10% tariff appears to be the default, with China singled out for stricter treatment.
That geopolitical tone has eased, but underlying risk remains. Both the US and China are ramping up national security-driven market exclusions, adding fuel to longer-term uncertainty.
Risk on – but don’t get comfortable
Despite the rebound in equities and the uptick in bond yields, the US dollar is not behaving as expected. The DXY index is drifting lower, while risk currencies like the euro, sterling, Aussie and Kiwi are firmly bid.
Movements have been extreme. EUR/USD surged over 450 points in just hours, while GBP saw a similar spike. NZD rallied sharply. Only AUD showed some restraint, but even it has notched impressive gains.
Massive flush, not a new trend
Much of last week’s price action was driven by illiquidity and portfolio clearing, not organic trend formation. Major institutions slashed risk exposure as headlines spread. Moves were not technical – they were emotional and reactive.
For example, the sterling plunge and rebound around 3 April highlights the disconnect: a 500-point collapse, then a return to baseline. Traders who stepped aside avoided the chop. Those who chased were typically stopped out before the turn.
Crosses offer cleaner opportunities
In this environment, it’s the crosses – not the dollar pairs – that are offering clarity.
- AUD/CHF and AUD/NZD are showing strong momentum from safe haven distortions
- EUR and GBP are overstretched and due for recalibration
- Kiwi, despite China linkage, is flying – which may invite correction
This week’s focus? Let the dollar stabilise and hunt setups across the crosses, where cleaner technical structures are emerging.
Key pairs at inflection points
- USD/JPY hovering at trendline support – not an easy trade yet
- USD/CHF struggling to reclaim lost ground
- USD/CAD breaking down, with another 150 pips of room below
Macro calendar: packed and potent
If last week was about chaos, this week is about clarity via fundamentals.
- Tuesday: UK unemployment, Canadian CPI
- Wednesday: Bank of Canada rate decision (60% chance of 0.25% cut)
- Thursday: UK inflation, US retail sales, ECB press conference, Philly Fed manufacturing index
- Friday: Japanese inflation – now a real market mover as BoJ shifts tone
While the ECB is expected to cut, the press conference half an hour later is where the fireworks lie. Canadian data, meanwhile, could seal the deal on rate cuts.
Trading mindset: measured, not manic
The overarching advice? Don’t feel like you missed the move. You didn’t. What happened last week was untradeable chaos driven by headline risk, not structure.
Professional traders were told to cut all exposure – and rightly so. Now, with volatility fading, the real trades can begin.
This week offers something rare: a technically aligned market, clear fundamental catalysts, and fading shock risk. That’s as close to ideal as we get.
The bottom line
- Risk is back on, but stay cautious – this isn’t full-throttle yet
- Dollar is under pressure, but trend conviction is fragile
- Crosses are cleaner than dollar pairs – especially AUD, NZD, CHF, and JPY plays
- Focus on macro catalysts from midweek onwards
Sit tight. Observe. And be ready to move when structure and sentiment align.