Fresh from the Trading Room: Always a bull market somewhere

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Major G7 currencies have posted significant gains against the U.S. dollar in recent weeks, confirming a broad-based USD weakness across the board.

The 10-Year T-Note futures have completed a textbook inverse Head-and-Shoulders pattern, breaking decisively above the neckline, signalling a potential trend reversal and further upside.

Crude has been compressing within a multi-year descending triangle. As price action approaches the apex, the likelihood of a directional and volatile breakout increases.

Following a strong rally, copper was rejected at a key overhead resistance. With mounting recession risks, the metal faces renewed downside pressure.

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President Donald Trump’s “Liberation Day” has undeniably unleashed chaos across global financial markets. The world was clearly unprepared for the scale and breadth of the tariffs. In response, equities sold off sharply following the announcement, and notably, the market failed to recover even the day after.

This isn’t the first time markets have absorbed a negative macro shock, but what sets this episode apart is the added blow from currency effects. Amid escalating tariff tensions, the U.S. dollar experienced significant depreciation against major G7 and European currencies. This has profound implications. As a region, Europe has been the largest cumulative foreign investor in the U.S. For a European institutional investor—who has benefited over the past decade from both U.S. equity outperformance and a relatively strong dollar—this moment represents a triple threat:

1. The “Magnificent 7” stocks, market darlings until recently, are now down more than 20% year-to-date, and we’ve only just passed Q1.
2. The U.S. dollar has weakened nearly 9% against the euro in the same period.
3. Some analysts have characterized the increasingly divergent approaches of the Trump administration and the EU to trade tariffs and international affairs.

Given these developments, it’s entirely rational for a European asset allocator to start thinking about repatriating capital. Different from short-term, sentiment-driven retail flows, these are strategic reallocations with long-term implications. That’s what makes the outlook for U.S. equities particularly grim. Even if some of the tariffs are eventually scaled back or negotiated down, it takes time to rebuild investor confidence and international alliances. In this context, the U.S. economy appears exposed and vulnerable. The probability of an economic slowdown, or even a recession, has increased markedly.

Still, as the saying goes, there’s always a bull market somewhere. We’ve maintained a bullish stance on gold since it was trading below 2,800. We have consistently expressed positive views on various currencies versus the U.S. dollar throughout Q1 (as seen in past FFTTR articles: Catching a Break, Resource Curse and Here Come the Tariffs). Additionally, amid the broader market turbulence, we’re seeing favorable technical setups in the Treasury market where futures have rallied in line with the administration’s preference for lower yields.

In line with the core theme of our Fresh from the Trading Room series, we encourage our readers to take a diversified approach. Opportunities abound across other asset classes and regions. What we’re witnessing now serves as a timely and powerful validation of that perspective.

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We conclude with the following hypothetical trades:¹:

Case Study 1: Long 10-Year T-Note futures

We would consider taking a long position in the 10-Year T-Note futures (ZNM5) at the current price of 112,050, with a stop-loss below 110,050, a hypothetical maximum loss of 112,050 – 110,050 = 2 points. Looking at Figure 2, if the Inverse Head-and-Shoulder bottom breakout is confirmed, the 10-Year T-Note futures price has the potential to rise to 116,050, resulting in 116,050 – 112,050 = 4 points. Each point move in the 10-Year T-Note futures contract is 1,000 USD.

Case Study 2: Short Copper futures

We would consider taking a short position in Copper futures (HGK5) at the current price of 4.86, with a stop-loss above 5.20, a hypothetical maximum loss of 5.20 – 4.86 = 0.34 points. Looking at Figure 4, if the reversal at the overhead resistance is confirmed, copper prices have the potential to drop to 4.20, resulting in 4.86 – 4.20 = 0.66 points. Each Copper futures contract represents 25,000 pounds of copper, and each point move is 25,000 USD. E-mini (QC) and Micro (MHG) Copper futures contracts are also available at 1/5 and 1/10 of the standard size, respectively.

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¹ Examples cited above are for illustration only and shall not be construed as investment recommendations or advice. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. Please refer to full disclaimers at the end of the commentary.

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