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• Geopolitical shocks, including the Middle East conflict and $100+ oil, have created inflationary pressure, pushing the Federal Reserve toward a "higher-for-longer" interest rate scenario.
• US equities are facing a valuation test due to the lingering effects of the 2025 tariff regime.
  The Nasdaq 100 is dealing with "AI exhaustion," though a $700 billion structural increase in AI capital expenditure in 2026 provides a fundamental floor for the tech sector.
• The Dow Jones Industrial Average is positioning as a potential "value haven" and could lead a Q2 recovery.

As we pull the curtain on a turbulent first quarter, the narrative for US equities in Q2 2026 is shifting from "all-out AI" to a more nuanced, "pensive" reality. The bullish momentum that defined 2025 has hit a significant roadblock, primarily driven by the escalation of conflict in the Middle East and the closure of the Strait of Hormuz.

For market participants, the question isn’t just whether the trend is still your friend, but whether you have the stomach for the "TACO" trade (Trump Always Comes Off), the market's growing belief that the administration will pivot to prevent a total equity meltdown.

The Macro Backdrop: Oil shocks and a Fed cornered

The primary headwind for Q2 is undeniably the energy market. With Brent crude spiking above $100/barrel, headline inflation is rearing its head again. S&P Global warns that while the US is better insulated as a net exporter than in decades past, the "inflationary consequences" are unavoidable.

This leaves the Fed in a precarious position. Markets are now pricing in a "higher-for-longer" scenario as the central bank balances supply-driven inflation against a cooling labor market. While a 25-bps cut is still penciled in for late 2026, the Q2 outlook remains a "growth scare" rather than an imminent recession.

The legacy of "Liberation Day" and the 2025 tariff regime

To understand the price action of Q2 2026, one must think of it against the shift in trade policy that occurred on April 2, 2025, known as "Liberation Day."

This executive order introduced a sweeping 10% reciprocal tariff on all imports, with significantly higher rates for countries like China (up to 45% when combined with previous measures), Canada, and Mexico. The immediate reaction in 2025 was a historic "shock to the system," causing the S&P 500 to flirt with bear market territory and the Nasdaq to enter one briefly in April 2025.

However, the "Liberation Day" theme in 2026 has changed from a source of panic into a valuation test.

Many of the leading technology firms, particularly the "Magnificent Seven," are currently trading at valuation levels that are nearly as attractive as the troughs reached during the initial 2025 tariff sell-off. The lessons of 2025 taught the market that while tariffs introduce policy uncertainty and alter expected returns, the resilience of the US economy, boosted by tax rebates and a pivot toward domestic manufacturing can eventually stabilize sentiment.

As we move through Q2 2026, the question is whether the market can repeat this stabilization in the face of a secondary geopolitical shock.

US Indices: Technical Levels and the Search for a Floor

The S&P 500 cash index found major resistance at the 7,000 level in late January 2026, a psychological and technical barrier that triggered a significant reversal. Since then, the index has been searching for a durable support zone.

• Primary Support at 6145: This support zone is directly linked to the price action seen post-Liberation Day in 2025. It serves as a historical "floor" where institutional buyers have previously stepped in.
• The 6000 Level: This level may come into play and represents a crucial area for bulls to defend. A failure here would open the door to a deeper correction.
• Outlook: The current sentiment is one of "opportunistic bullishness." Rather than chasing the bearish momentum, market participants should look for signs of a turn higher near these key support levels, supported by the expectation of a market-friendly Federal Reserve.

Something that piqued my interest this week was historical performance based on the first 59 days of the year. The table below outlines the 20 worst starts to a year for the S&P 500 (based on the first 59 trading days) from 1928 through 2026.

The most striking observation is that a bad start does not guarantee a bad year. In fact, the market often staged massive recoveries.

Positive Finishes: Out of the 19 completed years on this "Worst Starts" list, 11 of them (58%) ended the full calendar year in positive territory.

The "V" Recovery: In many cases, the "Day 60 to Year-End" returns were not just positive, but explosive.

For example:

• 1933: Fell -12.6% early, then rallied +64.8% to finish up +44.1%.
• 2020: Fell -18.6% (the worst start on record), then rallied +42.8% to finish up +16.3%.

Source: Creativeplanning, LSEG

The Nasdaq 100 (NDX): AI Exhaustion vs. Structural Growth

The Nasdaq 100 is currently grappling with "AI exhaustion," as the initial frenzy surrounding artificial intelligence has given way to a more sober assessment of valuation and capital expenditure. The weekly chart has become difficult to justify as bullish in the short term, as price action breaks through established support levels.

Major Support at 22500: This zone represented major resistance in 2025 and is now the first line of defense for the tech sector.

The 20000 Psychological Handle: A major zone spanning from 20,000 to 20,224, which aligns with a 61.8% Fibonacci retracement of the recent multi-year move. This is arguably the most critical support level for the NDX in 2026.

Fundamental Counterpoint: Despite technical weakness, the "AI data-center build" remains in its early stages. Top technology firms are on track to spend $700 billion on capex in 2026, a 36% year-over-year increase. This acyclic investment provides a fundamental "floor" for the index that traditional technical analysis might overlook.

Nasdaq 100 Daily Chart, March 30, 2026

Source: TradingView

The Dow Jones Industrial Average: A Potential Value Haven

The Dow Jones Industrial Average is viewed as offering a potentially more attractive backdrop for bullish continuation compared to the tech-heavy indices. Having stalled at the 50,000 handle, the Dow is testing support levels that could offer a more stable entry point.

• Key Support at 45244: This level represents a 100% measured move of the 2022 sell-off and is a major technical pivot.
• Secondary Support at 43,325: A prior resistance-turned-support zone that has historical significance.
• Outlook: If buyers can stage a defense near the 45,000 psychological level in early Q2, the Dow may lead a broader market recovery as investors rotate out of overvalued growth and into resilient industrial and financial names.

Dow Jones Daily Chart, March 30, 2026

Source: TradingView

GBPUSD: ⬇️ Sell

• GBPUSD broke support level 1.3220
• Likely to fall to support level 1.3100

GBPUSD currency pair recently broke below the strong support level 1.3220 (which has been reversing the price from November of last year, as can be seen below).

The breakout of the support level 1.3220 should accelerate the active long-term impulse wave 3 from the end of March.

Given the strongly bullish US dollar sentiment, GBPUSD currency pair can be expected to fall further to the next support level 1.3100 (former strong support from November).

Federal Reserve Chair Jerome Powell struck a tone of “strategic ambiguity” in remarks at a Harvard event, signaling that policymakers are not yet ready to respond to the current oil-driven supply shock, even as risks to both sides of the mandate are building. As the Iran war extends, Powell acknowledged the Fed could eventually face difficult trade-offs, but emphasized that the economic impact remains uncertain.

“The tendency is to look through any kind of a supply shock,” Powell said, highlighting the Fed’s baseline approach to energy-driven inflation. At the same time, he emphasized that such an approach depends critically on expectations remaining anchored. “Inflation expectations do appear to be well anchored beyond the short term,” he noted, while adding that policymakers would “carefully monitor” whether that remains the case.

A key constraint is the well-known lag in monetary policy transmission. “Monetary policy works with long and variable lags,” Powell said, warning that by the time tighter policy takes effect, “the oil price shock is probably long gone.” This reinforces the Fed’s reluctance to react prematurely to what could still prove to be a temporary supply-driven spike in inflation.

For now, Powell indicated that policy is “in a good place… to wait and see”. However, the balance could shift quickly if inflation expectations begin to drift higher or if second-round effects emerge. Until then, the Fed remains on hold, navigating between supply shock risks and policy timing constraints.

Markets

No post-weekend gamechanger as the war between the US and Israel on the one hand and Iran on the other hand enters its fifth week. There were few indications for a real de-escalation anytime soon. For now, the US didn’t start any ground invasion. Still, a potential seizure of the Irian oil Island Kharg by US forces remains one of the options being considered. At the same time, the Iran allied Houthi’s from Yemen actively joining strikes against Israel and Iran attacking important aluminum facilities in Abu Dhabi and Bahrain only suggest ever growing risk to more supply chain disruptions including from a hampered passage in the Suez Canal/Red Sea. US president Trump in morning comments on social media also gave mixed signals at best. He indicated that the US is in serious discussions with the (new) regime in Iran, but that the US can still destroy Iranian energy infrastructure if the Strait of Hormuz isn’t immediately open for business. Oil prices, still our main pointer on markets’ assessment of supply chain disruptions don’t preposition for improvement. Brent at $115+ is testing the highest levels since the start of the conflict. The reaction on interest rate markets was a bit different from the earlier stages of the conflict. We didn’t see the exact trigger, but markets today apparently focused a bit more on downside growth risks rather than upside inflation risks. US yields decline between 8 bps (5-y) and 5 bps (30-y), building on a downside momentum that already started on Friday. On Thursday, US money markets priced a > 50% chance of a Fed rate hike further out this year. Currently, this scenario is again priced out. European yields follow the US trend, albeit at a distance, with German yields easing between 5.5 bps (5& 10-y) and 4 bps (2-y). Question remains whether the likes of the ECB will have the luxury to disregard higher inflation/ inflation expectations to cope with a potential negative impact on growth. Preliminary German inflation data for March confirmed the feared for jump in inflation with HICP inflation accelerating to 1.2% M/M and 2.8% Y/Y (0.4% M/M and 2.0% in February), marking the highest level since January last year. The benign reaction on bond/yields’ markets also gave some (remarkable?) relief to equity markets. The Eurostoxx 50 ‘rebounds’ 0.5%. US indices add about 0.70-0.90% at the open. Constructive but not enough to reverse Friday’s sell-off. The technical picture of most indices remains fragile anyway (e.g. S&P 500 sub 6500 area). Also a bit remarkable, despite the substantial decline in US yields (bigger than in EMU or the UK) and the rebound in equities (risk-on!?), the dollar outperforms. DXY (100.4) regains the 100-mark with the post-crisis top (100.54) within reach. EUR/USD drops further from 1.1515 to 1.1475.The yen is the exception to the rule. USD/JPY this morning at 160.46 tested the highest level since July 2024, but the yen rebounded after Japanese vice minister for international affairs Atsushi Mimura warned authorities will take decisive action if they see speculative action picking up (USD/JPY currently 159.5).

News & Views

Belgian inflation slowed to 0.12% M/M in March, but that still pushed annual inflation up from 1.45% Y/Y to 1.65% Y/Y. The most significant price increases in March concerned motor fuels and package holidays. However, electricity, meat, alcoholic beverages, hotel rooms and plane tickets have had a decreasing effect on the index. Energy inflation stood at -4.41% Y/Y from -7.89% in February. Other details showed food inflation at -0.88% Y/Y (from +0.68% Y/Y) and services prices going from 4.75% Y/Y to 4.86% Y/Y. Rent inflation decreased from 3.47% to 3.39%. Overall core inflation, excluding energy and unprocessed food stabilized at 2.71% Y/Y (from 2.78%)

The European Commission’s Economic Sentiment Indicator (ESI) declined from 98.2 to 96.6 for the eurozone. The Employment Expectations Indicator (EEI) fell from 98.8 to 96.4. Adding to the decline of February, the marked deterioration of economic sentiment in March drove both indicators away from their long-term average of 100. Consumer confidence plummeted from -12.3 to -16.3, the lowest level since October 2023. On the business side, construction confidence was moderately up while industry confidence remained broadly stable. Services confidence fell slightly with the biggest hit going to retail trade confidence. Managers’ selling price expectations were sharply up in all four business sectors (beyond long-term average), and strikingly so in industry. Consumers’ perceptions of price developments over the past twelve months increased moderately, but their expectations about price developments for the next twelve months surged.

Daily Pivots: (S1) 212.15; (P) 212.65; (R1) 213.08; More...

GBP/JPY's strong break of 210.77 support suggests that rebound from 207.20 has completed at 213.29. The pattern from 214.98 should now be in the third leg. Intraday bias is back on the downside for 209.15 support first. Firm break there will target 207.20 next. For now, risk will stay on the downside as long as 213.29 resistance holds, in case of recovery.

In the bigger picture, up trend from 123.94 (2020 low) is still in progress. Firm break of 214.98 will target 61.8% projection of 148.93 (2022 low) to 208.09 (2024 high) from 184.35 at 220.90. This will remain the favored case as long as 55 W EMA (now at 203.13) holds, even in case of another deep pullback.

GBP/USD failed to climb above 1.3500 and corrected some gains. EUR/GBP started a decent increase and might aim for more gains above 0.8700.

Important Takeaways for GBP/USD and EUR/GBP Analysis Today

The British Pound is showing bearish signs below the 1.3400 support.

There is a key bearish trend line forming with resistance near 1.3280 on the hourly chart of GBP/USD at FXOpen.

EUR/GBP is gaining pace and trading above the 0.8660 pivot level.

There is a connecting bullish trend line forming with support at 0.8670 on the hourly chart at FXOpen.

GBP/USD Technical Analysis

On the hourly chart of GBP/USD at FXOpen, the pair failed to stay above the 1.3450 pivot level. As a result, the British Pound started a fresh decline below 1.3400 against the US Dollar.

There was a clear move below 1.3340 and the 50-hour simple moving average. The bears pushed the pair below 1.3250. Finally, there was a spike toward the 1.3200 handle. A low was formed near 1.3202, and the pair is now consolidating losses.

There was a minor move above 1.3240 and the 23.6% Fib retracement level of the downward move from the 1.3479 swing high to the 1.3202 low. On the upside, the GBP/USD chart indicates that the pair is facing resistance near a key bearish trend line at 1.3280.

A close above the trend line might send the pair toward the 50% Fib retracement at 1.3340. If the bulls remain in action, they could aim for more gains.

In the stated case, the pair might rise toward 1.3415. The next major hurdle for GBP/USD sits at 1.3480. On the downside, there is a key support forming near 1.3200. If there is a downside break below 1.3200, the pair could accelerate lower. The next key interest area might be 1.3160, below which the pair could test 1.3120. Any more downside could lead the pair toward 1.3050.

EUR/GBP Technical Analysis

On the hourly chart of EUR/GBP at FXOpen, the pair started a decent increase from 0.8635. The Euro traded above 0.8650 to enter a positive zone against the British Pound.

The pair settled above the 50-hour simple moving average and 0.8660. The pair traded as high as 0.8687 before there was a minor pullback, but the pair stayed above the 23.6% Fib retracement level of the upward move from the 0.8636 swing low to the 0.8687 high.

However, the pair is stable above 0.8670. Besides, there is a connecting bullish trend line forming with support at 0.8670.

A downside break below 0.8670 might call for more downsides. In the stated case, the pair could drop toward the 50% Fib retracement level at 0.8660. Any more losses might call for an extended drop toward the 0.8635 pivot zone.

If there is another increase, the EUR/GBP chart suggests that the pair is facing hurdles near 0.8685. A close above 0.8685 might accelerate gains. In the stated case, the bulls may perhaps aim for a test of 0.8700. Any more gains might send the pair to 0.8740.

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Daily Pivots: (S1) 1.1491; (P) 1.1520; (R1) 1.1537; More….

EUR/USD is still staying around mid-point of established range above 1.1408 and intraday bias remains neutral. Further decline is expected with 1.1666 cluster resistance (38.2% retracement of 1.2081 to 1.1408 at 1.1665) intact. On the downside, firm break of 1.1408 will resume the fall from 1.2081 to 38.2% retracement of 1.0176 to 1.2081 at 1.1353. However, decisive break of 1.1666 will argue that the fall from 1.2081 has completed, and turn bias back to the upside for 61.8% retracement of 1.2081 to 1.1408 at 1.1824.

In the bigger picture, prior break of 55 W EMA (now at 1.1497) should confirm rejection by 1.2 key cluster resistance level. The whole up trend from 0.9534 (2022 low) might have completed as a three wave corrective rise too. Deeper fall is expected to long term channel support (now at 1.0535). Meanwhile, risk will stay on the downside as long as 1.2081 holds, even in case of strong rebound.

Daily Pivots: (S1) 0.7955; (P) 0.7974; (R1) 0.8009; More….

USD/CHF's rally from 0.7603 is in progress and intraday bias stays on the upside. Further rise should be seen to 38.2% retracement of 0.9200 to 0.7603 at 0.8213. On the downside, below 0.7951 minor support will turn intraday bias neutral first. But further rally is expected as long as 0.7833 support holds, in case of retreat.

In the bigger picture, a medium term bottom should be in place at 0.7603 on bullish convergence condition in D MACD. Rebound from there is seen as correcting the fall from 0.9200 only. However, decisive break of 55 W EMA (now at 0.8088) will suggest that it's probably correcting the larger scale down trend from 1.0146 (2022 high). On the other hand, rejection by the 55 W EMA will setup down trend resumption to 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382 at a later stage.

Daily Pivots: (S1) 1.3229; (P) 1.3289; (R1) 1.3318; More...

Immediate focus is now on 1.3216 support in GBP/USD. Firm break there will resume the fall from 1.3867 to 1.3008 structural support. In any case, outlook will continue to stay bearish as long as 1.3482 resistance holds.

In the bigger picture, considering bearish divergence condition in both D and W MACD, a medium term top should be in place at 1.3867. Firm break of 1.3008 support will argue that fall from 1.3867 is at least correcting the rise from 1.0351 (2022 low) with risk of bearish reversal. That would open up further decline to 38.2% retracement of 1.0351 to 1.3867 at 1.2524. For now, medium term outlook will be neutral at best as long as 1.3867 resistance holds, or until further development.