Tag: DOW

  • Job Data and US-China Rapprochement Fuel Dollar Rebound Prospects

    Job Data and US-China Rapprochement Fuel Dollar Rebound Prospects


    Risk sentiment improved last week, driven by the solid US non-farm payroll report that helped ease fears of a deepening slowdown. Adding to the optimism was a thaw in US-China relations. While no concrete breakthrough emerged, the fact that both sides were willing to engage again offered some relief to global markets weary of tariff escalations.

    Dollar capitalized on this shift late in the week, rebounding after a string of weak data had previously weighed on sentiment. Although the greenback still finished as the second worst performer for the week, the technical picture points to scope for a near-term bounce.

    By contrast, Yen was the worst performer, pressured by improving risk appetite and technical breakouts in crosses, with further weakness likely if sentiment remains supported. Swiss Franc also underperformed, dragged down not just by reduced demand for safe-haven assets but also by a negative inflation print, which solidified expectations of another SNB rate cut this month.

    In the middle of the pack were Euro and Loonie. Both ECB and BoC delivered rate decisions in line with expectations. ECB cut by 25bps and BoC held steady. Yet, their respective advances against Dollar faded as improving trade prospects and rebounding US yields provided a floor for the greenback.

    NFP Rescues Sentiment, Fed Cut Bets Recede Further

    After a week dominated by downbeat US data—particularly the contractionary ISM manufacturing and services, sentiment got a needed boost from May’s non-farm payrolls. While hiring did slow, the headline print of 139k jobs, paired with a steady unemployment rate and stronger-than-expected wage growth, helped restore some confidence in the durability of the US labor market.

    For now, the economy appears to be holding up reasonably well against the growing cloud of tariff uncertainty. Rather than crumbling under pressure, the labor market continues to show resilience, suggesting the real economic drag from trade tensions may not fully materialize until later in the year—if at all.

    In response, market pricing for Fed policy has shifted. A rate hold at the June FOMC meeting is now virtually assured. Fed fund futures currently show an 83% chance of no change in July, up from 74% a week ago. September pricing has also adjusted notably, with odds of a hold rising to nearly 40%, from just 28% last week.

    This shift in expectations aligns with the more cautious wing of the Fed. As Minneapolis Fed President Neel Kashkari recently explained, two camps have emerged within the FOMC. One favors looking through tariff-induced price shocks as temporary and advocates rate cuts to support growth. The other sees a more prolonged inflation threat from drawn-out trade disputes and retaliatory measures, suggesting policy caution is warranted.

    Fed Governor Adriana Kugler has added detail to this latter view, identifying three channels through which tariffs may embed inflation. First, she cautioned that higher short-run inflation expectations may give firms more pricing power, extending inflation’s lifespan. Second, “opportunistic pricing” could allow businesses to raise prices even on goods unaffected by tariffs. Finally, she warned that reduced productivity, stemming from cost pressures and weakened investment, could feed longer-term inflation.

    For now, the labor market’s endurance gives the inflation-hawk camp more credibility.

    Renewed US-China Trade Talks Offer Glimmer of Hope

    Signs of thawing in US-China tensions added some additional cautious optimism. The long-awaited phone call between US President Donald Trump and Chinese President Xi Jinping finally took place last week, breaking weeks of silence and geopolitical posturing. More critically, the conversation was not just symbolic—it quickly translated into concrete steps, including a formal resumption of trade negotiations.

    Trump announced that Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Jamieson Greer will meet Chinese counterparts in London on Monday for renewed trade talks. The resumption of dialogue is a modest but meaningful shift away from the stalemate that has plagued relations.

    Adding to the sense of tentative de-escalation, Beijing has quietly taken steps to ease the pressure on US supply chains. According to a Reuters report, China granted temporary export licenses to rare-earth suppliers servicing the top three US automakers. This comes after Beijing’s April decision to restrict exports of rare earths and magnets—critical inputs for automotive, aerospace, and tech industries—sparked widespread supply chain disruptions.

    The impact of these restrictions is already visible. Ford recently suspended production of its Explorer SUV at its Chicago plant for a week due to a rare-earth shortage. That incident highlights how deeply reliant advanced manufacturing has become on these materials—and how easily geopolitical leverage can disrupt production cycles. Beijing’s decision to grant temporary relief may signal a tactical concession ahead of negotiations, without altering its broader strategic posture.

    Wall Street Ends Higher But Rally May Stall at Key Levels

    Despite ending the week on a positive note, major US stock indexes are showing signs of fatigue, with momentum staying unconvincing. Any further gains are likely to face stiff resistance ahead. Meanwhile, Dollar Index continued to struggle to breakout from recently established range. There is room for a bounce in Dollar as the near term consolidation is set to extend.

    DOW’s rise from 36611.78 is still seen as the second leg of the corrective pattern from 45073.63 high. While further rally might be seen, upside should be limited by 45073.63 to bring near term reversal. Also, considering that D MACD is now staying below signal line, firm break of 41352.09 support will at least indicate short term topping, and bring deeper pullback.

    NASDAQ’s picture is similar. Rise from 14784.03 is seen as the second leg of the consolidation pattern from 20204.58. While further rally might be seen, strong resistance should emerge from 20204.58 to bring near term reversal. Considering that D MACD is staying below signal line, firm break of 18599.68 support will at least indicate short term toping, and bring deeper pullback.

    Dollar index struggled to find decisive momentum to break through 97.92 low. Price action from there are seen as a corrective pattern to the decline from 110.17. Break of 100.54 resistance will indicate that the third leg of the consolidations has started, and target 38.2% retracement of 110.17 to 97.92 at 102.60.

    BoC Hold, ECB Cuts, EUR/CAD Ranges

    Two major central banks, BoC and ECB, delivered expected decisions last week. BoC left its overnight rate unchanged at 2.75% for the second straight meeting, as policymakers await greater clarity on the impact of global trade negotiations. While markets expect easing to resume later this year, the timing remains unclear. The central bank appears willing to act in the second half of the year but is seeking more definitive economic data before committing to further policy moves.

    Meanwhile, ECB followed through with a 25bps rate cut, lowering its deposit rate to 2.00%. After the meeting, a number of Governing Council members hinted at a possible pause in July. Some Governing Council members went further, suggesting the ECB may have already “won the battle” against inflation. With the policy rate now considered deep in neutral territory, the threshold for additional easing has risen substantially, especially amid persistent global trade and geopolitical risks.

    Technically, EUR/CAD continued to gyrate inside established range last week, as consolidation pattern from 1.5959 extended. Another dip cannot be ruled out in the near term. But downside should be contained by 1.5402 cluster support (38.2% retracement of 1.4483 to 1.5959 at 1.5395 to bring rebound. On the upside, break of 1.5759 resistance will bring retest of 1.5959 high.

    EUR/USD Weekly Outlook

    EUR/USD edged higher to 1.1494 last week but lost momentum again. Initial bias stays neutral this week first. Price actions from 1.1572 are seen as a corrective pattern to rally from 1.0716. While rebound from 1.1064 might extend, strong resistance should emerge from 1.1572 to limit upside. On the downside, break of 1.1356 support will argue that the correction is already in the third leg, and target 1.1209 support for confirmation.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0875) holds.

    In the long term picture, the case of long term bullish reversal is building up. Sustained break of falling channel resistance (now at around 1.1278) will argue that the down trend from 1.6039 (2008 high) has completed at 0.9534. A medium term up trend should then follow even as a corrective move. Next target is 38.2% retracement of 1.6039 to 0.9534 at 1.2019.



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  • Trade Chaos Likely to Linger, June to Bring More Uncertainty

    Trade Chaos Likely to Linger, June to Bring More Uncertainty


    Markets endured another week of trade confusion, with sentiment swinging sharply on alternating headlines. As a result, investor confidence remains fragile, with markets finding little footing as the tug-of-war between hopes of progress and fear of escalation continues.

    While the 90-day reciprocal tariff truce is now in effect, its second half is shaping up to be just as uncertain. There’s potential for additional trade agreements to be finalized in the coming weeks, especially among smaller economies or non-contentious regions. However, the negotiations that matter most—between the US and the EU, and the US and China—remain fraught with difficulty. These high-stakes talks carry the most weight for global markets and, therefore, also pose the greatest downside risk.

    Equity markets around the world are showing clear signs of fatigue. The bullish momentum that since mid-April has faded, replaced by choppy, indecisive price action. With global indexes indexes stalling, the stage is set for a prolonged period of sideways or probably downward movement.

    The old market adage “sell in May and go away” might have come slightly early for some. But given the current backdrop, the phrase may still apply—with a twist. For 2025, “sell in June is not too late” may prove to be the more accurate rule of thumb. Barring a clear and credible resolution on the major trade fronts, June could be another month of whipsaw trading, fragile sentiment, and rising caution.

    Overall in the currency markets, Dollar ended as the strongest one, followed by Loonie, and then Euro. Yen was the worst performer, followed by Aussie and then Sterling. Swiss Franc and Kiwi ended in the middle. But the pairs and crosses were merely in consolidations in general.

    Global Stock Markets Lose Momentum Further

    Technically, for DOW, upside momentum has clearly been diminishing as D MACD is trending below signal line. While another rise cannot be ruled out yet, strong resistance should emerge below 45073.63 high to cap upside.

    Rise from 36611.78 is seen as the as the second leg of the corrective pattern from 45073.63. Break of 41352.09 support will bring deeper fall back to 38.2% retracement of 36611.78 to 42842.04 at 40462.08. Decisive break there will suggest near term reversal, and target 61.8% retracement at 38991.74 and below.

    Similar picture is seen in NASDAQ as it’s also losing upside momentum as seen in D MACD. While another rise cannot be ruled out, upside should be capped by 20204.58 high. Break of 18599.68 support will bring deeper fall to 38.2% retracement of 14784.03 to 19389.39 at 17630.14. Further break there will argue that the corrective pattern from 20204.58 has already started the third leg.

    FTSE’s outlook is also similar, even though it’s an outperformer comparing to the US stock indexes. D MACD suggests that FTSE is also losing momentum. In case of another rise, upside should be limited by 8908.82 high. Break of 8604.80 support will bring deeper pullback to 38.2% retracement of 7544.83 to 8824.00 at 8335.36. Further break there will argue that corrective pattern from 8908.82 has started the third leg already.

    Even the record breaking DAX is also losing momentum as seen in D MACD. Strong resistance is expected from 100% projection of 17024.82 to 23476.01 from 18489.91 at 24940.97 to limit upside, in case of another rally. Bring of 23274.85 will indicate that a correction has started to 55 D EMA (now at 22848.19) and below.

    Dollar Index to Engage in More Consolidations before Downside Breakout

    Dollar Index gyrated in range above 97.92 short term bottom last week. Outlook is unchanged that it’s now in consolidation to the decline from 110.17. The pattern might be set to extend further due to market uncertainty. But in case of another rise, strong resistance should be seen from 38.2% retracement of 110.17 to 97.92 at 102.60 to limit upside. Firm break of 97.92 will confirm down trend resumption.

    Also, fall from 110.17 is seen as the third leg of the pattern from 114.77 (2022 high). On resumption, next target is 100% projection of 114.77 to 99.57 from 110.17 at 94.97.

    EUR/USD Weekly Outlook

    EUR/USD’s price actions from 1.1572 are seen as a corrective pattern to rally from 1.0176, which might still be extending. On the upside, above 1.1417 will bring retest of 1.1572 first. On the downside, below 1.1209 will target 1.1064 again. But overall, rise from 1.0176 is expected to resume after the correction completes at a later stage.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0856) holds.

    In the long term picture, the case of long term bullish reversal is building up. Sustained break of falling channel resistance (now at around 1.1290) will argue that the down trend from 1.6039 (2008 high) has completed at 0.9534. A medium term up trend should then follow even as a corrective move. Next target is 38.2% retracement of 1.6039 to 0.9534 at 1.2019.



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  • Tariff Truce Wobbles at Halfway Mark; Risk Sentiment Falters on Renewed Threats

    Tariff Truce Wobbles at Halfway Mark; Risk Sentiment Falters on Renewed Threats


    Trade war roared back into focus late last week, derailing fragile market sentiment already strained by concerns over the ballooning US deficit. The catalyst came in the form of a sharp threat from US President Donald Trump on European Union imports. This abrupt escalation shattered hopes that the 90-day truce period would lead to calmer trade diplomacy, and instead reignited fears of a broader trade war just as markets were struggling to absorb fiscal uncertainty.

    US equities tumbled in response, with heavy losses across major indices, while European bourses weren’t spared either. Risk aversion swept through global markets, pushing investors toward traditional safe-haven assets.

    Dollar, which had already been under pressure from Moody’s downgrade and debt sustainability concerns, took another hit and ended the week as the worst-performing major currency. Confidence in US assets appears increasingly fragile as both fiscal and trade risks deepen.

    Aussie followed as the second weakest, burdened not just by global risk aversion but also by the dovish tone from RBA earlier in the week, while Loonie also suffered at the bottom.

    In contrast, the Japanese Yen and Swiss Franc surged to the top of the FX leaderboard, clearly benefiting from haven demand. Gold also staged a powerful rally, with its bullish momentum signaling deep market unease.

    Euro and Sterling settled in the middle of the pack. While the Euro showed some vulnerability to Trump’s tariff threat, it remained relatively supported. Sterling, meanwhile, was underpinned by a series of stronger-than-expected economic data, including upside surprises in inflation and retail sales.

    Trade War Returns to Spotlight as Trump’s Tariff Threat on EU Hammers Markets, Dollar Slides

    The global financial markets, which had been preoccupied with US sovereign debt concerns and the impact of a Moody’s downgrade earlier in the week, saw sentiment quickly shift as trade war tensions re-emerged. The trigger came late Friday, when US President Donald Trump declared he is “recommending a straight 50% Tariff on the European Union,” citing frustration with stalled negotiations. The announcement stunned investors and reignited fears of a wider spiral, sending US stocks and Dollar sharply lower into the weekly close.

    Equity markets, which had enjoyed a strong six-week rally driven by optimism from the 90-day tariff truce with major trading partners, were caught off guard. As little tangible progress was made halfway through the truce period, Trump’s shift back to hardline tactics was interpreted as a sign that the administration may be preparing to walk away from negotiation tables. The renewed threat has not only clouded the outlook for trade but also raised concerns over the policy direction in Washington.

    Speaking at a White House event, Trump made clear his stance: “I’m not looking for a deal. I mean, we’ve set the deal. It’s at 50%.” Treasury Secretary Scott Bessent echoed the sentiment, suggesting the tariff threat was intended to “light a fire under the EU.” These remarks hinted at a deliberate strategy to escalate pressure on Brussels ahead of the June 1 deadline.

    In response, European Commission Vice President Maros Sefcovic stated the EU remains “fully engaged” and committed to securing a mutually beneficial deal. He emphasized that negotiations must be “guided by mutual respect, not threats,” and warned the EU stands ready to defend its interests. Despite diplomatic overtures, the tone on both sides suggests little ground has been gained, making further market volatility likely as the deadline nears.

    In summary, the re-ignition of trade tensions with the EU has thrown markets back into uncertainty. With US fiscal policy already under scrutiny and tariff escalation threatening global growth, investors may remain on the defensive until clearer direction emerges, either through a breakthrough in negotiations or a change in Washington’s rhetoric. Until then, volatility and risk aversion are likely to dominate.

    Technically, DOW’s extended decline last week indicates that a short term top was already formed at 42842.04. More consolidations would be seen with risk of deeper decline. But overall near term outlook will stay bullish as long as 38.2% retracement of 36611.78 to 42842.04 at 40462.08 holds.

    However, rise from 36611.78 is seen as the second leg of the medium term corrective pattern from 45073.63 high. So, even in case of another rise, DOW should start to lose momentum again as it approaches 45073.63.

    Dollar Index’s late break of 99.17 support argues that corrective rebound from 97.92 might have completed at 101.97 already. Further decline is now in favor in the near term to retest 97.92 low first. Firm break there will resume the larger down trend to 61.8% projection of 100.17 to 97.92 from 101.97 at 94.40.

    European Stocks Also Hit by Tariff Shock; DAX and CAC Signal Near-Term Tops

    European equities also slumped in tandem with the US on Friday on Trump’s tariff threat. The announcement dealt a direct blow to investor sentiment across the region, with Germany’s DAX and France’s CAC 40 each falling around -1.6% on the day.

    However, Germany’s equity outlook, and to a lesser extent the region’s, should remain underpinned by fiscal expansion at both national and EU levels, which could cushion downside risks and support a medium-term bullish outlook.

    Technically, the late selloff in DAX indicates that 24154.24 record high should already be a short term top. Near term risk is mildly on the downside for pull back to 55 D EMA (now at 22610.12). Nevertheless, strong support should emerge from 38.2% retracement of 18489.91 to 24154.24 at 21989.23 to contain downside to bring rebound.

    CAC should have formed a short term top at 7955.53, and turned into consolidations. Given CAC’s underperformance comparing to DAX, there is risk of dipping through 38.2% retracement of 6763.76 to 7955.53 at 7500.27. But strong support should be seen above 61.8% retracement at 7219.02 to contain downside.

    Aussie Under Fire as RBA’s Dovish Cut Fuels July Easing Bets

    Aussie ended last week as one of the weakest performers among major currencies, additionally weighed down by the dovish 25bps rate cut from RBA. While the move was widely expected, RBA Governor Michele Bullock revealed that the board had actively considered a larger 50bps reduction before settling on the more measured step.

    Bullock also deliberately leave the door open for fasting easing, as she indicated that “if we need to move quickly, we can. We have got space.”

    Alongside the cut, RBA downgraded its 2025 GDP growth forecast from 2.1% to 1.9% and revised year-end CPI projections sharply lower, from 3.7% to 3.0%.

    These adjustments cemented the market’s view that the easing cycle has room to run, with rate futures now assigning more than 50% probability to another cut as early as July and fully pricing in a second 25bps cut by August.

    Technically, AUD/JPY failed to sustain above 38.2% retracement of 109.36 to 86.03 at 94.94, and retreated from there. Focus is now on 92.10 cluster support (38.2% retracement of 86.03 to 95.63 at 91.96).

    Strong rebound from 91.96/92.10 will retain near term bullishness. Further break of 95.63 will solidify the bullish case that whole fall form 109.36 has completed as a three-wave correction to 86.03.

    However, firm break of 91.96/92.10 will argue that the rebound has completed. More importantly, the down trend from 109.36 is likely still in progress for another low below 86.03.

    Gold Eyes Fresh Record High as Safe Haven Flows Persist

    Gold rallied strongly last week, supported by a confluence of factors including persistent concerns over the US fiscal outlook and escalating global trade tensions.

    With global equities showing signs of strain and long-dated US Treasury yields on the rise, capital has flowed steadily into Gold. The precious metal’s resilience suggests it may be gearing up to break above the record high of 3500, especially if risk aversion intensifies in the days ahead.

    Technically, corrective decline form 3499.79 should have completed with three waves down to 3120.34. That came after strong support from 55 D EMA (now at 3177.32) and 38.2% retracement of 2584.24 to 3499.79 at 3150.04.

    Further rise is expected as long as 3279.22 support holds, to retest 3499.79 high first. Decisive break there will resume larger up trend to 61.8% projection of 2584.24 to 3499.79 from 3120.34 at 3686.14 next.

    GBP/USD Weekly Outlook

    GBP/USD’s up trend resumed by breaking through 1.3442 resistance last week. Initial bias remains on the upside this week for 61.8% projection of 1.2706 to 1.3442 from 1.3138 at 1.3593, and then 100% projection at 1.3874. On the downside, below 1.3389 minor support will turn intraday bias neutral again first.

    In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.2843) holds, even in case of deep pullback.

    In the long term picture, for now, price actions from 1.0351 (2022 low) are still seen as a corrective pattern to the long term down trend from 2.1161 (2007 high) only. However, firm break of 1.4248 resistance (38.2% retracement of 2.1161 to 1.0351 at 1.4480) will be a strong sign of long term bullish reversal.



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  • Sterling and Dollar Lead as Trade Deal Grabs Attention

    Sterling and Dollar Lead as Trade Deal Grabs Attention


    Last week was dominated by developments out of the US and UK, not just because of monetary policy decisions, but also the unexpected announcement of a US-UK trade deal. Fed’s hold and BoE’s cut were were largely overshadowed by the surprise trade breakthrough.

    Importantly, the structure of the agreement offered valuable insights into the US administration’s trade strategy which could set the template for negotiations with other key partners.

    Despite the significance of the agreement, market reactions were relatively restrained. Major US stock indexes and the UK’s FTSE 100 closed slightly lower. Investors remain cautious about the deal’s practical impact and the broader global developments.

    Still, the news did provide meaningful support to the currencies involved: Sterling and Dollar emerged as the week’s top performers. Japanese Yen took third place

    In contrast, Loonie underperformed at the bottom. Kiwi and Swiss Franc also lagged. Euro and Aussie ended in the middle of the pack.

    Historic Pact, Modest Reaction: Investors Cautious Despite US-UK Trade Breakthrough

    While the US-UK trade deal marked a diplomatic milestone, the first bilateral agreement since the sweeping tariff measures enacted in April, financial markets responded with notable indifference. Equities initially rallied on Thursday following the announcement, but the enthusiasm quickly faded. All three major US indexes reversed earlier gains and ended the week in the red, with S&P 500 falling -0.5%, NASDAQ down -0.3%, the DOW slipping -0.2%.

    The structure of the agreement reveals much about the current US approach to trade. The UK, given its trade surplus with the US and its unparalleled security ties, likely received the most favorable terms Washington is willing to offer. If this is the best-case scenario, expectations for more comprehensive or lenient agreements, even with regions like the EU or Japan, may need to be tempered.

    A 10% blanket tariff remains on virtually all UK exports to the US. That is likely the floor for future negotiations with other partners. This baseline may not only serve as a protective measure but also as a consistent revenue stream to fund Trump’s domestic agenda, including tax cuts. Though minor exemptions may be granted, such as on UK automobiles and metals, they are expected to be case-specific rather than systemic.

    What sets this agreement apart is the emphasis on expanding market access for US companies in the UK, particularly in agriculture and industries. It suggests that future trade arrangements will be designed less to eliminate tariffs wholesale and more to create bilateral corridors of opportunity favoring U.S. exporters, negotiated country by country.

    In that context, the muted market response becomes clearer. Investors recognize that this agreement doesn’t signify a return to pre-tariff global trade norms. With 90 days remaining in the current tariff truce, the road ahead includes complex negotiations not only with China and the EU but also within supply chains deeply impacted by the new tariff regime. Optimism about progress must be balanced against the reality that a systemic overhaul is still underway, and clarity will be slow to emerge.

    Technically, DOW’s rebound from 36611.78 is seen as the second leg of the corrective pattern from 45073.63 high. Further rise is in favor as long as 40759.41 support holds. However, DOW could start to lose momentum more apparently above 61.8% retracement of 45073.63 to 36611.78 at 41841.20. Break of 40759.41 will indicate short term topping, and bring pullback first.

    June Fed Cut Going Off the Radar, July Doubtful, Dollar Extends Modest Rise

    Fed held its benchmark interest rate unchanged at 4.25–4.50% last week, as widely anticipated. The key message from Fed Chair Jerome Powell was one of restraint: rate cuts are not imminent. Powell emphasized that with the current level of uncertainty surrounding US trade policy and tariffs, “it’s not a situation where we can be preemptive.” He reiterated that if the current size and scale of tariffs remain in place, the US could face the dual challenge of rising inflation and unemployment.

    Cleveland Fed President Beth Hammack’s comments from an interview published on Friday is worth a mention. She noted that the breadth of tariff measures already discussed and implemented raises “real questions” about their ultimate economic impact. As such, she suggested it may take longer before Fed can confidently begin to ease rates.

    Crucially, Hammack pointed out that there won’t be much new data between now and the next FOMC meeting in June, limiting the Fed’s ability to reassess the situation. Her comments align with current market pricing, which assigns just a 17.2% probability to a June rate cut.

    Looking ahead, July is now the more likely inflection point, though conviction is still weak. Market-implied odds for a 25bps cut in July stand at around 60%. Investors remain far from convinced a rate move is locked in.

    Dollar Index gyrated higher last week, partly supported by expectations that Fed interest rate will stay high for longer, and partly support by improved appetite on US assets as trade negotiations made progress.

    Technically, corrective rise from 97.92 could extend higher towards 55 D EMA (now at 102.08). But strong resistance should be seen from 38.2% retracement of 110.17 to 97.92 at 102.60 limit upside. On the downside, break of 99.17 support would argue that the corrective recovery has completed earlier than expected, and bring retest of 97.92 low next.

    BoE Vote Split Surprises, Top Mover GBP/CAD’s Rally Limited

    BoE delivered a 25bps rate cut to 4.25% as widely anticipated, but the composition of the vote took markets by surprise. The Monetary Policy Committee split three ways: five members supported the cut, two hawkish voices—Catherine Mann and Chief Economist Huw Pill—voted for no change, while Swati Dhingra and Alan Taylor pushed for a deeper 50bps reduction. The presence of two hawkish hold votes gave the overall decision a more cautious tone than markets had anticipated Market expectations for a gradual 25bps-per-quarter path remain intact.

    BoE Governor Andrew Bailey addressed the impact of global trade tensions in a speech following the decision, and raised an interesting perspective. He highlighted how different global tariff scenarios could affect the UK economy in divergent ways. Most notably, Bailey stressed that a demand-driven downside—where both inflation and activity fall—would require a stronger monetary response compared to a supply-driven upside shock, where inflation rises but growth slows. The key distinction lies in the trade-off: when inflation and activity move in opposite directions, policy decisions become more complex and risk-laden, requiring a more delicate balance.

    British Pound ended the week as the strongest major currency. GBP/CAD was the top mover, rising 1.13%. Still, price action in GBP/CAD doesn’t show clear strength. The bounce even failed to break the prior week’s high of 1.8598.

    Technically, GBP/CAD is seen as in consolidation pattern from 1.8777, with current rise from 1.7980 as the second leg. Further rally might be seen but upside should be limited by 1.8777.

    On the downside, break of 1.8280 support will argue that the third has started. Deeper fall should then follow to 1.7980, or even to channel support at around 1.7700.

    AUD/USD Weekly Report

    AUD/USD retreated after edging higher to 0.6511 last week, but downside is contained above 0.6364 support so far. Initial bias stays neutral this week first. On the upside, break of 0.6511 will resume the rally from 0.5913 to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, considering bearish divergence condition in 4H MACD, break of 0.6364 support should confirm short term topping. Intraday bias will be turned back to the downside for 38.2% retracement of 0.5913 to 0.6511 at 0.6283.

    In the bigger picture, as long as 55 W EMA (now at 0.6443) holds, down trend from 0.8006 (2021 high) should resume later to 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. However, sustained trading above 55 W EMA will argue that a medium term bottom was already formed, and set up further rebound to 0.6941 resistance instead.

    In the long term picture, prior rejection by 55 M EMA (now at 0.6764) is taken as a bearish signal. But for now, fall from 0.8006 is still seen as the second leg of the corrective pattern from 0.5506 long term bottom (2020 low). Hence, in case of deeper decline, strong support should emerge above 0.5506 to contain downside to bring reversal.



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  • Global Risk Sentiment Brightens, But Caution Lingers Around US Assets

    Global Risk Sentiment Brightens, But Caution Lingers Around US Assets


    Global risk sentiment showed further improvement last week, with stock markets around the world posting impressive gains. Although headlines continued to focus on the confusing state of U.S.-China trade tensions, there was quiet but notable progress on multiple trade fronts, including US talks with Japan, South Korea and India.

    US equities rebounded alongside the global rally even though they still lack the decisive momentum needed to confirm that a durable bottom has been established. European markets, on the other hand, painted a far more encouraging picture.

    The strength of the rebound in European equities suggests that the worst of the April selloff may already be behind us. Moreover, there is a growing sense that the sharpest phase of the tariff crisis has passed, and that incremental improvements could take root from here.

    The shift in sentiment was clearly reflected in the currency markets too. Kiwi ended the week as the strongest performer, followed by Aussie and Sterling. All three currencies benefited from the rebound in risk appetite, with investors rotating out of safe-haven assets and into higher-yielding or growth-linked currencies. On the other end, the safe-haven trio—Swiss Franc, Yen, and Euro—underperformed, as investors rotated away from defensive assets amid easing fears. Dollar and Loonie finished in the middle of the pack.

    While the equity rally suggests a return of broader risk appetite, investor interest in US assets has yet to fully recover. This is likely due to ongoing concerns over U.S. policy consistency and the uncertain path for trade negotiations. Until clearer signals emerge from Washington and stronger technical confirmations develop in US stock markets, Dollar may continue to lag behind the recovery seen elsewhere.

    Markets Rally on Trade Progress, But Major Hurdles with China and EU Remain

    Global stock markets extended their strong rally last week. There seems to be growing optimism that the worst phase of the tariff crisis may be behind us, at least for now. Trade negotiations appear to be picking up momentum across several fronts, offering hope for partial resolutions. Recent economic data, particularly PMI surveys from the Eurozone and the US, suggest that businesses have been bracing well for uncertainty, cushioning the blow from trade tensions.

    In an interview with Time magazine on Friday, US President Donald Trump said he expects “many” trade deals to fall into place over the next three to four weeks. Positive signals are emerging from several bilateral channels too. Japan’s Economy Minister Ryosei Akazawa is set to visit Washington this week for a second round of talks. US Treasury Secretary Scott Bessent has hinted that a US-South Korea trade deal could be finalized as early as next week. US and India are reported to have agreed on the terms for a bilateral deal covering trade in goods, services, and critical sectors like e-commerce and minerals. Switzerland also announced it was among a group of 15 countries given “somewhat preferential treatment” in tariff talks, with Swiss President Karin Keller-Sutter indicating that the 90-day truce could be extended for active negotiating partners.

    However, not all fronts are moving smoothly. Despite initial discussions, talks between the US and the EU have yet to yield tangible compromises. Progress remains slow, even in setting a basic framework for formal negotiations. The slow movement with Europe highlights that achieving broad global de-escalation is far from guaranteed.

    Meanwhile, the situation with China remains the murkiest. Rumors continue to swirl about informal discussions, but no clear confirmation has been provided by either side. Trump insists that some communication with Beijing is ongoing, while Chinese officials deny that any talks are happening. Although there were earlier hopes for de-escalation, Trump has reiterated that tariffs on China will remain in place unless “they give us something substantial.”

    Without a clear breakthrough or even a defined negotiation channel, US-China trade tensions remain a major overhang for global markets, tempering some of the broader optimism.

    European Strength Offers Hope, Caution Persists for US Indexes

    While US stocks have staged a strong rebound recently, the technical backdrop remains somewhat unconvincing. The recovery lacks decisive confirmation, particularly in DOW. In contrast, the outperformance seen in European markets is offering hope that the worst of the market correction could already be behind us. Particularly in the UK and Germany, technical signals suggest that early April’s steep selloff may have been a medium-term shakeout rather than the start of a long-term bearish trend.

    In the UK, FTSE ‘s breach of 55 D EMA (now at 8420.51) and break of 55 W EMA (now at 8260.66) suggest that corrective fall from 8900.82 has already completed at 7554.83. Price actions from 8908.82 is likely just a medium term consolidations pattern, rather than a long term bearish trend reversal. The range of the consolidations should be set between 38.2% retracement of 4898.79 to 8902.82 at 7376.99 and 8908.82.

    Nevertheless, for the near term, while further rise could be seen as long as 8166.53 support holds, FTSE should start to lose momentum above 55 D EMA.

    Germany’s DAX tells a similar story. The index’s corrective fall from the 23476.01 has likely completed at 18489.91. What we are seeing now is a medium-term consolidation rather than a full trend reversal. The range is set between 38.2% retracement of 8255.65 to 23476.01 at 17661.83 and 23476.01.

    For the near term, further rise is in favor as long as 21044.61 support hold. But DAX should lose momentum as it approaches 23476.01 high.

    Turning to the US, developments in Europe suggest that DOW may eventually find solid support from 38.2% retracement of 18213.65 to 45073.63 at 34813.12 to contain downside even in case of another fall, should another selloff occur. Still, firm break of 55 D EMA (now at 41361.53) is needed to indicate that fall from 45703.63 has completed. Or risk will remain on the downside for the near term.

    NASDAQ’s picture is a little bit more promising than DOW. Firm break of 55 D EMA (now at 17604.27) will indicate that fall from 2024.58 has completed at 14783.03, after defending 38.2% retracement of 6631.42 to 20204.58 at 15019.63. That should set the range for medium term consolidations for NASDAQ.

    Dollar Struggles Despite Risk Stabilization, Policy Uncertainty Remains a Drag

    While risk sentiment has shown signs of stabilizing in global markets, and even hints at a return of risk appetite, this does not necessarily imply a renewed interest in US assets. In particular, both the Dollar and US. Treasuries continue to face headwinds until investors see more policy consistency from the Trump administration. Markets remain wary of abrupt shifts in trade policy, tariff threats, and broader economic strategies, which cloud the overall investment climate for Dollar-based assets.

    Another important factor is the evolving US trade balance. Should the Trump administration succeed in narrowing the US trade deficit, there could be a meaningful structural impact on the demand for Dollar-denominated assets. A narrower deficit would mean fewer surplus Dollars circulating abroad to be recycled into US Treasuries and other assets, potentially pushing yields higher and softening the Dollar’s appeal at the same time, particularly if fiscal deficits remain large.

    Technically, Dollar Index’s recovery from 97.92 short term bottom is lacking decisive momentum. As long as 100.27 resistance holds, near term risk will remain on the downside for another fall through 97.92 sooner rather than later. Break of 97.92 will pave the way to 100% projection of 114.77 to 99.57 from 110.17 at 94.97 next.

    Nevertheless, firm break of 100.27 would set the stage for stronger rebound to 38.2% retracement of 110.17 to 97.92 at 102.60, even still as a corrective move.

    NZD/JPY Extends Rebound, Bullish Reversal Hinges on 87.35 Break

    NZD/JPY extended the rebound from 79.79 last week as risk sentiment continued to improve. The breach of falling trend line resistance is a tentative sign that fall from 92.45 has completed at 79.79. Further rise is now in favor as long as 83.88 support holds.

    On the upside, decisive break of 87.35 cluster resistance (38.2% retracement of 99.01 to 79.79 at 87.13) will argue that corrective decline from 99.01 has already completed too. Further rally should then be seen to 61.8% retracement at 91.66.

    However, rejection by 87.13/35 will keep near term outlook bearish. Break of 83.88 support will bring retest of 79.79, and possibly resumption of the down trend from 99.01 too.

    EUR/CHF Weekly Outlook

    EUR/CHF’s stronger than expected rebound last week suggests that fall from 0.9660 has already completed at 0.9218, ahead of 0.9204 low. Rebound from 0.9218 is either a corrective move, or the third leg of the pattern from 0.9204. In either case, further rally is expected this week as long as 0.9336 support holds, towards 0.9660. However, break of 0.9336 will bring retest of 0.9204/18 support zone.

    In the bigger picture, prior rejection by long-term falling channel resistance (now at 0.9555) retains medium term bearishness. That is, down trend from 1.2004 (2018 high) is still in progress. Firm break of 0.9204 (2024 low) will confirm resumption. This will remain the favored case as long as 0.9660 resistance holds.

    In the long term picture, overall long term down trend is still in force in EUR/CHF. Outlook will continue to stay bearish as long as 55 M EMA (now at 0.9962) holds.



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  • A Whirlwind Week Leaves US Assets Reeling Amid Tariff Turmoil

    A Whirlwind Week Leaves US Assets Reeling Amid Tariff Turmoil


    It has been a brutally volatile week across global markets, driven by a whirlwind of US tariff implementations, abrupt reversals, and rapid retaliatons. Investors were left scrambling to make sense of the White House’s constantly shifting trade stance. We won’t attempt to recap every step of the tariff saga, when even members of the administration seemed unable to track the unfolding policy moves.

    The most consequential outcome of the week was the broad-based pressure on US assets. The sharp selloff in Treasuries drew the most concern, raising alarms over whether the bedrock of the financial markets is beginning to erode. That said, while the jump in yields was certainly eye-catching, it has yet to cross the threshold into full-blown crisis territory.

    US stocks, after plunging to their lowest levels in months mid-week, managed to stage a strong rebound. Key technical support levels held, keeping the long-term uptrend intact—for now. However, that doesn’t mean the risks are gone. If the mounting tariffs ultimately tip the US into recession, the bounce may prove to be nothing more than a bear market rally.

    Dollar also struggled, ending as the week’s worst performer. Despite rising yields and some risk-off mood, neither provided the greenback any meaningful support. Dollar Index is now on the verge of resuming its broader medium-term downtrend.

    In the broader forex markets, Sterling and Yen also underperformed. On the other end, Swiss Franc stood tall as the market’s safe-haven anchor, followed by Australian and New Zealand Dollars. Euro and Canadian Dollar ended the week in middle ground.

    Tariff Shock and Yield Spike Rattle Markets; Not a Crisis Yet, But Warnings Are Flashing

    The essence of the market chaos: US reciprocal tariffs officially went into effect—only to be paused within hours to allow room for negotiation, except for China. On the surface, that might have calmed markets. And indeed, it opened the door to dialogue, with Taiwan reportedly holding the first video talks, while delegations from the EU and Japan are en route for face-to-face meetings in Washington in the coming days.

    But on the other side of the equation was deepening hostilities between the US and China. Both sides escalated tariffs beyond economically meaningful levels, effectively moving toward full-scale trade decoupling. The narrative is no longer about negotiation—it’s about economic separation.

    What spooked markets the most wasn’t just the trade conflict, but the simultaneous selloff in US assets—equities, Dollar, and perhaps most importantly, Treasuries. This rare alignment of outflows suggested something deeper: a loss of confidence. Some speculate this is precisely why US President Donald Trump reversed course and paused the reciprocal tariffs—because of the violent reaction in the bond market.

    Indeed, Trump and his economic advisors have repeatedly cited the importance of keeping bond yields low to support the broader economic agenda. As yields spiked and refinancing costs soared, concerns within the White House likely escalated. A persistent rise in yields would undermine everything from fiscal stimulus to housing affordability and corporate balance sheets.

    There are several theories about what triggered the Treasury selloff. Some point to the unwinding of the “Treasury basis trade”—a leveraged strategy used by hedge funds that collapsed under margin stress. Others blame foreign governments, particularly China, for dumping US debt in retaliation.

    But perhaps the most straightforward explanation is the simplest: long-term investors are losing interest in US assets, shifting instead into alternatives like Gold in this time of uncertainty, which surged to fresh record highs this week.

    Importantly, not all global bond markets are suffering. Germany’s 10-year yield remained within a calm 2.5–2.7% range.

    Japan’s 10-year yield held steady around 1.3–1.4% after being pulled up by US yields.

    In contrast, US 10-year yields soared, nearing 4.6%, a stark rise from just 3.89% a week ago.

    Technically, the picture in US 10-year yields is worrying but not yet in panic mode. For the near term, the decline from 4.809 should have bottomed at 3.886% as a correction. As long as 4.289 support holds, further rise toward 4.809 is expected.

    That said, this is still within the bounds of a broad consolidation pattern from the 2023 peak at 4.997%. Current rally might just be one of the legs.

    However, if 10-year Treasury yields were to break decisively above the symbolic 5% level, the impact could be seismic. Borrowing costs across the economy would surge along, from mortgages to corporate debt, tightening financial conditions at a pace that could choke off growth.

    Beyond the US, such a move could trigger forced selling by foreign holders, particularly if trade tensions worsen or FX reserves are rebalanced. The result could be a broad and disorderly repricing of global assets, especially in equity markets and emerging economies, ushering in a new chapter where financial stability, rather than inflation, becomes the dominant concern.

    Stock Rebound Preserves Uptrend, But Recession Could Break the Spell

    The steep intra-week selloff in US equities, among the sharpest in years, has been met with an equally aggressive rebound. Key technical levels held, for example in DOW, which bounced decisively ahead of the 55-month EMA, preserving the long-term uptrend from the 2009 low. For now, market action points to a deep medium-term correction rather than the beginning of a full-blown bear market. However, it would be premature to call the all-clear.

    Many economists and central bankers globally have described the US tariff hikes as a textbook stagflationary shock—simultaneously dampening growth and fueling price pressures. According to estimates from the European Commission, the existing 10% blanket tariffs and the 25% metal duties could shave 0.8% to 1.4% off US GDP by 2027. For the EU, the impact is more muted at around 0.2%. But if the tariff regime becomes entrenched or if retaliations escalate further, those numbers could rise dramatically—especially with US-China tariffs not yet fully factored in.

    Inflation expectations are also flashing warning signs. While the March US CPI data delivered some relief by slowing more than expected, the University of Michigan’s consumer survey painted a grimmer picture. One-year inflation expectations surged to 6.7%—a level last seen in 1981—up sharply from 5.0% in March. Inflation could reaccelerate ahead if supply shocks persist or if inflation expectations become unanchored.

    Adding to the concern is the historical warning from the yield curve, something that we have mentioned a number of times. The spread between the US 10-year and 2-year Treasuries—the classic recession signal—inverted in mid-2022 and uninverted last August. Historically, this un-inversion has preceded recessions around 6 to 12 months. That puts the timeline for a economic downturn squarely within 2025. That clock is ticking.

    Technically, DOW’s defense of 55 M EMA (now at 3558.57) keeps long-term uptrend from 6369.96 (2009 low) alive. For the near term tough, firm break of 61.8% retracement of 45703.63 to 36611.78 at 41841.20 is needed to confirm that correction from 45703.63 has completed. Without that, the best investors can expect is range-bound consolidation.

    The worst-case scenario? Decisive break of 55 M EMA would open up deeper fall to 38.2% retracement of 6469.95 to 45703.64 at 30327.02 at least.

    Dollar Index Cracks 100 Psychological Level, Heading to 95?

    Dollar Index dived to as low as 99.01 last week as fall from 110.17 reaccelerated. The break of 100.15 support (2024 low) affirms the case that whole down trend from 114.77 (2022 high) is resuming. Further break of 99.57 (2023 low) should confirm this bearish case. Meanwhile, near term risk will stay heavily on the downside as long as 103.22 support turned resistance holds, even in case of recovery.

    So where will Dollar Index head to? Price actions from 114.77 are so far still viewed as a corrective pattern. The next line of defense could come at 38.2% retracement of 70.69 (2008 low) to 114.77 at 97.93. If not, the next target will be 100% projection of 114.77 to 99.57 from 110.17 at 94.97.

    The development in EUR/USD should also be considered. Last week’s break of 1.1274 resistance (2023 high) should confirm resumption of whole rise from 0.9534 (2022 low). More importantly, EUR/USD is now breaking through the falling channel resistance that lasted more than 1.5 decade. Rise from 0.9534 is likely to extend to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916, or slightly further to 38.2% retracement of 1.6039 (2008 high) to 0.9534 at 1.2019.

    Given the EUR/USD’s bullish outlook, and that Yen is also strong against Dollar, Dollar index is more likely to hit above mentioned 94.97 projection level than not.

    USD/CAD Weekly Outlook

    USD/CAD’s fall from 1.4791 high continued last week and accelerated through 1.3946/76 key support zone. There is no sign of bottoming yet. Initial bias stays on the downside this week for 100% projection of 1.4791 to 1.4150 from 1.4414 at 1.3773. On the upside, break of 1.4150 support turned resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

    In the bigger picture, the break of 1.3976 resistance turned support (2022 high) and 55 W EMA (now at 1.3992) indicates that a medium term is already in place at 1.4791. Fall from there would either be a correction to rise from 1.2005, or trend reversal. In either case, firm break of 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727 will pave the way back to 61.8% retracement at 1.3069.

    In the long term picture, as long as 55 M EMA (now at 1.3479) holds, up trend from 0.9056 (2007 low) should still resume through 1.4791 at a later stage. However, sustained trading below 55 M EMA will argue that the up trend has already completed, with rise from 1.2005 to 1.4791 as the fifth wave. 1.4791 would then be seen as a long term top and deeper medium term correction should then follow.



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  • Markets Soar on Tariff Truce, Reentry Signal or Perfect Exit Opportunity?

    Markets Soar on Tariff Truce, Reentry Signal or Perfect Exit Opportunity?


    US stocks staged a powerful relief rally overnight, snapping back from the recent tariff-induced collapse. All three major indexes posted gains not seen in years, marking a dramatic reversal in sentiment. Yet, despite the scale of the rebound, it remains unclear whether this marks the beginning of genuine investor re-entry—or simply a massive short-covering rally triggered by a temporary policy U-turn.

    What markets need now isn’t just a pause, but clarity and consistency. If the 90-day negotiation window devolves into more confusion, or if tariffs on China continue to escalate, the gains seen today could vanish just as quickly as they arrived.

    The crux of the matter is whether yesterday’s rally represents just a reflexive bounce driven by short-covering and algorithmic momentum? With the market having been stretched to deeply oversold levels after recent collapse, the slightest spark was bound to trigger a sharp relief jump.

    More improtantly, it is uncertain if long-term investors view this bounce as a reason to re-engage with US assets, or merely as an opportunity to exit at better levels. If the latter proves true, this rally could quickly fade into yet another bear market trap.

    The catalyst behind the surge came from US President Donald Trump’s abrupt announcement that new 10% tariffs on most US trade partners—technically in effect just hours earlier—would be paused for 90 days to facilitate negotiations.

    In contrast, the administration simultaneously escalated its economic conflict with China, announcing an immediate increase in tariffs on Chinese imports to 125%. The White House reinforced the pressure with a warning: “Do not retaliate and you will be rewarded.”

    Technically, for DOW, this week’s low at 36,611.78 offers a potential base for near-term consolidation, especially given its proximity to 55 M EMA (now at 35595.76). However, any upside is likely to be capped by 61.8% retracement of 45073.63 to 36611.78 at 41841.20 to set the range for near term consolidations, well, probably for 90 days? Sustained break of 41841.20 is needed before declaring that this tariff crisis is over.

    In the currency markets, after all the volatility, Aussie is currently the strongest one for the week so far, followed by Kiwi, and then Loonie. Sterling is the worst performer, followed by Dollar, and then Euro. Swiss Franc and Yen are positioning in the middle.

    In Asia, at the time of writing, Nikkei is up 8.01%. Hong Kong HSI is up 1.96%. China Shanghai SSE is up 0.93%. Singapore Strait Times is up 5.73%. Japan 10-year JGB yield is up 0.045 at 1.327. Overnight, DOW rose 7.87%. S&P 500 rose 9.52%. NASDAQ rose 12.16%. 10-year yield rose 0.138 to 4.400.

    Fed minutes highlight pre-tariff caution, hint at tough tradeoffs ahead

    The minutes from the FOMC’s March meeting revealed growing concern among policymakers about the economic outlook, particularly amid rising uncertainty. While these discussions occurred before the dramatic escalation of the US tariff war in April, the insights remain valuable.

    “Almost all” participants viewed inflation risks as tilted to the “upside”, while “downside” risks to employment and growth were also flagged—setting the stage for a policy dilemma.

    Some officials highlighted that the Fed could soon face “difficult tradeoffs,” especially if inflation remains elevated while job and growth prospects deteriorate.

    Notably, a few participants also warned that an “abrupt repricing of risk in financial markets” could magnify the impact of any negative economic shocks. Given what has since transpired with global markets in April, these comments seem prescient.

    While the minutes may now appear somewhat outdated, they nonetheless provide a crucial baseline for understanding how the Fed might react in an increasingly fragile environment.

    Japan’s PPI accelerates to 4.2% while import costs ease

    Japan’s PPI rose 4.2% yoy in March, a slight acceleration from February’s 4.1% yoy and topping expectations of 3.9% yoy rise. The increase was broad-based, with notable gains in food prices, which rose 3.1% yoy, and energy costs, with petroleum and coal prices surging by 8.6% yoy.

    Despite the uptick in domestic producer prices, import costs in Yen terms fell -2.2% yoy in March, extending the -0.9% decline in February. Export prices, however, rose a modest 0.3% yoy, slowing sharply from February’s 1.7% yoy growth.

    China’s CPI falls -0.1% yoy in March, PPI highlights persistent deflationary pressures

    China’s consumer inflation remained in negative territory for a second straight month in March, with CPI falling -0.1% yoy, missing expectations of 0.1% yoy increase. While the decline was narrower than February’s -0.7% yoy, it still reflects subdued demand pressures across the economy.

    Food prices was a drag, down -1.4% yoy, while service prices provided only modest support, rising 0.3% yoy. Core CPI, which excludes volatile food and energy prices, edged up to 0.5% yoy from 0.3% previously, offering a slight glimmer of resilience.

    However, with headline inflation still hovering around zero and signs of consumer caution persisting, the broader disinflation trend appears entrenched.

    On a monthly basis, CPI dropped -0.4% mom, following February’s -0.2% mom decline, suggesting continued weakness in household spending momentum.

    Meanwhile, producer prices extended their decline for a 30th straight month, with PPI dropping -2.5% yoy, deeper than the expected -2.3%.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.5987; (P) 0.6081; (R1) 0.6249; More…

    AUD/USD’s rebound from 0.5913 extended higher, and it’s now pressing 55 4H EMA (now at 0.6146). Sustained trading above there will should confirm short term bottoming,and bring stronger rebound towards 0.6388 resistance. Nevertheless, rejection by the EMA, followed by break of 0.6057 minor support will bring retest of 0.5913 low, and resumption of larger fall from 0.6941 at a later stage.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 0.6388 resistance holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP RICS Housing Price Balance Mar 2% 8% 11%
    23:50 JPY Bank Lending Y/Y Mar 2.80% 3.10% 3.10% 3.00%
    23:50 JPY PPI Y/Y Mar 4.20% 3.90% 4.00% 4.10%
    01:30 CNY CPI M/M Mar -0.40% -0.20%
    01:30 CNY CPI Y/Y Mar -0.10% 0.10% -0.70%
    01:30 CNY PPI Y/Y Mar -2.50% -2.30% -2.20%
    12:30 CAD Building Permits M/M Feb -0.90% -3.20%
    12:30 USD Initial Jobless Claims (Apr 4) 222K 219K
    12:30 USD CPI M/M Mar 0.20% 0.20%
    12:30 USD CPI Y/Y Mar 2.50% 2.80%
    12:30 USD CPI Core M/M Mar 0.30% 0.20%
    12:30 USD CPI Core Y/Y Mar 3.00% 3.10%
    14:30 USD Natural Gas Storage 60B 29B

     



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  • Market Turmoil Unleashed as Global Tariff Battlelines Drawn

    Market Turmoil Unleashed as Global Tariff Battlelines Drawn


    The global financial markets were shaken last week as US President Donald Trump’s long-anticipated reciprocal tariff plan arrived with a bang. The magnitude of the tariff rates, the number of countries impacted, and the sheer complexity of implementation shocked investors. What could have been a temporary setback quickly spiraled into a broader risk event, fueling sharp selloffs and potentially igniting a full-fledged bear market.

    Matters only worsened after China swiftly responded with its own retaliatory measures. The rhetoric on both sides is heating up. Trump, doubling down on his hardline stance, declared on social media that his “policies will never change” and accused China of panicking. Meanwhile, Chinese officials dismissed the US measures, mockingly claiming, “The market has spoken.”

    With Washington and Beijing locked in confrontation, global focus now turns to how the rest of the world will react. The first clear sign of diplomacy came from Vietnam, where General Secretary To Lam phoned Trump and offered to negotiate a deal to reduce tariffs on US exports to zero, in exchange for equal treatment. If this sets a precedent, it may provide insight into whether Trump’s long-term vision is truly a bilateral web of lowered trade barriers. Or, he has something else in his mind.

    Still, the true litmus test lies ahead with the US-EU trade negotiations. European Commission President Ursula von der Leyen has shown no signs of backing down, warning that the EU “holds a lot of cards” and that “all instruments are on the table.” Europe’s massive market and leadership in tech give it leverage, and should talks break down, the threat of firm and coordinated countermeasures looms large. The shape and tone of the US-EU discussions will be critical in determining whether a full-blown global trade war materializes, or if some de-escalation is still possible.

    In the currency markets, Swiss Franc emerged as the ultimate winner last week, solidifying its position as the top safe-haven asset, while Yen followed closely. Euro, notably, seems to be replacing Dollar as a safe-haven choice. The

    At the bottom of the currency ladder was the Aussie, which was hammered by China’s retaliation, given its economic dependence on Chinese demand. Kiwi followed while Sterling rounded out the bottom three. Loonie, and Dollar saw mixed results—gaining ground against commodity currencies but faltering against their safe-haven counterparts.

    Oversold Bounce Possible, Yet Trade War Escalations Keep Downside Risks Elevated

    Following last week’s brutal stock market selloff, there’s technical scope for a short-term rebound. Markets are deeply oversold, and some bargain-hunting or short coverers may lift equities from their recent lows in the days ahead. However, any recovery in risk sentiment will likely be capped by the still-heavy cloud of uncertainty surrounding the unfolding global tariff war.

    Despite the market’s hopes, it’s unrealistic to expect trade negotiations — especially those involving sweeping reciprocal tariffs and multiple major economies — to wrap up quickly. The threat of a prolonged standoff or even a complete breakdown in talks remains high. In such a case, a full-blown global trade war could be on the table, with wide-ranging consequences for investment, consumption, and global growth.

    Of particular concern is Europe’s position in this trade crossfire. Both the EU and ECB have previously flagged concerns that China could redirect excess supply to the EU if blocked by US tariffs. Such dumping would put further pressure on already weak growth and inflation in the region. To avoid this, Europe might be forced to erect its own trade barriers against China, risking retaliation and further fragmentation of global trade flows.

    In this increasingly fragile environment, the risks for a synchronized global slowdown looms large. However, unlike the Great Recession of 2008-09, unlikely the country could act as a buffer this time. China itself is now a central target in the trade conflict, and its export-driven model could face unprecedented pressure from multiple fronts. That leaves the world vulnerable to a more prolonged and widespread economic downturn if trade tensions escalate further.

    For traders and investors, the message is clear. Any near-term rally should be treated with caution. Rebounds may be sharp, but as long as key technical resistance levels in major indexes like DOW, Nikkei, or DAX remain intact, it’s premature to call it a return to normal. Until then, the base case remains a fragile market dominated by geopolitical risk, with any relief rallies vulnerable to sudden reversals.

    Technically, for DOW, it’s now at an important support zone of the long term rising trend line and 38.2% retracement of 28660.94 to 45071.29 at 38802.54. A rebound from current level would be reasonable, but risk will stay heavily on the downside as long as 55 W EMA (now at 41260.37) holds. However, sustained break of 38802.54 will raise the change of even deeper correction to next key support at 55 M EMA (now at 35554.06).

    NASDAQ’s outlook was worse with the break of 38.2% retracement of 10088.82 to 20204.68 at 16340.36. Risk will stay on the downside as long as 55 W EMA (now at 17770.58) holds. Fall from 20204.58 should be on track to 55 M EMA (now at 14387.21) on next fall.

    Nikkei’s steep fall confirmed that corrective pattern from 42426.77 (2024 high) has already started the third leg. Strong bounce from current level will keep Nikkei inside the long term rising channel. But risk will stay on the downside as long as 55 W EMA (now at 37604.93) holds. Sustained trading below the channel support will bring even deeper fall to 55 M EMA (now at 31405.39) or even further to 38.2% retracement of 6994.89 (2009 low) to 42426.77 at 28891.80.

    Outlook in DAX is slightly better thanks to the strong rally in March. But still, near term risk will be on the downside as long as 55 D EMA (now at 22102.60) holds. Fall from 23476.01 is seen as corrective the up trend from 11862.84 (2022 low only). There are a few levels ahead that could help floor the correction, including 55 W EMA (now at 19768.44), trend line support at around 19200, and 38.2% retracement of 11862.84 to 23476.01 at 19039.78.

    Will 100 Be the Savior for Sliding Dollar Index?

    Dollar Index staged a notable late-week rebound, closing at 103.02 on Friday, well off the week’s low of 101.26. The move helped ease immediate downside pressure. The 100 psychological level, along with the 55 M EMA (now at 101.01) could provide a floor in the near term and turn the index into consolidations. Still, firm break of 104.68 resistance is needed to confirm short term bottoming first. Or risk will remain on the downside.

    From a broader perspective, the fall from 110.17 is seen as the third leg of a larger correction originating from 114.77 (2022 high). Decisive break below key 99.57/100.15 support zone would open the door for deeper medium term fall to decade-long rising channel support (now at 95.80), or even further to 100% projection of 114.77 to 99.57 from 110.17 at 94.97.

    A critical variable in Dollar’s path is the development of US Treasury yields. The sharp drop in the 10-year yield last week reinforces the view that the broader corrective pattern from 4.997 (2023 high) is in another downleg.

    Risk will stay on the downside as long as 55 W EMA (now at 4.255) holds. Further decline is likely to 3.603 support.

    Even so, solid technical support should emerge from the 38.2% retracement of 0.398 to 4.997 at 3.240 to contain downside. That should provide some support to floor Dollar’s decline in the medium term.

    Swiss Franc Dominates in Europe, Would It Cap EUR/GBP Advance?

    Swiss Franc ended last week as the strongest European currency, outperforming both Euro and the risk-sensitive Sterling by a mile.

    GBP/CHF’s break of 1.1086 support suggests that whole rally from 1.0741 has completed at 1.1501. Deeper fall should be seen back to 1.0741 support first. Firm break there will argue that long term down trend is ready to resume through 1.0183 (2022 low). Meanwhile, above 1.1193 minor resistance will turn bias neutral and bring consolidations first, before staging another fall.

    As for EUR/CHF, focus is back on 0.9331 support after the sharp fall. Firm break there should confirm that rebound form 0.9204 has completed at 0.9660. More importantly, that would also confirm rejection by the long term channel resistance. Larger down trend might then be ready to resume through 0.9204.

    EUR/GBP resumed the rise from 0.8239 and hit as high as 0.8522, just shy of 100% projection of 0.8239 to 0.8448 from 0.8314 at 0.8523. The break of medium term falling channel resistance is a bullish sign. It’s also plausible that down trend from 0.9267 (2022 high) has completed at 0.8221, just ahead of 0.8201 key support (2022 low). Firm break of 0.8523 will affirm this case, and target 0.8624 cluster resistance (38.2% retracement of 0.9267 to 0.8221 at 0.8621) for confirmation of bullish reversal.

    However, for EUR/GBP to extend its bull run decisively, support is needed from a rebound in EUR/CHF. If EUR/CHF breaks down further below 0.9331 and drags on Euro more broadly, EUR/GBP would struggle to gain traction or even come under pressure itself.

    AUD/CAD and AUD/NZD in free fall

    Commodity currencies all declined broadly on risk aversion. But Aussie was the worst by far, particularly hard-hit following China’s announcement of retaliatory tariffs against the US.

    AUD/CAD’s break of 0.8562 (2023 low) suggests that whole down trend from 0.9991 (2021 high) is resuming. Outlook will stay bearish as long as 0.8853 support turned resistance holds, even in case of recovery. Next target is 161.8% projection of 0.9375 to 0.9128 from 0.8853 at 0.8283.

    AUD/NZD’s break of 1.0789 support suggests that rise from 1.0567 has already completed at 1.1177 already. More importantly, whole rebound from 1.0469 (2022 low) could have finished as a three-wave corrective rise too. Near term outlook will now remain bearish as long as 1.0904 support turned resistance holds. Deeper fall would be see back to 1.0567 support next. Firm break there will raise the chance that whole down trend from 1.1489 (2022 high) is ready to resume through 1.0469.

    USD/JPY Weekly Outlook

    USD/JPY’s fall from 158.86 resumed last week and hits as low as 144.54. But a temporary low should be formed with subsequent recovery. Initial bias is turned neutral this week for consolidations first. Outlook will remain bearish as long as 151.20 resistance holds. Below 144.54 will target 61.8% projection of 158.86 to 146.52 from 151.20 at 143.57. Break there will target 139.57 low.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    In the long term picture, it’s still early to conclude that up trend from 75.56 (2011 low) has completed. A medium term corrective phase should have commenced, with risk of deep correction towards 55 M EMA (now at 137.30) and even below.



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  • Global Trends Hit Pause, Consolidations to Follow Until Trump’s Liberation Day

    Global Trends Hit Pause, Consolidations to Follow Until Trump’s Liberation Day


    The dominant trends that shaped Q1 in global markets appear to have run their course, with most major assets entering consolidation phase last week.

    US stocks staged a mild recovery from steep selloff since mid-February, but upside momentum was notably weak. Meanwhile, Dollar, which had been under pressure throughout March, appeared to find a near-term bottom. Resilience of hard economic data in the US somewhat offset persistent concerns over trade disruptions.

    In Europe, Euro and German DAX also lost steam. Optimism over Germany’s historic EUR 500B infrastructure and defense spending plan helped fuel a strong rally earlier in the month, but now traders are starting to price in political and implementation challenges ahead.

    In Asia, sentiment toward China has been broadly positive in recent weeks, driven by policy support and hope for a consumer-led recovery. However, the rally in Hong Kong stocks, in particular, appears stretched.

    Even Gold, after a powerful run to record highs, is struggling to overcome a key medium-term resistance zone.

    What ties these developments together is a growing sense of caution ahead of the highly anticipated reciprocal tariffs set to be unveiled on April 2.

    Market participants remain wary, especially after US President Donald Trump described the date as America’s “liberation day.” His mixed messaging on potential “flexibility” in applying the tariffs — while simultaneously rejecting carveouts — only adds to the confusion and uncertainty.

    In this environment, broad-based risk appetite is likely to stay subdued. While tariff concerns may cap further upside in stocks and restrain Dollar’s rebound, traders are unlikely to make aggressive moves until more clarity emerges in early April.

    For the week, Swiss Franc led the performance chart, followed by Canadian Dollar and the Greenback. Aussie was the weakest, followed by Euro and Yen, while Kiwi and Sterling ended in the middle of the pack.

    Fed Sparks Brief Moves, Markets Consolidate Ahead of April Tariff Showdown

    US stock markets saw a brief bounce following Fed’s decision to keep interest rates unchanged and maintain the median outlook for two rate cuts later this year. However, the optimism quickly faded, with major indexes settling back into their near-term ranges. Investors seemed to digest the Fed’s stance as largely expected, and without any significant surprises to break the prevailing sentiment stalemate.

    The updated Summary of Economic Projections (SEP) hinted at some cautious acknowledgment of the economic toll from trade war. GDP forecasts were revised lower across the board, particularly for 2025 at 1.7%, but remained anchored around Fed’s longer-run estimate of 1.8% growth by 2026 and 2027. On the inflation front, core PCE was nudged higher to 2.8% for this year, up from the previous 2.5%. But projections for 2026 and 2027 held steady at 2.2% and 2.0% respectively.

    Overall, the projections suggest that while tariffs may impact near-term economy activity, Fed sees no long-term deviation from trend growth. Also, Fed expects the inflationary pressure from tariffs to be “transitory”, fading after the initial pass-through period.

    Still, the assumption remains a fragile one. With President Donald Trump’s sweeping reciprocal and sectoral tariff plans due for rollout on April 2, markets are bracing for more clarity—or chaos. The lack of concrete detail on implementation leaves room for policy whiplash, adding to the uncertainty businesses and consumers are already grappling with.

    For now, Fed fund futures imply an 88% chance of a rate cut in June, followed by around 70% odds of another cut in September. Still, those odds remain sensitive to upcoming inflation readings, consumer sentiment, and of course, any fresh headlines out of Washington on trade.

    Technically, DOW gyrated higher last week after forming a short term bottom at 40661.77 earlier in the month. The structure of the recovery so far suggests that it’s merely a corrective bounce. Further decline is expected as long as 55 D EMA (now at 43027.95) holds. Fall from 45054.36 is seen as corrective the whole up trend from 28660.94. On resumption, DOW should target 38.2% retracement of 28660.94 to 45054.36 at 38792.07.

    Similarly, NASDAQ turned sideway after forming a short term bottom at 17238.23. While stronger recovery cannot be ruled out, risk will stay on the downside as long as 55 D EMA (now at 18753.98) holds. Fall from 20204.58 is seen as a correction to the ups trend from 10088.82. Break of 17238.23 will target 38.2% retracement of 10088.82 to 20204.58 at 16340.36.

    Dollar Index should have formed a short term bottom at 103.19 and turned into consolidations already. Further recovery might be seen in the near term. But there would be strong resistance between 55 W EMA (105.21) and 55 D EMA (now at 105.91) to limit upside. Break of 103.19 will resume the fall from 110.17 to 99.57/100.15 support zone.

    Euro and DAX Enter Consolidation as Focus Shifts to German Coalition Talks

    Both Euro and German DAX may have peaked in the near term, as the initial optimism surrounding Germany’s sweeping fiscal expansion plan begins to fade. The EUR 500 B infrastructure and defense package, along with reforms to the long-standing debt brake rule, passed the Bundestag earlier in the week and was approved by the Bundesrat on Friday. With the legislative hurdles cleared, investor attention is now turning to the political process of implementing the plan.

    Chancellor-in-waiting Friedrich Merz is aiming to finalize a coalition with SPD by Easter, but the path forward is far from certain. Migration policy remains a key stumbling block. At the same time, Merz is already facing internal criticism from parts of his CDU/CSU bloc for what some see as an overly generous fiscal shift. These political frictions would be the uncertainty that could weigh on both sentiment and market performance in the coming weeks.

    Even in the absence of external risks like US tariffs, the timeline for tangible economic impact from the spending package remains distant. A regular budget for 2025 may not be passed until mid-year, meaning it could be months before new investments begin to support growth.

    A consolidation phase may now set in for German equities and Euro, lasting at least until Merz completes the coalition negotiations.

    Technically, while DAX still has some room to climb, considering bearish divergence condition in D MACD, upside will likely be limited by 161.8% projection of 14630.21 to 18892.92 from 17024.82 at 23921.87, or in short 24k mark. Break of 22226.34 support will suggest that a correction has started to digest the rally from 17024.82.

    EUR/USD should have completed a short term top at 1.0953 after last week’s pull back. Deeper fall might be seen to 38.2% retracement of 1.0358 to 1.0953 at 1.0726. But strong rebound is expected from there to set the range for a near term corrective pattern.

    China Optimism and HSI Rally Nears Exhaustion, Aussie at Risk

    After weeks of bullish sentiment toward China, markets in Asia may be poised for a meaningful correction. Much of the recent optimism was driven by Beijing’s ambitious “special action plan” to stimulate domestic consumption and the buzz surrounding AI startup DeepSeek. However, as attention shifts from announcements to implementation, investors are turning cautious on whether these initiatives will yield the hoped-for near-term growth.

    In particular, the rally in Hong Kong stocks appears increasingly stretched. HSI had made a strong push higher since January, but it’s now facing a tough hurdle at the psychologically significant 25,000 mark. That level also aligns closely 100% projection of 16964.28 to 23241.74 from 18671.49 at 24948.95. Combined with bearish divergence in daily MACD, there’s a rising risk that profit-taking could be triggered on any failure to break this resistance zone.

    Firm break of 23198.13 support would be a key signal that the rally has topped for the near term, opening the door for deeper pullback toward the 55 D EMA (now at 22302.72) or even below.

    Australian Dollar is especially vulnerable in this bearish scenario, given its strong trade ties with China. Sustained break of near term trend line support (now at 0.6251) will argue that consolidation pattern from 0.6087 has already completed. Further break of 0.6186 support will solidify bearish case and suggest that fall from 0.6941 is ready to resume.

    Gold Correction Looms With Rejection by Key Resistance Zone

    Gold’s impressive record run may have reached a near-term peak as it ran into a confluence of critical resistance zone. The levels include 61.8% projection of 2584.24 to 2956.09 from 2832.41 at 3062.21, and more importantly, medium-term rising channel resistance.

    Sustained break of 55 4H EMA (now at 2993.64) should confirm this view and bring deeper pull back to 2956.09 resistance turned support or a bit lower. But strong support should be seen from 55 D EMA (now at 2862.52) to contain downside, and bring rebound,, at least on first attempt.

    USD/CAD Weekly Outlook

    Range trading continued in USD/CAD last week and outlook is unchanged. Initial bias remains neutral this week first. Overall, price actions from 1.4791 are seen as a corrective pattern. On the upside, break of 1.4541 will extend the second leg from 1.4150 to retest 1.4791 high. On the downside, break of 1.4238 will argue that the third leg has already started through 1.4150 support.

    In the bigger picture, long term up trend is tentatively seen as resuming with prior breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned support holds (2022 high), even in case of deep pullback.

    In the longer term picture, up trend from 0.9506 (2007 low) is in progress and possibly resuming. Next target is 61.8% projections of 0.9406 to 1.4689 from 1.2005 at 1.5270. While rejection by 1.4689 will delay the bullish case, further rally will remain in favor as long as 55 M EMA (1.3463) holds.



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  • Currency Markets Consolidate as Trader Start Repositioning for Tariff Battles in April

    Currency Markets Consolidate as Trader Start Repositioning for Tariff Battles in April


    The past week in the currency markets was marked more by consolidation than decisive moves, even as risk aversion deepened in US stock markets. Dollar’s selloff slowed and turned into a modest recovery, but there was no clear momentum for bullish trend reversal. Sentiment remained fragile, weighed down by constantly escalating trade tensions and the growing impact of tariffs on American consumer and business confidence. However, with stocks and Dollar both looking oversold, markets appear to have found a temporary reprieve, allowing for some short-term stabilization.

    That said, this pause does not indicate a shift in sentiment, but rather reflects a phase of profit-taking and repositioning. Traders seem to be adjusting their positions ahead of the critical tariff showdown in April, when reciprocal trade measures on key US trading partners are expected to take effect. As markets brace for the next wave of developments, uncertainty and indecisiveness have become dominant themes. This is evident in the fact that only three currency crosses closed outside their prior week’s ranges, highlighting a lack of conviction in directional moves.

    Among the currency performers, New Zealand Dollar overtook Euro at last hours as the week’s strongest, but its gains lacked clear momentum for a sustained uptrend. Australian Dollar, which came in third, and Kiwi appeared to be mostly digesting their recent losses, aided by a modest stabilization in risk sentiment.

    While these currencies showed some resilience, they have yet to break out of their broader downtrends, and further gains will likely depend on how global markets react to the next round of trade developments.

    Euro, despite slipping to second place, could soon regain momentum, especially as Germany’s major political parties reached a breakthrough on a historic debt deal.

    On the weaker side, Japanese Yen, Swiss Franc, and Dollar ranked as the bottom three performers. Meanwhile, Sterling and Canadian Dollar closed the week in the middle of the pack

    Stocks Sink for the Week Despite Friday’s Rebound, April Set to Be Crucial

    US stocks suffered significant losses last week, with DOW plummeting -3.1% for its worst weekly performance since March 2023. Both S&P 500 and NASDAQ also slipped more than -2% and notched their fourth consecutive week in the red. While a strong rebound on Friday briefly lifted spirits—becoming the best single day of 2025 for S&P 500 and NASDAQ—these gains were insufficient to salvage the broader downtrend that has gripped the market.

    Friday’s bounce appeared to be more of a technical rebound than a shift in fundamentals. With the major indices down 10% from their all-time highs, markets had reached oversold conditions, making them ripe for short traders to take profits. However, the broader narrative remains bearish, at least for the near term. .

    Tariff uncertainties will continue to cap upside momentum in stocks, at least through April. The critical turning point would come on April 2, when reciprocal tariffs from US are set to be announced. The corresponding retaliatory measures from the European Union, Canada, China, and Japan—and the potential for further US escalation in response—will dictate how deep the economic impact may run. The developments in the second quarter will ultimately determine whether the US markets are in merely a medium-term correction or entering an outright bear market.

    For S&P 500, fall from 6147.43 is currently seen as a correction to the up trend from 3491.58 (2022 low) only. While further decline remains in favor, downside should be contained by 38.2% retracement of 3491.58 to 6147.43 at 5132.89.

    However, firm break of 5132.89 will raise the chance of long term reversal, and target trend line support (now at around 4740).

    Similarly, DOW should now be in correction to the whole rally from 28660.94 (2022 low). While further fall is expected, downside should be contained by 38.2% retracement of 28660.04 to 45703.63 at 38803.98. However, sustained break of this fibonacci level will argue that larger scale reversal is underway.

    Dollar Index May Stabilize Around 61.8% Retracement Level, But Downside Risks Remain

    The sharp decline in Dollar Index slowed last week, as market expectations for Fed’s next rate cut have shifted back from May to June. Despite softer-than-expected consumer inflation data, traders are acknowledging that Fed will likely need more time to assess the economic impact of escalating tariffs before making a policy move.

    June FOMC meeting offers the central bank a broader window to evaluate the full effects of reciprocal trade measures and any additional retaliatory tariffs. Additionally, Fed will have a fresh set of economic projections by then, providing a more comprehensive view of inflation, growth, and labor market trends.

    Technically, Dollar Index is now hovering around 61.8% retracement of 99.57 to 110.17 at 103.61. This level could provide some short-term stabilization, particularly as D RSI also suggests oversold conditions. Some consolidations might follow first, or even a notable recovery.

    However, risks will continue to stay on the downside as long as 55 D EMA (now at 106.37) holds. Sustained break of 103.61 will extend the fall from 110.17 to 99.57 low (2023 low).

    Eurozone Confidence Surges, DAX and Euro Poised for Further Gains

    Euro and Germany’s DAX lost some momentum last week, but Friday’s bounce suggests both may be gearing up to extend their recent rallies.

    In a major political breakthrough, Chancellor-in-waiting Friedrich Merz announced on Friday that he had secured the backing of the Greens for a massive increase in state borrowing. With support from the Social Democrats already in place, Merz now has the two-thirds parliamentary majority required to pass constitutional amendments.

    The highly anticipated vote is scheduled for next week and, if approved, would mark a historic shift in Germany’s fiscal policy, paving the way for significant infrastructure and defense spending.

    Merz’s declaration that “Germany is back” highlighted the renewed optimism surrounding both the German and broader European economies.

    This growing confidence is also reflected in recent sentiment indicators. Eurozone Sentix Investor Confidence Index surged from -12.7 to -2.9 in March, reaching its highest level since June 2024. More notably, Expectations Index skyrocketed from 1.0 to 18.0, marking its third consecutive monthly increase and the highest level since July 2021. This surge represents the largest monthly improvement since 2012.

    Germany’s investor confidence has also rebounded sharply, signaling a significant turnaround in market expectations. The German Sentix Investor Confidence Index jumped from -29.7 to -12.5, its strongest level since April 2023. Meanwhile, the Expectations Index surged from -5.8 to 20.5, reaching its highest point since July 2021.

    For DAX, near term outlook stays bullish with 22226.34 support intact. Current trend should continue to 161.8% projection of 14630.21 to 18892.92 from 17024.82 at 23921.87. Decisive break there would pave the way to 200% projection 25550.22 next.

    Nevertheless, rejection by 23921.87 will indicate medium term topping, on bearish divergence condition in D MACD. DAX should then turn into consolidations, until fresh catalyst pushes it through to new records.

    The key for Euro remains on whether EUR/CHF could decisively break through the long term channel resistance to solidify its bullish trend reversal. In this case, stronger rally should be seen to 0.9928 resistance at least.

    However, break of 0.9489 support will suggest rejection by the channel resistance, and keep outlook bearish for EUR/CHF, which might also be an indication of Euro’s outlook elsewhere.

    NZD/JPY as a Top Gainer, But Bearish Trend Remains Intact

    NZD/JPY was among the top-performing currency pairs last week, rising by over 1.1%. However, the crosses continued to trade within falling channel that originated from 92.45 high. It’s also capped well below 55 D EMA (now at 86.45).

    Thus, while the current rebound signals some near-term buying interest, the broader technical picture remains bearish.

    On the upside, NZD/JPY could face strong resistance from 86.71 (38.2% retracement of 92.45 to 83.14 at 86.96). Only a firm break of this cluster resistance zone would confirm bullish trend reversal.

    Otherwise, fall from 92.45 is still in favor to continue. Indeed, firm break of 83.02 (2024 low) will resume whole down trend from 99.01 (2024 high).

     

    USD/JPY Weekly Outlook

    USD/JPY edged lower to 146.52 last week but recovered since then. Initial bias remains neutral this week for more consolidations. Upside of recovery should be limited by 150.92 support turned resistance. On the downside, sustained trading below 61.8% retracement of 139.57 to 158.86 at 146.32 will pave the way to 139.57 support.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    In the long term picture, it’s still early to conclude that up trend from 75.56 (2011 low) has completed. A medium term corrective phase should have commenced, with risk of deep correction towards 55 M EMA (now at 136.88).



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  • Recession Fears Weigh on Markets as Risk-Off Trade Intensifies

    Recession Fears Weigh on Markets as Risk-Off Trade Intensifies


    The risk-off sentiment that triggered the biggest US stock market selloff in months has spilled over into Asian markets, leading to broad declines across the region. The currency markets reflect this shift too, with traditional safe havens such as Japanese Yen and Swiss franc leading gains in Asia, while risk-sensitive currencies like the Australian and New Zealand Dollars face pressure.

    Unlike previous bouts of risk aversion, Dollar is not benefiting from the current flight to safety. This time, the core of the problem originates from the US economy itself, where recession worries are intensifying. Rather than flocking to the greenback, investors appear to be diversifying into other safe havens or moving to the sidelines until the dust settles.

    The uncertainty surrounding US trade policies has left businesses and consumers hesitant, potentially dragging economic growth lower. In response to the changing economic outlook, market participants are increasingly convinced that Fed will resume policy easing within the first half of the year. The only question is whether the next rate cut will arrive in May or June.

    Another driver of Dollar weakness is the extending decline in yields since mid January. Technically, there is prospect for 10-year yield to draw support from 4.000 psychological level, which is slightly below 61.8% retracement of 3.603 to 4.809 at 4.063, to form a near term bottom. However, there is little prospect for 10-year yield to rebound strongly through 55 D EMA (now at 4.412). But at least, sideway movement in 10-year yield could help lift the pressure on Dollar.

    Overall for the week so far, Yen is the best performer, followed by Euro, and then Swiss Franc. Aussie is the worst, followed by Loonie and then Kiwi. Dollar and Sterling are positioning in the middle.

    In Asia, at the time of writing, Nikkei is down -1.02%. Hong Kong HSI is down -1.02%. China Shanghai SSE is down -0.50%. Singapore Strait Times is down -2.02%. Japan 10-year JGB yield is down -0.063 at 1.509. Overnight, DOW fell -2.08%. S&P 500 fell -2.70%. NASDAQ fell -4.00%. 10-year yield fell -0.104 to 4.213.

    US stock market correction deepens as recession fears take hold

    The US stock market suffered its most significant setback in months, with the S&P 500 dropping -2.7%, its biggest one-day decline since December 18. NASDAQ also lost -4.0%, marking its worst single-day percentage loss since September 2022. Analysts widely point to mounting recession worries as the primary catalyst behind the selloff.

    Initial concerns emerged over the past month following a series of weaker economic data points, believed by some to be early reactions to an increasingly contentious tariff policy. These worries intensified after recent remarks from the White House suggested a bumpy economic outlook ahead.

    In an interview aired on Sunday, US President Donald Trump fueled apprehensions further by describing the economy as going through “a period of transition.” When pressed about an impending recession, he avoided a direct prediction but acknowledged potential “disruption.” His remarks—“Look, we’re going to have disruption, but we’re OK with that”—did little to reassure investors already on edge about growth prospects.

    Adding further weight to recession fears, historical bond market indicators have been flashing warning signs. The 10-year to 2-year US yield curve inverted in mid-2022—a classic recession signal—and only turned positive again in September 2024. Historically, a U.S. recession tends to follow within months after the yield curve normalizes (i.e., turned positive again). If this trend holds true, the US economy could be inching closer to a downturn.

    However, another view posits that tariffs are a distraction and that the real driver behind the US selloff is the recent surge in Japanese government bond yields, which have hit a 16-year high. As the carry trade unwinds—where investors borrow in low-yield currencies, often involving Japanese Yen, to fund investments in higher-yield or high-growth assets—capital is flowing out of big tech names, contributing to the NASDAQ’s outsized losses.

    Technically, NASDAQ’s strong break of 55 W EMA (now at 17864.01) suggests that it’s already in correction to the up trend from 10088.82 (2022 low). Deeper fall should be seen to 38.2% retracement of 10088.82 to 20204.58 at 16340.36. Reaction from there will decide whether it’s merely in a medium consolidations phase or in an out-right bearish trend reversal.

    As for DOW, immediate focus is now on 41844.89 support. Firm break there will complete a double top reversal pattern (45073.63, 45054.36). That should set up deeper fall to 38.2% retracement of 32327.20 to 45073.63 at 40204.49 at least, even it’s just a correction to the rise from 32327.20.

    Australia Westpac consumer sentiment jumps to 95.9, soft landing achieved

    Australian consumer sentiment saw a strong rebound in March, with Westpac Consumer Sentiment Index jumping 4.0% mom to 95.9, the highest level in three years and not far from neutral 100 mark.

    Westpac attributed the improvement to slowing inflation and February’s RBA interest rate cut which have lifted confidence across households. positive views on job security suggest that “soft landing has been achieved”. Nevertheless, “unsettling overseas news” continues to weigh on the broader economic outlook.

    Looking ahead to RBA’s upcoming meeting on March 31-April 1, Westpac expects the central bank to keep the cash rate unchanged. RBA was clear that the 25bps cut in February “did not mean further reductions could be expected at subsequent meetings.”

    Westpac added, “further slowing in inflation will give the RBA sufficient confidence to deliver more rate cuts this year with the next move coming at the May meeting”.

    Australia’s NAB business confidence slips back into negative as cost pressures persist

    Australia’s NAB Business Confidence fell from 5 to -1 in February, erasing last month’s gain and returning to below-average levels. While business conditions improved slightly from 3 to 4, the decline in confidence suggests that businesses remain cautious despite RBA’s recent rate cut and positive Q4 GDP data.

    NAB Chief Economist Alan Oster noted that the lift in sentiment seen in January was not sustained, signaling ongoing uncertainty in the business environment. Persistent cost pressures and subdued profitability appear to be key factors weighing on sentiment, keeping confidence below long-term norms.

    Within business conditions, trading conditions ticked up from 7 to 8, and profitability conditions rose slightly from -2 to -1, though still remaining in negative territory. Employment conditions, however, weakened from 5 to 4.

    Cost pressures remain a concern, with purchase cost growth accelerating from 1.1% to 1.5% in quarterly equivalent terms. On the positive side, labor cost growth eased from 1.7% to 1.5%, indicating that wage price pressures are gradually cooling. Meanwhile, final product price growth slowed from 0.8% to 0.5%, though retail price inflation held steady at 1.0%.

    EUR/AUD Daily Outlook

    Daily Pivots: (S1) 1.7149; (P) 1.7213; (R1) 1.7320; More…

    EUR/AUD’s rally resumed and brief consolidations and intraday is back on the upside. Rise from 1.6335 should now target 161.8% projection of 1.5963 to 1.6800 from 1.6355 at 1.7709 next. On the downside, below 1.7102 minor support will turn intraday bias neutral again and bring consolidations, before staging another rally.

    In the bigger picture, up trend from 1.4281 (2022 low) is resuming. Sustained trading above 1.7180 key resistance will pave the way to 61.8% projection of 1.4281 to 1.7062 from 1.5963 at 1.7682, which is also close to 61.8% retracement of 1.9799 (2020 high) to 1.4281 at 1.7691. For now, this will remain the favored case as long as 1.6355 support holds, even in case of deep pullback.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Manufacturing Sales Q4 2.60% -1.20% 0.20%
    23:30 AUD Westpac Consumer Confidence Mar 4.00% 0.10%
    23:30 JPY Overall Household Spending Y/Y Jan 0.80% 3.60% 2.70%
    23:50 JPY GDP Q/Q Q4 F 0.60% 0.70% 0.70%
    23:50 JPY GDP Deflator Y/Y Q4 F 2.90% 2.80% 2.80%
    23:50 JPY Money Supply M2+CD Y/Y Feb 1.20% 1.40% 1.30%
    00:30 AUD NAB Business Confidence Feb -1 4 5
    00:30 AUD NAB Business Conditions Feb 4 3
    06:00 JPY Machine Tool Orders Y/Y Feb P 4.70%
    10:00 USD NFIB Business Optimism Index Feb 101 102.8

     



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  • A Multi-Decade Trend Reversal Underway in EUR/USD?

    A Multi-Decade Trend Reversal Underway in EUR/USD?


    The sharp contrast between Europe’s newfound unity and the ongoing tariff chaos in the US has been a defining theme in the financial markets. Euro’s extraordinary strength last week reflected growing investor confidence in the region’s strategic shift toward fiscal expansion and defense spending. From the formation of the “Coalition of the Willing” to the ReArm Europe initiative, they highlighted a strong, coordinated response to challenges, be it geopolitical or economic. That could set the stage for a long-term structural shift in European markets.

    Meanwhile, the US continued to grapple with trade policy uncertainty, with tariffs now more seen as a drag on sentiment and economic growth rather than a source of inflationary pressure. The recent exemptions granted to Canada and Mexico only reinforced the perception of inconsistency in Washington’s trade strategy. The lack of clarity on future policy moves has started to weigh on investor sentiment. That, if persists, could lead to a outflow of capital from the US and weakening the Dollar further.

    From a technical points of view, EUR/USD has shown clear signs of a potential long-term bullish reversal. The pair’s strong surge last week suggests that the multi-year downtrend may have bottomed out, with further upside potential if Europe successfully executes its ambitious fiscal and defense spending plans. However, challenges remain, including implementation risks and the broader impact of trade tensions on European exports.

    Currency market performance last week reflected the shifting sentiment. Euro ended as the strongest performer, followed by Sterling and Swiss Franc, which also benefited from Europe’s renewed economic confidence.

    On the other hand, Dollar closed as the worst performer, struggling under the weight of investor skepticism and diminishing safe-haven appeal. Elsewhere, Canadian Dollar and Australian Dollar also underperformed, indicating that risk-off sentiment remains present, particularly in the US. Yen and Kiwi positioned themselves in the middle of the performance spectrum.

    Europe’s Bold Shift Ignites Market Optimism

    Last week brought a seismic shift in Europe’s geopolitical, defense, and fiscal policies. In a move not seen in decades, the region is asserting greater strategic independence while ramping up economic stimulus. The changes were embraced by investors with enthusiasm, fueling rallies in European assets, particularly in Euro and German equities.

    Euro surged 4.4% against Dollar, its best weekly performance since 2009. Meanwhile, Germany’s 10-year yield posted its biggest jump since the fall of the Berlin Wall. DAX hit fresh record highs, with cyclical and defense-related stocks leading the charge.

    At the heart of this shift is the “ReArm Europe” initiative, which commits the EU to a significant defense buildup. European Commission President Ursula von der Leyen has proposed mechanisms to mobilize up to EUR 800B in special funds. This landmark decision not only strengthens military readiness, but also reduces reliance on external allies.

    Further reinforcing this new direction, EU leaders took a bold stand against Hungarian Prime Minister Viktor Orbán, overriding his veto on aid to Ukraine. In an unusual move, member states issued a separate statement reaffirming their unified support for Kyiv.

    Meanwhile, in Germany, despite ongoing coalition talks, CDU leader Friedrich Merz wasted no time aligning with the SPD to push for loosening of the “debt brake”, which would unlock EUR 500B for infrastructure projects. Additionally, defense spending above 1% of GDP will be permanently exempt from fiscal constraints. Over the next decade, these measures could increase government spending by a staggering 20% of GDP. The scale surpasses even that seen after German reunification in the 1990s.

    This massive fiscal shift in Germany carries significant upside potential for both domestic and Eurozone growth. With a sharp boost in public spending, it could also act as a buffer against potential US tariffs. For years, European growth has been held back by fiscal conservatism—but now, these bold new policies could reshape the region’s economic future for years to come.

    Technically, DAX might be rebuilding upside momentum as seen in D MACD. Current up trend should head to take on 161.8% projection of 14630.21 to 18892.92 from 17024.82 at 23921.87. Decisive break there would target 200% projection at 25550.22 next. Nevertheless, firm break of 22226.34 support will suggest DAX has topped for the near term at least, and consolidations should follow first.

    Is Euro Entering a Long-Term Bull Cycle?

    As Europe embarks on a new era of fiscal expansion and policy coordination, Euro’s looks well-positioned for a prolonged rally and with prospects of long term bullish trend reversal.

    Another key factor supporting Euro is the growing belief that ECB is nearing a pause in its policy easing cycle. With monetary policy now “meaningfully less restrictive”, as described by President Christine Lagarde, a pause could start as soon as in April. ECB could opt for a wait-and-see approach, to assess how trade policy, fiscal initiatives, and broader geopolitical risks play out.

    However, key risks remain, including escalation in trade disputes with the US, as well as how effectively Europe executes its ambitious spending plans. The coming months will be crucial in determining whether this historic shift translates into sustained economic momentum or if internal and external headwinds slow down the Euro’s resurgence.

    Technically, EUR/USD’s strong rally suggests that fall from 1.1274 (2023 high) has completed as a correction, with three waves down to 1.0176. Firm break of 1.1274 would resume larger rally from 0.9534 (2022 low), to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916.

    More significantly, if the bullish case is realized, that would push EUR/USD through the two-decade falling channel resistance, which could be an important sign of long term trend reversal.

    US Stocks at Risk of Bearish Trend Reversal Amid Tariff Chaos

    US stocks endured a turbulent week as investors wrestled with the unpredictable nature of President Donald Trump’s trade policies. The volatility has taken a clear toll on market sentiment, with technical indicators increasingly pointing to bearish trend reversal in major indexes. The coming weeks could prove decisive in determining whether the strong uptrend that has defined the past few months has reversed or if equities can regain their footing.

    S&P 500 logged its worst week since September, falling -3.1%, while DOW dropped -2.4%. NASDAQ was hit hardest, tumbling -3.5%.

    The implementation of 25% tariffs on Canadian and Mexican imports on March 4, had initially sent markets into a tailspin. However, Trump’s decision on Thursday to pause tariffs on USMCA-covered goods for another month only added to the confusion, as investors struggled to decipher the long-term direction of trade policy.

    This chaotic cycle of tariff imposition followed by temporary reversals has created an uncertain and fragile investment environment. Businesses remain hesitant to make forward-looking decisions, while consumer confidence is showing signs of strain. The erratic nature of US trade policy has left markets with little clarity, and the risk of further deterioration in sentiment remains high.

    Nevertheless, Friday’s non-farm payroll report provided some relief, as job growth remained near its recent average, unemployment stayed within its recent range, and wage growth held robust. The data suggested that, at least for now, the feared economic fallout from tariffs has not yet materialized in a meaningful way. However, lingering uncertainty around trade and global economic conditions continues to weigh on sentiment.

    Meanwhile, Fed Chair Jerome Powell reiterated on Friday that the central bank is in no rush to cut rates, stating that the Fed is “well-positioned to wait for clarity.” Powell’s cautious stance contrasts with growing market expectations for rate cuts, as investors bet on economic weakness forcing the Fed’s hand.

    While a hold in March remains the base case, with 88% odds, Fed fund futures now price in a 52% probability of a 25bps rate cut in May, up sharply from 33% a week ago and 26% a month ago. This suggests that investors are bracing for the possibility of further economic softening, with Fed being forced to act sooner than its current guidance suggests.

    Technically, DOW’s up trend should still be intact as long as 41844.89 support holds. However, firm break there will argues that it’s already in correction to the up trend from 28660.93 (2022 low). Sustained trading below 55 W EMA (now at 41332.86) will further solidify this bearish case. Next target will be 38.2% retracement of 28660.94 to 45087.75 at 38812.71.

    As for NASDAQ, it’s now pressing 55 W EMA (at 17878.67). Sustained break there will also indicate that it’s already correcting the up trend from 10088.82 (2022 low). Next target is 38.2% retracement of 10088.82 to 20204.58 at 16340.36.

    As for Dollar Index, last week’s steep decline and strong break of 55 W EMA (now at 105.31) argues that corrective pattern from 99.57 (2023 low) has completed with three waves up to 110.17. Near term risk will now stay on the downside as long as 55 D EMA (now at 106.91) holds. Further downside acceleration will raise the chance that Dollar Index is indeed resuming the whole down trend from 114.77 (2022 high) .

    While it’s still too early to confirm the bearish case, firm break of 100.15 support could set up further medium term fall to 100% projection of 114.77 to 99.57 from 110.17 at 94.97.

    The challenge for Dollar is that risk aversion no longer seems to be offering support. Tariffs are providing little help unlike what it did this year. Meanwhile, Fed appears poised to resume rate cuts sooner than expected. With these factors in play, it’s unclear what could drive a rebound for the greenback, other then implosion of Euro and other currencies

    EUR/CHF Weekly Outlook

    EUR/CHF surged to as high as 0.9634 last week but faced strong resistance from long term falling channel and retreated. Initial bias stays neutral this week first and some more consolidations could be seen. Further rally will be expected as long as 55 4H EMA (now at 0.9467) holds. On the upside, above 0.9634, and sustained trading above 0.9651 fibonacci level will pave the way back to 0.9928 key resistance next.

    In the bigger picture, the strong break of 55 W EMA (now at 0.9482) is a medium term bullish sign. Sustained break trading above long-term falling channel resistance (at around 0.9620) would suggest that the downtrend from 1.2004 (2018 high) has bottomed at 0.9204. Stronger rally should then be see to 0.9928 key resistance at least.

    In the long term picture, bullish signs are emerging. However, the important hurdle at 0.9928 resistance, which is close to 55 M EMA (now at 0.9960), is needed to be taken out decisively before considering long term trend reversal. Otherwise, outlook is neutral at best.



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  • Risk Aversion Returns as US Tariff Fears Resurface, Dollar Recovers Late

    Risk Aversion Returns as US Tariff Fears Resurface, Dollar Recovers Late


    Geopolitical developments dominated global headlines last week, particularly surrounding peace negotiations over Russia’s invasion of Ukraine and evolving US-Ukraine relations. While US President Donald Trump’s tariffs took a backseat, concerns over their impact on consumer spending and economic growth resurfaced by the end of the week, triggering renewed risk aversion.

    Markets lacked clear direction for most of the week, with major assets struggling to gain momentum in either direction. However, risk sentiment soured late in the week as fresh worries emerged over the potential inflationary effects of tariffs, particularly on US consumers. This shift in tone could set the market narrative for the near term.

    Against this backdrop, Dollar initially struggled but recovered some ground by the week’s close, finishing as the third worst performer overall. The late-week risk-off mood helped Dollar stabilize, with Dollar Index showing potential for a rebound off key Fibonacci support if risk aversion deepens further.

    Euro finished as the second weakest currency, partly weighed down by disappointing PMI data. Hopes for a political boost from German election over the weekend could be short-lived, as renewed US tariff threats may quickly drag Euro lower again. The worst performer was Canadian Dollar, which faced additional pressure from concerns over trade and slowing economy.

    In contrast, Yen emerged as the strongest currency, benefiting from increasing speculation of an earlier-than-expected BoJ rate hike. Divergence in yields also provided support, as Japan’s JGB yields rose while US Treasury yields declined.

    Sterling and the Swiss Franc were the second and third strongest, respectively, as both benefited from uncertainty surrounding Euro. Australian and New Zealand Dollars ended mixed, weighed down by the late-week risk aversion. However, Kiwi ended up with a slight upper hand over Aussie.

    Stocks Slide as Consumer Confidence Plunges, Dollar Index Holds Key Support

    US stocks ended the week notably lower as earlier resilience turned into steep selloff on Friday. S&P 500, which had set a new record high, ended the week with -1.7% loss, while DOW and NASDAQ both fell -2.5%. DOW’s -700-point drop on Friday marked its worst trading day of the year, catching many investors off guard and raising concerns over broader market sentiment.

    At the heart of the selloff was the unexpected deterioration in consumer sentiment. The University of Michigan Consumer Sentiment Index for February was finalized at 64.7, significantly below January’s 71.7 and the preliminary reading of 67.8. This was the lowest level since November 2023, signaling growing unease among US households about economic conditions.

    Adding to market anxiety, inflation expectations surged. Households now expect inflation over the next year to rise to 4.3%, the highest since November 2023, up from 3.3% last month. Over the next five years, inflation expectations climbed to 3.5%, the highest level since 1995, compared to 3.2% in January.

    Some analysts attribute the drop in sentiment to uncertainty over US President Donald Trump’s policies, particularly the potential for inflationary effects from new tariffs. The University of Michigan noted that the deterioration in sentiment was led by the -19% drop in buying conditions for durable goods, as consumers fear tariff-driven price hikes. Additionally, expectations for personal finances and the short-run economic outlook fell by nearly -10%.

    However, there are differing views on the inflationary impact of tariffs. Some analysts argue that Trump’s tariff threats are more of a strategic negotiation tool aimed at broader geopolitical objectives, such as pressuring Canada and Mexico on fentanyl issues. If these concerns fade, inflation expectations could retreat, allowing consumer confidence to rebound.

    Technically, DOW’s steep decline and strong break of 55 D EMA (now at 43848.97) is clearly a near term bearish sign. However, current fall from 45054.36 are seen as the third leg of the corrective pattern from 45073.63 only. Hence, while deeper fall could be seen to medium term rising channel support (now at around 42530) or below, strong support should emerge around 41884.89 to complete the pattern and bring up trend resumption.

    However, decisive break of 41844.89 will complete a double top reversal pattern (45073.63, 45054.36). DOW would then be at least in correction to the up trend form 32327.20. That would open up deeper correction to 38.2% retracement of 32327.20 to 45054.36 at 40204.49, or even further to 38499.27 support. But then, this is far from being the base scenario at this point.

    For now, Dollar Index is still sitting above 38.2% retracement of 100.15 to 110.17 at 106.34. Near term risk aversion could help Dollar Index defend this support level, with prospect of a bounce from there. Firm break of 55 D EMA (now at 107.40) should bring stronger rally back towards 110.17 high. However, Decisive break below the 106.34 support would deepen the decline to 61.8% retracement at 103.98, even still as a correction.

    Yen Ends Week Strong as BoJ Might Hike Rates Again Sooner

    Yen ended last week as the best-performing currency, thanks to robust inflation data and hawkish remarks from BoJ officials. The rally briefly paused midweek after BoJ Governor Kazuo Ueda signaled readiness to intervene in the bond market, causing Japan’s 10-year JGB yield to retreat from its 15-year high. However, this setback proved temporary, as Yen quickly regained strength amid rising risk aversion and falling US Treasury yields.

    According to the latest Reuters poll, 65% of economists (38 out of 58) expect BoJ to raise rates from 0.50% to 0.75% in July or September. Among the 39 analysts who gave a specific month, 59% (23 respondents) chose July, while 15% (six analysts) expected a June hike. The remaining 10 analysts were evenly split between April and September.

    However, stronger-than-anticipated inflation could give BoJ further cause to pull the timetable forward. Last week’s data already showed core CPI surging more than expected to 3.2% in January, marking the fastest pace in 19 months. If consumer price pressures remain elevated, markets speculate that policymakers might prefer to act sooner rather than wait for the second half.

    The April 30 – May 1 policy meeting could stand out as an appropriate window for BoJ to act. By then, BoJ will have access to Shunto wage negotiation results and an updated economic outlook, providing the necessary justification for an earlier rate hike.

    USD/JPY’s extended decline last week suggests that rebound from 139.57 has already completed with three waves up to 158.86. Fall from 158.86 is now seen as the third leg of the pattern from 161.94.

    Deeper fall is expected as long as 150.92 support turned resistance holds, to 61.8% retracement of 139.57 to 158.86 at 146.32. Firm break there will pave the way back to 139.57. Meanwhile, break of 150.92 will delay the bearish case and bring some consolidations first.

    Any extended USD/JPY weakness should limit Dollar’s rebound. However, this alone shouldn’t be enough to push DXY below key fibonacci support at 106.34 mentioned above.

    AUD/NZD Reverses after RBA and RBNZ Rate Cuts

    Both RBA and RBNZ delivered rate cuts last week, with RBA lowering its cash rate by 25bps to 4.10% and RBNZ cutting by 50bps to 3.75%, in line with expectations.

    RBA maintained a cautious tone, with Governor Michele Bullock emphasizing “patience” before considering another cut. The accompanying statement warned against easing “too much too soon,” highlighting concerns that disinflation progress could stall and inflation could settle above the midpoint of the target range if policy is loosened aggressively.

    Australian economic data also reinforced RBA’s cautious stance, with strong job growth and elevated wage pressures supporting a measured pace of policy easing.

    Meanwhile, RBNZ delivered a more defined path for easing, with Governor Adrian Orr clearly ruling out further 50bps cuts barring an economic shock. Instead, the central bank has outlined two additional 25bps cuts in the first half of the year.

    In the currency markets, AUD/NZD saw a sharp decline, falling back toward its 55 D EMA (now at 1.1063). The key driver of this move is likely the perception that RBNZ is nearing the end of its rate-cutting cycle, while RBA has only just begun easing, leaving room for further reductions if economic conditions weaken.

    With the OCR at 3.75% already close to the neutral band, there is limited downside for RBNZ, while RBA at 4.10% has more room to cut rates. This policy divergence, particularly if Australia’s economy slows further due to trade tensions between US and China, could keep downward pressure on AUD/NZD in the near term.

    Technically, sustained trading below 55 D EMA should confirm rejection by 1.1177 resistance. Fall from 1.1173 would be seen as the third leg of the corrective pattern from 1.1177. Further break of near term channel support (now at 1.1029) would pave the way back to 1.0940 support next.

    EUR/USD Weekly Outlook

    Range trading continued in EUR/USD last week and outlook is unchanged. Initial bias remains neutral this week first. Price actions from 1.0176 are seen as a corrective pattern only. IN case of further rise, upside should be limited by 38.2% retracement of 1.1213 to 1.0176 at 1.0572. On the downside, break of 1.0400 support will turn bias back to the downside for 1.0176/0210 support zone. However, decisive break of 1.0572 will raise the chance of reversal, and target 61.8% retracement at 1.0817.

    In the bigger picture, focus stays on on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, strong rebound from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

    In the long term picture, down trend from 1.6039 remains in force with EUR/USD staying well inside falling channel, and upside of rebound capped by 55 M EMA (now at 1.0929). Consolidation from 0.9534 could extend further and another rising leg might be seem. But as long as 1.1274 resistance holds, eventual downside breakout would be mildly in favor.



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  • CAD Steady After BoC Cut, DOW Nears Record Ahead of FOMC Hold

    CAD Steady After BoC Cut, DOW Nears Record Ahead of FOMC Hold


    Canadian Dollar is steady after BoC delivered its sixth consecutive rate cut, lowering its policy rate by 25bps to 3.00% as expected. The pace of easing has slowed from December’s 50bps reduction, reflecting a more measured approach as interest rate sits inside neutral zone. BoC explicitly warned of risks stemming from potential US tariffs, noting that a prolonged trade conflict could weigh on economic growth while simultaneously exerting upward pressure on inflation.

    Governor Tiff Macklem reinforced this concern in his press conference, describing US trade policy as a “major source of uncertainty,” with multiple possible outcomes. He also noted that tariffs reduce economic efficiency and cannot be offset by monetary policy alone, adding that with only one policy tool—the interest rate—the BoC cannot simultaneously combat “weaker output and higher inflation.”

    Attention now shifts to Fed, which is widely expected to hold its policy rate steady at 4.25–4.50% today. The key question is whether Fed will signal an extended pause in its rate-cutting cycle, either through its statement or Chair Jerome Powell’s press conference. Powell’s tone will be crucial in shaping market expectations—any indication of a prolonged pause could bolster the Dollar and weigh on risk assets, while a more dovish stance could encourage renewed risk-taking.

    In equities, DOW’s response to FOMC decision will be closely watched. The index has remained resilient despite this week’s tech sector volatility and is now approaching the record high of 45073.63.

    Decisive break above this level would confirm long-term uptrend resumption, and target 61.8% projection of 38499.27 to 45073.63 from 41844.89 at 45907.85. In this bullish scenario, risk-on sentiment could spread to other sectors and take S&P 500 and NASDAQ higher too.

    However, break of 44026.27 support will delay the bullish case and bring another fall to extend the consolidation from 45073.63 instead.

    Overall in the currency markets, Yen is trading as the strongest for the week so far, followed by Dollar and then Swiss Franc. Aussie is the worst, followed by Kiwi, and then Euro. Sterling and Loonie are positioning in the middle.

    BoC cuts rates to 3.00%, flags trade risks and ends QT

    BoC lowered its overnight rate target by 25bps to 3.00% as widely expected. In accompanying statement, the central bank warned that a prolonged trade conflict with the US could strain economic growth and drive inflation higher.

    BoC noted that “if broad-based and significant tariffs were imposed, the resilience of Canada’s economy would be tested.” Policymakers emphasized that they will closely monitor trade developments and assess their impact on economic activity, inflation, and future policy decisions.

    The updated projections suggest a modest recovery in economic growth. Following an estimated 1.3% expansion in 2024, GDP is now expected to grow by 1.8% in both 2025 and 2026, slightly exceeding potential growth. Inflation is projected to remain near the 2% target over the next two years, reinforcing expectations that BoC will maintain a cautious approach to policy easing.

    The central bank also announced plans to complete the normalization of its balance sheet by ending quantitative tightening. BoC will restart asset purchases in early March, adopting a gradual pace to ensure balance sheet stabilization while aligning with economic growth.

    German Gfk consumer sentiment falls to -22.4, recovery hopes fade

    Germany’s GfK Consumer Sentiment Index for February fell to -22.4, down from -21.4 and missing expectations of -20.5.

    In January, economic expectations dropped by 1.9 points to -1.6, while income expectations declined by 2.5 points to -1.1. The most concerning development came from willingness to buy, which fell 3 points to -8.4, its lowest level since August 2024,.

    Rolf Bürkl, consumer expert at NIM, noted that “the Consumer Climate has suffered another setback and starts gloomy into the new year.”

    The moderate optimism seen in late 2024 has faded, with Bürkl adding that the trend since mid-2024 has been stagnation at best. A key concern is inflation, which has recently picked up again, limiting prospects for a meaningful rebound in consumer demand.

    Australia’s CPI slows to 2.4% in Q4, trimmed mean CPI down to 3.2%

    Australia’s Q4 CPI rose just 0.2% qoq, same as the prior quarter, falling short of expectations of 0.4% yoy. Trimmed mean CPI also undershot forecasts, rising 0.5% qoq versus the expected 0.6% qoq.

    On an annual basis, headline CPI slowed from 2.8% yoy to 2.4% yoy, slightly below 2.5% yoy consensus. Trimmed mean CPI fell from 3.6% yoy to 3.2% yoy, missing 3.3% yoy estimate.

    These weaker inflation prints reinforce expectations that RBA may begin easing policy as early as its February 17-18 meeting.

    The decline in annual inflation was largely driven by steep drops in electricity prices (-25.2%) and automotive fuel (-7.9%). Goods inflation slowed sharply to 0.8% yoy, down from 1.4% yoy in Q3. Meanwhile, services inflation remained elevated at 4.3% yoy, though slightly lower than the 4.6% yoy in the previous quarter.

    In December, monthly CPI rebounded from 2.3% yoy to 2.5% yoy, matched expectations.

    RBNZ’s Conway sees cautious OCR path to neutral

    RBNZ Chief Economist Paul Conway stated in a speech today that Official Cash Rate at 4.25% remains “north of neutral”. The central bank estimates the neutral rate between 2.5% and 3.5%.

    “Easing domestic pricing intentions and the recent drop in inflation expectations help open the way for some further easing,” Conway added.

    However, Conway emphasized a cautious approach, noting that policymakers will “feel our way” as rates approach neutral. RBNZ will continuously reassess its neutral rate estimate, adjusting based on economic conditions.

    If neutral is underestimated, stronger-than-expected activity and inflation would signal a less restrictive policy than intended, prompting recalibration, he added.

    The central bank expects potential output growth to range between 1.5% and 2% annually over the next three years, reflecting a lower economic “speed limit.” This weaker outlook stems from sluggish productivity and reduced net immigration, limiting long-term economic capacity.

    USD/CAD Mid-Day Outlook

    Daily Pivots: (S1) 1.4367; (P) 1.4394; (R1) 1.4428; More…

    USD/CAD rebounded notably today but stays in range below 1.4516 short term top. Intraday bias remains neutral and more consolidations could be seen. Further rally is expected as long as 1.4260 support holds. On the upside, firm break of 1.4516 will resume larger up trend to 1.4667/89 key resistance zone. Nevertheless, firm break of 1.4260 will turn bias to the downside for deeper pullback to 55 D EMA (now at 1.4235) and below.

    In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Decisive break there will confirm long term up trend resumption. Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. Medium term outlook will remain bullish as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY BoJ Meeting Minutes
    00:30 AUD Monthly CPI Y/Y Dec 2.50% 2.50% 2.30%
    00:30 AUD CPI Q/Q Q4 0.20% 0.40% 0.20%
    00:30 AUD CPI Y/Y Q4 2.40% 2.50% 2.80%
    00:30 AUD RBA Trimmed Mean CPI Q/Q Q4 0.50% 0.60% 0.80%
    00:30 AUD RBA Trimmed Mean CPI Y/Y Q4 3.20% 3.30% 3.50% 3.60%
    05:00 JPY Consumer Confidence Jan 35.2 36.5 36.2
    07:00 EUR Germany GfK Consumer Sentiment Feb -22.4 -20.5 -21.3 -21.4
    09:00 CHF UBS Economic Expectations Jan 17.7 -20
    09:00 EUR Eurozone M3 Money Supply Y/Y Dec 3.50% 4.10% 3.80%
    13:30 USD Goods Trade Balance (USD) Dec P -122.1B -105.4B -102.9B -103.5B
    13:30 USD Wholesale Inventories Dec P -0.50% 0.10% -0.20% -0.10%
    14:45 CAD BoC Rate Decision 3.00% 3.00% 3.25%
    15:30 CAD BoC Press Conference
    15:30 USD Crude Oil Inventories   2.2M -1.0M
    19:00 USD Fed Rate Decision 4.50% 4.50%
    19:30 USD FOMC Press Conference

     



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  • Global Easing Expectations to Anchor Markets Despite Tech Sector Turmoil

    Global Easing Expectations to Anchor Markets Despite Tech Sector Turmoil


    Markets opened the week with a dramatic shift in risk sentiment as last week’s record-breaking highs in US equities gave way to sharp declines, driven by tech sector rout. Concerns over US dominance in artificial intelligence surfaced after Chinese startup DeepSeek unveiled a competing AI assistant, leading to fears of heightened competition. Nvidia saw its stock plummet over -12%, dragging NASDAQ down more than -3%. It should be emphasized that the long-term implications of this development remain unclear. Yet, some investors are treating it as an opportunity to take profits in the overheated tech sector, and wait for a sizeable correction, if any, to reenter the market.

    Despite the tech selloff, it’s far too early to suggest that equity markets have peaked. The broader macroeconomic backdrop continues to support risk assets, with expectations for continued monetary easing from major global central banks still intact. In the US, President Donald Trump’s lack of action on tariffs, particularly toward allies, has helped contain inflation risks. These factors should help cushion market sentiment even as tech stocks experience turbulence.

    Technically, DOW’s retreat today is so far rather shallow. As long as 55 H EMA (now at 43907) holds, DOW’s rally from 41884.98 should still be in progress. A serious test 45703.63 key near term resistance should at least be seen before any more sustained correction can be considered.

    10-year yield’s correction 4.809 resumed earlier than expected by gapping through last week’s low of 4.552. But that’s not so much a surprised and was inline with the outlook mentioned in our weekly report. Deeper correction looks more likely than not for now, but downside should still be contained by 38.2% retracement of 3.603 to 4.809 at 4.348. That’s supported by expectations inflation in the US would remain sticky that keep Fed’s easing much shallower than its global peers.

    Overall in the currency markets, Yen and Swiss Franc are the strongest ones today, supported both by risk aversion in the stock markets and fall in US and European benchmark yields. Commodity currencies are all in red with Aussie being the worst, followed by Kiwi and then Loonie. Euro and Sterling are trading mixed in the middle with Dollar. The greenback is at a disadvantage with the deeper decline in US yields.

    German Ifo rises to 85.1, slightly improvement but still pessimistic

    German Ifo Business Climate ticked up from 84.7 to 85.1 in January. Current Situation Index also rose form 85.1 to 86.1. But Expectations Index fell from 84.4 to 84.2.

    By sector, manufacturing fell from -24.9 to -25.3. Services rose from -5.6 to -2.2. Trade was unchanged at -29.5. Construction dropped notably from -26.2 to -28.2.

    Ifo said that despite the slight improvement, “companies continue to be pessimistic”.

    China’s PMI manufacturing falls to 49.1, weak start to 2025

    China’s manufacturing activity slipped into contraction in January, with NBS Manufacturing PMI falling from 50.1 to 49.1, missing expectations of 50.1. This marks the first contraction since October and the lowest reading since August.

    The decline was attributed to Lunar New Year holiday, as workers left early, according to NBS senior statistician Zhao Qinghe. Analysts also noted potential effects from slowing export demand after earlier front-loading tied to trade concerns.

    The services sector showed similar weakness, with the Non-Manufacturing PMI dropping from 52.2 to 50.2, below the expected 52.0. Composite PMI, combining manufacturing and services, slipped to 50.1 from 52.2, reflecting a broad deceleration.

    While some of this is likely seasonal, the magnitude of the slowdown raises concerns about underlying economic momentum, especially with external pressures like trade tensions still in play.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 155.03; (P) 155.81; (R1) 156.77; More…

    Intraday bias in USD/JPY stays on the downside this point. Fall from 154.77 is in progress for 38.2% retracement of 139.57 to 158.86 at 151.49. Sustained break there will suggest that whole rally from 138.57 has completed already. For now, risk will stay on the downside as long as 156.74 resistance holds, in case of recovery.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    01:30 CNY NBS Manufacturing PMI Jan 49.1 50.1 50.1
    01:30 CNY NBS Non-Manufacturing PMI Jan 50.2 52 52.2
    09:00 EUR Germany IFO Business Climate Jan 85.1 84.6 84.7
    09:00 EUR Germany IFO Current Assessment Jan 86.1 85.4 85.1
    09:00 EUR Germany IFO Expectations Jan 84.2 84 84.4
    15:00 USD New Home Sales Dec 698K 669K 664K

     



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  • Global Markets Look Beyond Trump’s Inauguration as Local Drivers Take the Lead

    Global Markets Look Beyond Trump’s Inauguration as Local Drivers Take the Lead


    Global markets are buzzing in anticipation of Donald Trump’s inauguration on January 20, yet the latest developments suggest investors may already be looking past the immediate impact. Despite speculation surrounding Trump’s policies—particularly tariffs—various benchmarks and asset classes are charting their own directions based on localized drivers and monetary policy expectations.

    In the US, the strong bounce in major stock indexes owes something to hopes of expansive fiscal stimulus under Trump. However, a significant portion of the rally can be traced to an improving inflation outlook and the view that Fed remains on track to further monetary easing. Additionally, the lack of significant concern over tariffs impacting inflation suggests that investors may not see Trump’s trade policies as an immediate threat to the US economy.

    Meanwhile record-breaking runs in FTSE and DAX signal distinct optimism. UK investors are banking on additional BoE easing after disappointing GDP, retail sales, and CPI data highlighted ongoing struggles. Germany’s DAX is supported by ECB’s dovish leanings as well as hopes of a political turnaround after snap elections in Germany in February. Market enthusiasm for Europe clearly isn’t driven by any expectation of beneficial tariffs; rather, local factors are in control.

    Japan, not a prime target of Trump’s tariff rhetoric, saw Nikkei weighed down by intensifying speculation about a looming Bank of Japan rate hike. This dynamic stands in sharp contrast to the overarching risk-on atmosphere elsewhere.

    In the currency markets, Yen emerged as the strongest performer last week, propelled by bets on BoJ action. Australian and New Zealand dollars followed suit, aided by the broader risk-on mood. On the weaker side of the spectrum, Canadian Dollar was the worst-performing currency, finally something reflecting potential vulnerability to Trump’s trade policies as BoC may have underestimated the economic risks posed by tariffs. Sterling also underperformed while Dollar was similarly subdued. Euro and Swiss Franc ended the week in middle positions.

    Risk Appetite Returns: DOW, S&P 500, NASDAQ End Week with Solid Gains

    Risk-on sentiment returned to US equity markets this week, with all three major indexes posting strong gains. DOW surged 3.69% for the week, S&P 500 rose 2.91%, and NASDAQ climbed 2.45%. Technically, the robust rebound eased fears of an imminent bearish reversal, affirming that recent pullbacks were likely just corrections within a broader uptrend.

    Market attention was drawn to Fed Governor Christopher Waller’s remarks at CNBC’s “Squawk on the Street”, interpreted by some as a dovish tilt. He expressed confidence that the inflationary stickiness seen in 2024 will begin to “dissipate” in 2025 and described himself as “more optimistic” about inflation than many of his Fed colleagues. Waller indicated the potential for three or four 25bps rate cuts this year, contingent on favorable inflation data.

    However, it should emphasized that Waller also tempered this optimism with caution, acknowledging that “If the data doesn’t cooperate, then you’re going to be back to two, maybe even one”.

    Waller left the door open for a rate cut in March, remarking that such a move “cannot be completely ruled out.” However, the message underlying was still consistent with market expectation that May or June might be more likely.

    Overall, despite the dovish interpretation by some, Waller’s comments suggest a flexible, data-dependent approach rather than a clear commitment to easing. The comments also largely aligned with market pricing.

    Nonetheless, inflation data for December did provide some relief. While, headline CPI rose from 2.7% to 2.9% yoy, core CPI edged down from 3.3% to 3.2%. This incremental progress reduces pressure on the Fed to maintain restrictive policy for an extended period. More importantly, that makes a return to tightening less likely.

    Futures pricing didn’t change much over the week, reflecting a 97.9% chance that Fed will hold rates steady at 4.25–4.50% at the January meeting, with a 72.4% chance of another hold in March. The probability of a May rate cut stands at 44%, rising to 66% by June. By year-end, markets still project a 52.1% chance of just one rate cut, reducing rates to 4.00–4.25%.

    Technically, DOW’s break of 55 D EMA (now at 43038.33) suggests that pullback from 45073.63 has completed at 41844.98 already. The medium term channel holds intact, as well as the up trend. Whether DOW is ready for another record run through 45073.63 would depend on the momentum of the next rise.

    But even in case that corrective pattern from 45073.63 is going to extend with another falling leg, downside looks more likely than not to be contained by cluster support level at around 40k, with 39889.05 resistance turned support, and 38.2% retracement of 32327.20 to 45073.63 at 40204.49.

    NASDAQ’s price actions from 20204.58 are also clearly corrective looking so far, with notable support from 18671.06 resistance turned support. With this support intact, larger up trend should resume through 20204.58 sooner rather than later.

    Yields and Dollar Index Form Short-Term Top With Improved Risk Sentiment

    Improved risk sentiment in US markets has triggered pullback in both 10-year Treasury yield and the Dollar Index, suggesting a temporary pause in their recent rally.

    Technically, a short term top is likely in place at 4.809 in 10-year yield, considering that D MACD has crossed below signal line. More consolidations should follow in the near term below 4.809, with risk of deeper pull back to 55 D EMA (now at 4.434). But outlook will continue to stay bullish as long as 38.2% retracement of 3.603 to 4.809 at 4.348 holds. Another rally through 4.809 to retest 4.997 high is expected, though breaking the psychological 5% level may prove challenging without stronger momentum.

    Dollar Index could have formed a short term top at 110.17 too, just ahead of 61.8% projection of 100.15 to 108.87 from 105.42 at 110.31, with D MACD crossed below signal line. Deeper retreat could be seen to 108.07 resistance turned support, or even further to 55 D EMA (now at 107.15). But near term outlook will stay bullish as long as 38.2% retracement of 100.15 to 110.17 at 106.34 holds. Firm break of 110.17 will resume the rally to 100% projection at 113.34.

    FTSE and DAX Surge to Record Highs

    Risk-on sentiment was also evident in the European equity markets, with FTSE 100 and DAX surged to new record highs. The optimism was fueled by expectations of rate cuts, positive economic projections, and hopes for political stability.

    In the UK, a trio of softer economic data—GDP, retail sales, and CPI—reinforced market expectations for BoE easing. Markets now anticipate more than 75 basis points of rate cuts throughout 2025, compared to just 50 basis points priced in the prior week. A 25bps rate cut in February is now universally expected.

    Supporting this sentiment, IMF upgraded its UK growth forecast for 2025 by 0.1 percentage points to 1.6%, making the UK the third-fastest-growing G7 economy after the US and Canada. IMF attributed this optimism to increased government investment, improved household finances, and anticipated rate cuts.

    That’s a strong nod to the Labour government despite wide criticism on its Autumn Budget. Meanwhile, IMF also projects BoE’s headline rate to fall from 4.75% to 3.75% by year-end.

    Technically, FTSE’s break of 8474.41 confirmed that triangle consolidation from there has completed at 8002.34, and larger up trend has resumed. Next target is 61.8% projection of 7404.08 to 8474.41 from 8002.34 at 8663.80.

    In Germany, DAX surged to new record on improving risk appetite and expectations of continued ECB easing.

    ECB’s December meeting minutes leaned towards the dovish side, and revealed discussions about a more aggressive 50-basis-point cut. The central bank ultimately favored a measured approach, with consensus on a more controlled pace of easing, to allow for checkpoints to confirm that disinflation remains on track.

    While IMF downgraded its 2025 growth forecasts for Germany and France, the outlook still points to modest recovery. Germany, previously expected to grow by 0.8%, is now forecasted to expand by just 0.3%, marking a slow rebound from two years of contraction. France’s growth forecast was also reduced by 0.3 percentage points to 0.8%. The positive side of the forecasts is that both economies are expected to regain some footing this year.

    It should also be noted that markets are probably pricing in a degree of optimism around the February 23 snap elections, which could lead to greater political stability and more consistent economic policies in Germany.

    Technically, DAX should now be on track to 100% projection of 14630.21 to 18892.92 from 17024.82 at 21287.52 next.

    Nikkei Weighed by BoJ Hike Risks, SSE Struggles to Rebound

    Investor sentiment in Asia, however, was much less optimistic, with Japan facing headwinds from growing expectations of Bank of Japan policy normalization, while China’s economic recovery struggles to inspire confidence amid external pressures.

    In Japan, speculation over a rate hike at the upcoming January 23–24 BoJ meeting has intensified. Governor Kazuo Ueda and Deputy Governor Ryozo Himino have repeatedly hinted at the possibility of policy tightening, with analysts interpreting their comments as preparation for market adjustments.

    Additionally, reports suggest BoJ is likely to raise its inflation forecasts in its quarterly outlook, highlighting upside risks fueled by the persistently weak Yen and elevated import costs. Internally, BoJ policymakers believe that stabilizing inflation expectations around the 2% target could allow short-term rates to rise as high as 1% without hindering economic growth.

    Traders are pricing in an 80% chance of a rate hike from 0.25% to 0.50%.

    Nikkei weakened for the week on expectations of BoJ’s normalization move, but stayed above 37651.07 support.

    Outlook is unchanged that price action from 42426.77 are developing in to a medium term three wave consolidation pattern, with rebound from 31156.11 as the second leg.

    For now, another rally cannot be ruled out, but strong resistance should emerge below 42426.77 to limit upside. Firm of 37651.07 support will in turn indicate that the third leg has likely commenced, and bring deeper fall to 35253.43 support and below

    In China, Shanghai SSE Composite struggled to generate meaningful gains other than a mild recovery.

    China’seconomy grew 5.4% yoy in Q4, lifting full-year GDP growth to 5.0%, matching the government’s target.Meanwhile, market rumors suggest Beijing is hesitant to use Yuan depreciation as a tool to counter tariffs from a second Trump presidency. Analysts believe sharp currency depreciation, as seen during Trump’s first term, could harm the struggling economy more than it would help.

    However, market confidence remains subdued, and the stock market recovery appeared technical rather than driven by fundamentals.

    SSE found support at the 50% retracement level of 2,635.09 to 3,674.40 at 3154.74, but remained capped below 55 D EMA (now at 3279.16).

    Risk remains on the downside for the near term for SSE. Break of 3140.90 will extend the corrective fall from 3674.40 to 61.8% retracement at 3032.11. Nevertheless, sustained break above the 55 D EMA will indicate that stronger near term rebound is underway back towards 3494.86 resistance.

    USD/CAD Weekly Outlook

    USD/CAD’s late break of 1.4466 resistance confirms larger up trend resumption. Initial bias is back on the upside this week for 1.4667/89 long term resistance zone. For now, outlook will stay bullish as long as 1.4302 support holds, in case of retreat.

    In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Decisive break there will confirm long term up trend resumption. Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. Medium term outlook will remain bullish as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

    In the longer term picture, price actions from 1.4689 (2016 high) are seen as a consolidation pattern, which might have completed at 1.2005. That is, up trend from 0.9506 (2007 low) is expected to resume at a later stage. This will remain the favored case as long as 1.3418 support holds.



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  • Dollar Gains Momentum as Fed Cuts Come Into Question

    Dollar Gains Momentum as Fed Cuts Come Into Question


    The US markets last week were shaped by two dominant themes: uncertainty surrounding trade policies of the incoming US administration and the impact of robust US economic data. Initial market confusion, driven by ambiguous signals regarding tariffs, created significant volatility. However, this indecisiveness gave way to clarity as strong US data reaffirmed the resilience of the economy, casting doubt on the likelihood of more Fed rate cuts in 2025.

    US Treasury yields surged as markets recalibrated their expectations for Fed policy, while equities faced notable selling pressure. This dual development provided a substantial boost to Dollar, which ended the week broadly higher. While some traders remain cautious, wary of surprises tied to US political developments, the Dollar’s upward momentum appears poised to persist, supported by the hawkish shift in Fed expectations and strong macroeconomic fundamentals.

    Across the Atlantic, Sterling faced intense pressure, falling sharply as concerns over fiscal de-anchoring took center stage. Rising UK gilt yields, coupled with a weakening Pound, highlighted fears of a negative spiral for the UK’s fiscal health. Investors are increasingly concerned that higher borrowing costs could exacerbate fiscal imbalances, particularly in an environment of tepid growth and stagflationary risks. Sterling’s underperformance made it the worst performer among major currencies.

    Elsewhere, Canadian Dollar emerged as the strongest currency of the week, but only for consolidating recent losses. Yen followed Dollar as the third strongest, benefiting from a late-week risk-off environment. On the other hand, Aussie and Kiwi, reflecting their risk-sensitive nature, were among the weakest performers. Euro and Swiss Franc ended in middle positions.

    Fed Pause to Extend, Rate Cuts in 2025 Less Certain, Hike Risks Emerge?

    Dollar and US Treasury yields soared last week, while equities took a hit, as a new idea gained traction: Fed might refrain from any rate cuts in 2025. This shift in market sentiment emerged after several catalysts converged, including robust employment data, jump in inflation expectations, and public remarks from key Fed officials. Traders are now rethinking their scenarios for the months ahead, pricing in the possibility that the central bank will remain on hold longer than previously thought.

    Driving the narrative is the unexpectedly strong December non-farm payroll report. Employers added 256k new jobs, surpassing consensus forecasts of 150k and even outpacing the monthly average of 186k for 2024. Unemployment rate dipped back to 4.1%, reinforcing the view that the labor market is in solid shape.

    These data points suggest not only a healthy labor market but also reacceleration in hiring after last year’s elections, bolstered by expectations of pro-business policies under the incoming Trump administration. If these dynamics persist, the labor market could tighten further, reigniting inflationary pressures. The timing of these numbers matters greatly too, as they have arrived just as the market was anticipating a more tempered economy heading into 2025.

    Another factor reshaping investor expectations is the January University of Michigan survey, which revealed a marked rise in inflation expectations. One-year inflation forecasts jumped from 2.8% to 3.3%, the highest since May, while long-run expectations climbed to 3.3%, not seen since June 2008. These developments highlight a growing concern that inflation could move beyond Fed’s comfort zone, especially with additional fiscal and trade policies fueling price pressures ahead.

    In parallel, the incoming Trump administration’s policy stance, in particular on trade, adds more complexity. While the president-elect denied reports of a shift to sector-specific tariffs out of concerns over political backslash, subsequent speculation about declaring a national economic emergency to justify tariffs has left markets unsettled.

    It should be emphasized that these scenarios are not mutually exclusive. Trump could still use emergency powers to target specific sectors or countries. This uncertainty is likely to persist at least until his inauguration on January 20.

    Looking at Fed, three key takeaways have taken form. First, a pause in January appears virtually locked in, with robust data and upbeat official commentary reinforcing the case for no immediate move. Second, markets are now leaning toward the next cut being postponed until May, representing a prolonged window of inactivity. Third, there is a growing notion that Fed could deliver just one cut in 2025 or potentially none at all, should inflation remain elevated and growth hold steady.

    Meanwhile, central bank communication has echoed these changing expectations. Former rate-cut proponents at Fed have begun to indicate growing consensus that policy easing may be nearing an end. However, it should be clarified that Fed Governor Michelle Bowman described December’s cut as the “final step” in the “recalibration” process only. She stopped short of declaring an outright end to the cycle. Still, Bowman’s words imply that a higher threshold for further reductions is now in play.

    Adding to the hawkish tilt, analysts from Bank of America have raised the possibility of a Fed rate hike rather than additional cuts. Such a scenario isn’t the baseline, given that policies are still restrictive, despite being close to neutral. Fed appears content to let existing policy restrictions work their way through the economy for now.

    However, significant acceleration in core inflation—particularly if it exceeds 3%—could force Fed policymakers to reconsider their stance. But then the bar for a hike is also high.

    DOW Correction Deepens, 10-Year Yield and Dollar Index Power Up

    Technically, DOW’s correction started to take sharp as the decline from 45703.63 resumed last week. Two near term bearish signal emerged recently, rejection by 55 D EMA and break of rising channel support.

    Further fall is expected as long as 55 D EMA (now at 43504.46) holds, targeting 38.2% retracement of 32327.20 to 45073.63 at 40204.49. Nevertheless, this decline is seen as correcting the rise from 32327.20 only. Hence strong support should be seen from 40204.49 which is close to 40k psychological level, to contain downside.

    Also, the broader US equity markets remain relatively resilient, with S&P 500 and NASDAQ hold well above support levels at 5669.67 and 18671.06, respectively. These two levels will need to be decisively broken to confirm broader medium-term corrections. Without such breaks, the overall market appears to be in a sideways consolidation phase, with DOW underperforming.

    10-year yield’s rally from 3.603 reaccelerated last week and powered through 61.8% projection of 3.603 to 4.505 from 4.126 at 4.683. Further rally is now expected in the near term to 4.997 high. And possibly further to 100% projection at 5.028. In any case, near term outlook will remain bullish as long as 4.517 support holds during any pullbacks.

    The bigger picture in 10-year yield still suggests that up trend from 0.398 (2020 low) is ready to resume. Consolidations from 4.997 (2023 high) should have completed at 3.603 already.

    It may still be a bit early, but this bullish medium term scenario is getting closer. Firm break of 4.997 will target 38.2% projection of 0.398 to 4.997 from 3.603 at 5.359.

    Dollar Index’s rally from 100.15 continued last week and remains on track to 61.8% projection of 100.15 to 108.87 from 105.42 near term target. Decisive break there will target 100% projection at 113.34. In any case, near term outlook will stay bullish as long as 107.73 support holds.

    In the bigger picture, Dollar index now looks on track to retest 114.77 key resistance (2022 high). But more importantly, considering the strong support from rising 55 M EMA, it might also be ready to resume the long term up trend from 70.69 (2008 low), with its sight on 61.8% projection of 89.20 to 114.77 from 100.15 at 115.95.

    Fiscal De-anchoring Fears Send UK Bond Yields Soaring, Pound Plunging

    The UK also found itself at the center of market attention last week, with 10-year Gilt yield surging to its highest level since 2008. At the same time, Sterling sank to a more-than-one-year low against Dollar.

    The simultaneous rise in bond yields and depreciation of the currency has raised alarm bells, as some analysts interpret it as a sign of fiscal de-anchoring. In this scenario, higher yields push up borrowing costs, compounding fiscal worries and creating a negative feedback loop.

    Investors have increasingly voiced concern about stagflationary environment in the UK, marked by both subdued economic growth and rising inflationary pressures. The Autumn Budget, with its array of tax and fiscal measures—including an increase in employers’ national insurance contributions—appears to have hindered economic activity to a greater extent than initially expected.

    Comparisons to the “Truss Crisis” of 2022 have naturally emerged. Back then, the mini-budget proposed by Prime Minister Liz Truss and Chancellor Kwasi Kwarteng triggered a dramatic collapse in Sterling from 1.16 to 1.05 against Dollar, alongside a sudden spike in Gilt yields. Those moves, however, were entirely reversed within a few weeks once both the Chancellor and Truss resigned, paving the way for a change in policy direction.

    The scope of last week’s market shifts is notably smaller by comparison, providing a measure of reassurance that the current situation may not descend into a repeat of that crisis. Nonetheless, market sentiment appears less likely to stabilize quickly this time, as there is no indication of immediate change in key government positions.

    Prime Minister Keir Starmer and Chancellor of the Exchequer Rachel Reeves are expected to remain in office despite the current headwinds, which differs markedly from the abrupt reshuffling seen in 2022. Without a rapid pivot in fiscal policy, the overhang of higher borrowing costs and fragile investor confidence could persist, prolonging downward pressure on Sterling and upward pressure on bond yields.

    The confluence of looming stagflation, renewed fiscal anxieties, and limited policy flexibility casts a shadow over Sterling’s outlook. Where the pound plummeted sharply during the Truss episode—only to bounce back swiftly—the new environment suggests a more gradual but persistent decline.

    Technically, with last week’s strong rally, EUR/GBP’s is now back on 0.8446 resistance, which is close to 55 W EMA (now at 0.8444). Decisive break there will firstly confirm medium term bottoming at 0.8221, after drawing support from 0.8201 (2022 low). Further rally should be seen to 0.8624 cluster resistance ( 38.2% retracement of 0.9267 to 0.8221 at 0.8621), even as a correction. Reactions from there would then decide whether the whole down trend from 0.9267 (2022 high) has reversed.

    As for GBP/CHF, it has clearly struggled to sustain above flat 55 W EMA, which kept outlook neutral at best. Break of 1.1106 support will indicate that rebound from 1.0741 has completed, and deeper fall should be seen back to this support. More importantly, downside acceleration below 1.1106 will raise the chance that fall from 1.1675 is resuming the long term down trend, which could send GBP/CHF through 1.0741 to retest 1.0183 (2022 low) at least.

    AUD/USD Weekly Report

    AUD/USD’s break of 0.6169 key support level last week confirms larger down trend resumption. Initial bias stays on the downside this week for 61.8% projection of 0.6687 to 0.6198 from 0.6301 at 0.5999. For now, outlook will stay bearish as long as 0.6301 resistance holds, in case of recovery.

    In the bigger picture, down trend from 0.8006 (2021 high) is resuming with break of 0.6169 (2022 low). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806, In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6587) holds.

    In the long term picture, prior rejection by 55 M EMA (now at 0.6846) is taken as a bearish signal. But for now, fall from 0.8006 is still seen as the second leg of the corrective pattern from 0.5506 long term bottom (2020 low). Hence, in case of deeper fall, strong support should emerge above 0.5506 to contain downside to bring reversal. However, this view is subject to adjustment if current decline accelerates further.



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