Nasdaq 100 forecast: Stocks stumble on tariff and geopolitical strain

Just when it looked like the trade uncertainty was coming to an end with the US resuming talks with China and implying several other deals were on the cards, Trump has done it again. The US president has rattled markets with fresh threats of unilateral tariff rates on several trading partners. He intends to send letters in the next couple of weeks informing them of the new rates, ahead of a July 9 deadline. The news has caused the US futures and the US dollar to tumble, sending the EUR/USD to a fresh 2025 high near 1.16 handle. Will this turn out to be another so-called TACO trade remains to be seen. But after a big rally off the April lows and without much progress on the trade front, investors are now asking questions and want to see results to justify holding expensive stocks amid all the trade uncertainty, and that’s before considering other risks that include valuations, bond market troubles, and a military conflict between Iran and Israel. Against this backdrop, the short-term risk to the Nasdaq 100 forecast is now tilted to the downside.

Risk appetite wanes after Trump’s latest tariff bombshell

So, one step forward, two back. Global equities are taking a new turn lower on renewed trade jitters, as markets digested a fresh dose of trade tension and simmering geopolitical unrest. US President Donald Trump has once again unsettled investors, this time signalling an intent to impose unilateral tariffs on a swathe of trading partners – a move likely to fuel economic uncertainty in the weeks ahead. Unless of course he makes yet another U-turn. But even signs of progress in US-China trade discussions failed to lift the markets. Investors’ reaction was notably muted, possibly due to the vague nature of the agreements being hinted at. But more likely, this was the case because the President announced that his administration is preparing a series of ‘take it or leave it’ trade letters aimed at over 20 nations currently in negotiation with Washington.

With the possibility of a 9th July tariff hike still looming large, investors remain wary. So, the markets will do very well to hold around current levels amid a backdrop of uncertainty. But if we start to see some further bearish price action then this will call into question the recent bullish trend. So, in the near-term the Nasdaq 100 forecast looks highly uncertain with risks tilted to the downside.

Middle East tensions also weighing on sentiment

Adding to the uneasy mood, reports surfaced suggesting Israel is fully primed to launch a military operation against Iran, stoking fears of wider regional instability. The confluence of trade angst and rising geopolitical tension delivered a risk-off tone that sent both stocks and the US dollar lower, causing crude oil to rally yesterday, and gold is higher today.

Iran’s defence minister has warned of retaliatory strikes on US military assets in the region should hostilities break out, further amplifying the stakes. Trump, for his part, has expressed growing scepticism over the prospect of a nuclear accord, threatening military action should diplomacy fail. Five rounds of talks have been held since April, but with little progress, markets are increasingly factoring in the possibility of a more serious conflict.

Technical Nasdaq 100 forecast: No new highs - for now

The major US stock averages were on the brink of breaking to new records, but that seems to have been put on hold for now. The Nasdaq 100 has stalled just shy of record highs, with technology companies taking a dip. Market participants are searching for a new catalyst to maintain upward momentum, but Trump’s combative stance on trade may prove to be anything but supportive.

Source: TradingView.com

After failing to break the resistance trend of the rising wedge pattern, our US Tech 100 chart, which is derived from the underlying Nasdaq 100 futures, closed yesterday’s session in the red. It also failed to close above the key 22,000 resistance level after a couple of breakout attempts. With the RSI showing a bit of negative divergence near overbought levels, it makes technical sense to witness some weakness here. The loss of bullish momentum means we could either see a consolidation near current levels, or correction of some sort until a fresh macro stimulus helps to drive the market higher. The former would be considered a more bullish scenario than the latter.

There are lots of potential support levels to watch on the way down. The first one comes in around 21,500 area. This level was previously a key battle ground between the bulls and bears. Things will get more interesting below this zone, for then we could see a more profound sell-off as traders are forced to exit their longs. The most recent low was made on May 23, at 20,665. This is now the line in the sand. I will turn bearish if this level breaks in the coming days or weeks, for then we will have our first lower low following the big rally off the April lows. Without such a bearish sign, the current weakness we are observing now could turn out to be a normal retracement you see in strong bull trends. But while trying to remain as objective as possible, I will feel differently about this observation should we get more bearish price action in the next couple of sessions. Therefore, a potential break below the abovementioned 21,500 support area would be the first major bearish sign.

Meanwhile on the upside, resistance comes in around 21,800, marking yesterday’s low and then 22,000. If, despite all these macro uncertainties we climb above the 22,000 on a closing basis, then at that point, a rally to a new record will be a strong possibility, and that would certainly make the technical Nasdaq 100 forecast bullish once more.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R