Tag: DXY

  • 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.



    Source link

  • 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.



    Source link

  • 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.



    Source link

  • Moody’s Downgrade Disrupts Calm from Tariff Truce, Dollar Faces New Test

    Moody’s Downgrade Disrupts Calm from Tariff Truce, Dollar Faces New Test


    Just as markets were finding their footing following a series of positive trade developments, Moody’s delivered a late-week shock by downgrading the US sovereign credit rating from Aaa to Aa1. The move overshadowed the optimism sparked by the US-China tariff truce and the broader de-escalation of trade tensions.

    The trade outlook appears less volatile in the near term, with more agreements possibly in the pipeline. Markets may enjoy a reprieve from tariff headlines until early July for non-China partners, and until mid-August for China.

    However, that stability could be abruptly shaken by Moody’s downgrade. The timing of the downgrade coincides with fragile improvements in sentiment, raises the risk of renewed selling in both Treasuries and Dollar.

    In the currency markets, performance was mixed last week, a hallmark of broader consolidation. Dollar finished as the strongest currency but notably failed to build on its early-week strength. Aussie followed as the second-best performer, buoyed by strong domestic job data and risk appetite, while Sterling also held firm with support from strong UK GDP. However, gains were limited overall. On the weaker side, Euro posted the poorest performance, followed by Swiss Franc and Kiwi. Yen and Loonie ended the week in the middle.

    Wall Street Surges on Trade Truce, Even Though Soaring Inflation Expectations Reinforce Fed Patience

    US equity markets wrapped up the week with strong gains, driven by renewed optimism over global trade and investor resilience, despite worrying economic signals. S&P 500 surged 5.3%, DOW added 3.4%, and NASDAQ Composite outperformed with a 7.2% jump. The rally was initially sparked by the surprising outcome of the US-China trade meeting. Both sides agreed to a 90-day truce and rolled back a significant portion of the tariffs, though not fully returning to pre-conflict levels.

    Investors looked past several downside risks and pushed stock prices higher, even as economic data pointed to potential trouble ahead. Markets absorbed weak consumer sentiment and sharply rising inflation expectations without flinching. This reflects a broader hope that trade normalization will continue to offset macro headwinds, at least in the short term.

    The University of Michigan’s preliminary consumer sentiment report for May, released Friday, highlighted growing public anxiety. The headline index dropped to 50.8, its second-lowest reading on record. Year-ahead inflation expectations surged from 6.5% to 7.3%, the highest since 1981.

    Importantly, the survey was conducted between April 22 and May 13. That timeframe includes the period after US President Donald Trump announced that reciprocal tariffs on all trading partners other than China would be scaled back to a 10% baseline. It also includes responses collected a day after the US-China truce was declared.

    In that context, the persistent collapse in sentiment and worsening inflation outlook suggest that consumers remain highly skeptical about the economic direction. Even the rollback of some tariffs was not enough to lift the mood or tame concerns about rising prices. Attention will now be on the final May release due May 30, to see if sentiment and expectations shift more positively as the trade truce sinks in.

    For Fed, the data likely reinforce a cautious stance, for holding back from another rate cut for longer. Fed funds futures now reflect just a 36% chance of a 25bps rate cut in July. Expectations rise to 75% for a September cut, followed by around 70% odds of another in December. That suggests markets believe only two rate cuts are likely this year, if any.

    Technically, S&P 500 gapped higher at the start of the week and extended its rally from 4835.04 low. The current rise is still viewed as the second leg in the medium-term corrective pattern from the 6147.43 high. Momentum should start to fade above 6000 psychological level. A break below 5720.10 gap support would indicate short-term topping. Sustained trading below 55 Day EMA (now at 5650.80) would suggest that the third leg of the correction has already begun.

    Moody’s Downgrade Casts Shadow Over Dollar and Treasuries

    Despite a strong weekly finish for Wall Street and Dollar, sentiment faces a fresh challenge after Moody’s downgraded the US sovereign credit rating on Friday. The move, announced after markets closed, cut the rating by one notch to Aa1 from Aaa—marking a rare loss of top-tier status. While the immediate market reaction was muted due to timing, the downgrade could cast a shadow over financial markets in the coming week, with pressure potentially building on both Dollar and US Treasuries.

    Notably, Dollar ended as the top-performing major currency last week, but it did so without conviction. After Monday’s initial surge, momentum faded quickly. By midweek, the greenback began to stall, showing little follow-through despite stronger inflation expectations. That suggests underlying demand may be fragile.

    Moody’s cited deteriorating fiscal outlook as the key reason for the downgrade, pointing to “successive US administrations and Congress” that have failed to reverse the trend of widening deficits and rising debt servicing costs. The agency also expressed skepticism that meaningful fiscal reforms are on the horizon, making clear that the downgrade reflects more than just short-term political risks. The downgrade reflects not only mounting fiscal stress, but also the political impasse that continues to hinder structural reforms.

    This backdrop is especially important given how markets reacted in early April, when sweeping reciprocal tariffs imposed by the US triggered a rally in Treasury yields and broad weakening of Dollar. That episode suggested investors may be reassessing traditional assumptions about the US’s role as the ultimate safe asset provider. A similar dynamic could resurface if the Moody’s downgrade gains traction with bondholders or sparks broader credit rating scrutiny.

    Technically, 10-year yield’s strong rise last week suggests that near term correction from 1.4592 has already completed at 4.124. Rise from 3.886 might be ready to resume. Further rally is now in favor as long as 55 D EMA (now at 4.3437) holds. Firm break of 4.592 would target 100% projection of 3.886 to 4.592 from 4.124 at 4.830 next.

    Dollar Index’s corrective recovery from 97.92 continued last week, but started to struggle ahead of 55 D EMA (now at 101.93). While another rise cannot be ruled out, upside should be limited by 38.2% retracement of 110.17 to 97.92 at 102.60. On the downside, break of 99.17 support will argue that larger down trend is ready to resume through 97.92 low.

    One asset that could benefit from renewed stress on the Dollar and Treasuries is Gold. Technically, Gold is now at an ideal level to complete the corrective pullback from 3499.79 high. Current levels include 55 D EMA (now at 3152.88) and 38.2% retracement of 2584.24 to 3499.79 at 3150.04. On the upside, firm break of 3262.74 resistance should bring stronger rally back to 3434.76/3499.79 resistance zone.

    EUR/USD Weekly Outlook

    EUR/USD dived further to 1.1064 last week but recovered ahead of 38.2% retracement of 1.0176 to 1.1572 at 1.1039. Initial bias remains neutral this week first. Strong support is still expected from 1.1039 to complete the correction from 1.1572. On the upside, above 1.1292 will bring stronger rise back to retest 1.1572. However, sustained break of 1.1039 will dampen this view and target 61.8% retracement at 1.0709 next.

    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 1.0818) 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 1.1300) 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.



    Source link

  • Fed Cut Bets Recede Ahead of US CPI, Dollar Approaches Key Resistance

    Fed Cut Bets Recede Ahead of US CPI, Dollar Approaches Key Resistance


    Global equity markets surged overnight in response to the breakthrough US-China tariff truce, with risk appetite roaring back across the board. DOW jumped more than 1100 points, while S&P 500 and NASDAQ surged 3.26% and 4.35%, respectively. The relief rally extended into Europe, where Germany’s DAX surged to a new record high, reflecting broad optimism that trade tensions have eased significantly—at least for now. In Asia, Japan’s Nikkei jumped nearly 1.8% in early trading as it played catch-up, though the boost faded in Hong Kong where HSI turned lower, signaling some regional caution.

    In the currency markets, however, the initial momentum has slowed. Dollar remains the strongest currency for the week so far, supported by rising Treasury yields and expectations that Fed will maintain its high interest rate longer. Commodity currencies like the Australian, Canadian, and New Zealand Dollars are also holding firm, buoyed by improved risk sentiment. Meanwhile, Yen and European majors continue to lag.

    The attention now shifts to today’s US April CPI release, which will be the first major inflation print since the April tariff escalation and the subsequent truce. Although the immediate impact of tariffs may not be fully visible yet, any upside surprise could reinforce Fed’s message of caution. While that may further support Dollar, it’s unlikely to significantly dampen the broader risk-on mood, given that markets have already recalibrated expectations following the trade deal.

    Indeed, Fed fund futures have responded decisively to the latest developments. A week ago, markets were pricing in a 74% chance of a July rate cut. That probability has now dropped sharply to 41% in the wake of the tariff truce. This suggests that traders have already priced in a “higher for longer” Fed policy stance, reducing the likelihood of any sudden repricing unless inflation data comes in meaningfully above expectations.

    Technically, with yesterday’s strong rally, DXY will enter into a key resistance zone ahead, between 55 D EMA (now at 102.07) and 38.2% retracement of 110.17 to 97.92 at 102.60. For now, rebound from 97.92 is still seen as part of a correction to the fall from 110.17. Hence, strong resistance should be seen from 102.07/60 to limit upside, at least on first attempt. However, sustained break of this zone will raise the chance of reversal, and target 61.8% retracement at 105.49 next.

    In Asia, at the time of writing, Nikkei is up 1.79%. Hong Kong HSI is down -1.67%. China Shanghai SSE is up 0.08%. Singapore Strait Times is up 0.43%. Japan 10-year JGB yield is up 0.07 at 1.459. Overnight, DOW rose 2.81%. S&P 500 rose 3.26%. NASDAQ rose 4.35%. 10-year yield rose 0.082 to 4.457.

    Looking ahead, UK employment data and German ZEW economic sentiment will be the main feature in European session. Later in the day, US CPI is the center of focus.

    Fed’s Goolsbee warns tariff truce still carries stagflation risk

    Chicago Fed President Austan Goolsbee welcomed the weekend’s US-China tariff agreement as a step in the right direction but cautioned that its limited scope offers only modest relief.

    In an interview with the New York Times, he said the temporary 90-day reduction in tariffs would be “less impactful stagflationarily than the path they were on.”

    But that still represents a significant burden on the economy. With tariffs remaining three to five times higher than pre-trade war levels, Goolsbee warned the deal would still “make growth slower and make prices rise”, hallmarks of a stagflationary environment.

    Given the persistent uncertainty surrounding US trade policy, Goolsbee reiterated his support for a wait-and-see approach on interest rates. He noted that the Trump administration’s statements acknowledge the temporary nature of the current truce. “It’s going to be revisited in the near future,” he said.

    BoE’s Taylor defends 50bps cut, cites perilous trade climate and weak demand

    BoE MPC member Alan Taylor explained his decision to vote for a 50bps rate cut last week, warning that both global and domestic conditions have deteriorated significantly.

    He pointed to a “quite perilous” international trade environment, driven in large part by broader-than-expected US tariffs. Also, “the erosion of confidence that we saw has continued”, he added, with low readings in business surveys like the PMI and REC, along with signs of increased precautionary saving and delayed investment.

    Taylor also called the recent UK-US trade deal “quite slender,” noting that most British exports will still face a 10% tariff, offering little near-term relief for exporters.

    Taylor warned that waiting for complete confirmation that all inflation pressures had eased before easing policy further could leave BoE behind the curve.

    ECB officials signal cautious path to June cut

    Latvian ECB Governing Council member Martins Kazaks indicated overnight that a rate cut in June remains a “pretty possible step,” aligning with market expectations, provided upcoming data confirms progress toward anchoring inflation around the 2% target.

    Kazaks added that “gradual cautious cuts could come upon the anchoring of inflation to around the 2% target.”

    Meanwhile, German and Spanish ECB members Joachim Nagel and Jose Luis Escriva added a note of caution in a joint interview, warning that US President Donald Trump’s aggressive tariff policies have clouded the economic outlook.

    “Regarding monetary-policy decisions, it is important to be cautious and not to overreact by overemphasizing specific announcements that could change shortly afterwards,” Nagel emphasized.

    BoJ’s Uchida sees temporary inflation pause, but wage growth to persist

    BoJ Deputy Governor Shinichi Uchida said today that while Japan’s underlying inflation and medium- to long-term inflation expectations may “temporarily stagnate”, wage growth is expected to remain firm as “Japan’s job market is very tight.”

    He added that companies are likely to continue “passing on rising labour and transportation costs by increasing prices”.

    Uchida also stressed that BoJ will assess the economic impact of US trade policy “without pre-conception,” acknowledging the high degree of uncertainty surrounding the global outlook.

    BoJ opinions: Sees tariff risks but maintains flexible rate-hike stance

    BoJ’s Summary of Opinions from its April 30–May 1 meeting revealed a generally cautious view on the impact of US tariffs, with board members acknowledging the potential economic damage but not seeing it as enough to derail the pursuit of the 2% inflation target.

    One member noted that BoJ may enter a “temporary pause” in rate hikes due to weaker US growth. But it’s emphasized that “it shouldn’t be too pessimistic”.

    The member emphasized that rate hikes could resume if conditions improve or US policy shifts.

    Other opinions highlighted the high level of uncertainty facing Japan’s economic and price outlook, driven largely by global trade tensions. One board member noted the policy path “may change at any time.”

    Another reaffirmed that there has been “no change to the BoJ’s rate-hike stance”, as projections continue to show inflation reaching the 2% target and real interest rates remain deeply negative.

    Australian Westpac consumer sentiment rises to 92.1, weak confidence supports RBA cut

    Australia’s Westpac Consumer Sentiment Index rose 2.2% to 92.1 in May, partially recovering from April’s sharp decline triggered by trade-related uncertainty.

    Westpac attributed the modest rebound to stronger financial markets and a decisive outcome in the Federal election. However, sentiment remains subdued, with the index still 3.9% below its March level and firmly in pessimistic territory.

    With all key inflation measures now back within the 2–3% target range, Westpac expects RBA to cut the cash rate by another 25bps to 3.85%. The combination of soft domestic sentiment and a more “unsettled and threatening global backdrop” strengthens the case for further easing.

    Australia’s NAB business conditions weaken to 2, profit pressures mount

    Australia’s NAB Business Confidence Index edged up from -3 to -1 in April. However, the underlying Business Conditions Index slipped from 3 to 2. Trading conditions eased from 6 to 5, while profitability dropped sharply from 0 to -4, highlighting the ongoing strain on margins.

    Purchase cost growth accelerated to 1.7% in quarterly equivalent terms, up from 1.4%. Labor cost growth remained elevated at 1.6%. Rising input costs appear to be eroding profitability, with businesses struggling to pass through the full extent of these increases. This was reflected in modest increases in final product and retail price growth, which rose to 0.8% and 1.4% respectively—still below the pace of input cost growth.

    NAB Chief Economist Sally Auld noted that weaker profitability was at the core of the drop in business conditions, aligning with the uptick in purchase costs and softer trading performance.

    USD/CHF Daily Outlook

    Daily Pivots: (S1) 0.8367; (P) 0.8421; (R1) 0.8512; More….

    USD/CHF’s rebound from 0.8038 is still seen as a corrective move. Strong resistance is expected from 38.2% retracement of 0.9200 to 0.8038 at 0.8482 to limit upside. Break of 0.8330 resistance turned support will turn intraday bias will turn bias back to the downside. Further break of 0.8184 will bring retest of 0.8038 low. However, sustained trading above 0.8482 will dampen this bearish view and target 61.8% retracement at 0.8756 next.

    In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8750) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY BoJ Summary of Opinions
    23:50 JPY Money Supply M2+CD Y/Y Apr 0.50% 0.60% 0.80%
    00:30 AUD Westpac Consumer Confidence May 2.20% -6%
    01:30 AUD NAB Business Conditions Apr 2 4
    01:30 AUD NAB Business Confidence Apr -1 -3
    06:00 GBP Claimant Count Change Apr 22.3K 18.7K
    06:00 GBP ILO Unemployment Rate (3M) Mar 4.50% 4.40%
    06:00 GBP Average Earnings Including Bonus 3M/Y Mar 5.20% 5.60%
    06:00 GBP Average Earnings Excluding Bonus 3M/Y Mar 5.70% 5.90%
    09:00 EUR Germany ZEW Economic Sentiment May 9.8 -14
    09:00 EUR Germany ZEW Current Situation May -77 -81.2
    09:00 EUR Eurozone ZEW Economic Sentiment May -4.4 -18.5
    10:00 USD NFIB Business Optimism Index Apr 94.5 97.4
    12:30 USD CPI M/M Apr 0.30% -0.10%
    12:30 USD CPI Y/Y Apr 2.40% 2.40%
    12:30 USD CPI Core M/M Apr 0.30% 0.10%
    12:30 USD CPI Core Y/Y Apr 2.80% 2.80%

     



    Source link

  • 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.



    Source link

  • US Dollar Index at Key Levels Amid Cautious Fed, Trade Talks

    US Dollar Index at Key Levels Amid Cautious Fed, Trade Talks


    • The US Dollar Index turns positive amid Fed’s cautiousness.
    • Geopolitical concerns keep the gains capped.
    • US-China trade talks pose a temporary optimism.

    The US Dollar Index (DXY) hovers around the 100.00 area during the early European session on Thursday. The recent upside stems from the Fed’s cautious stance and wait-and-watch approach. Moreover, market participants are looking for coming up US-China trade negotiations.

    -Are you looking for forex robots? Check our detailed guide- 

    The Fed’s post-meeting statement on Wednesday admitted inflation and unemployment risk as Jerome Powell cautioned about tariffs disrupting global trade. According to CME FedWatch Tool, markets are pricing in 25 bps rate cut by July. Powell also indicated that the Fed’s future path would be driven by the economic data, and ongoing trade tension may force the central bank to stay cautious.

    Geopolitical concerns are also weighing on the dollar. The tension between Russia and Ukraine and the Middle East crisis have soured the risk sentiment, pushing investors to seek safe-haven assets like gold, yen, and Swiss franc. However, the dollar managed to post modest gains for the second consecutive session.

    Market participants eye US-China trade talks set on May 10 in Switzerland. The US Treasury Secretary will meet China’s top officials in the first formal dialogue related to the tariffs. Though the announcement boosted the sentiment, the expectations have been tempered, calling the meeting a preliminary step.

    However, President Trump came with a bold teaser on social media, promising a major trade deal announcement on Thursday. Analysts remain skeptical of the long-term impacts of tariffs even if there’s a relief in the short run.

    US Dollar Index (DXY) Technical Analysis: Bulls break 30-SMA

    US Dollar Index (DXY) Technical Analysis
    US Dollar Index (DXY) 4-hour chart

    The 4-hour chart of the US dollar shows a surge above the 30-period SMA which is a bullish sign for the index. The price bounced off the trendline support and is looking to test the 1004.0 area, which is the previous peak. If the level is broken, the index may eye the 101.00 area.

    -Are you looking for the best CFD broker? Check our detailed guide-

    On the flip side, the DXY staying below 100.00 can urge sellers to pounce at 99.50. Further sell-off can lead to testing the psychological mark at 99.00.

    Looking to trade forex now? Invest at eToro!

    67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.



    Source link

  • Risk-On Sentiment Regains Control as Data Downplays Severity of Tariff Shock

    Risk-On Sentiment Regains Control as Data Downplays Severity of Tariff Shock


    Global risk sentiment continued to improve last week, with major equity indices staging robust rallies as investor anxiety over the fallout from tariffs eased. The solid US non-farm payroll data was a key turning point, reassuring markets that the early economic impact of the trade shock was not as damaging as initially feared. Added to that, there were signs of progress on multiple trade negotiation fronts, including a potential thaw in US-China relations.

    In the currency markets, Aussie was the top performer, buoyed not only by improving risk appetite but also by stronger-than-expected inflation data, which suggests the RBA’s easing path may remain gradual. Loonie followed as second benefiting from political stability after the Canadian elections. Swiss Franc ranked third.

    On the other hand, Yen fell the most, under pressure from a dovish BoJ that downgraded its growth outlook. Euro was the second weakest performer, reversing some of its earlier strength despite a sharper-than-expected acceleration in core inflation. Sterling also lagged as third worst. Dollar and New Zealand Dollar ended the week in the middle of the pack.

    US Stocks Erase April Losses as Payrolls Soothe Growth Fears, Fed Cut Odds Fall

    The US markets have decisively moved past the turmoil sparked by the reciprocal tariff announcements in April. Investor confidence has fully recovered, especially in equities with both S&P 500 and NASDAQ reversed all losses from April. S&P 500 even notched a remarkable nine consecutive days of gains, its longest winning streak since 2004. DOW is also on track to complete a full reversal.

    Sentiment had wavered briefly after Q1 GDP showed an unexpected contraction. However, those concerns were largely alleviated by April’s non-farm payroll report, which showed solid job creation and stable unemployment. The data suggests that while trade disruptions remain a concern, the labor market is resilient and the broader economy is still on strong footing. This has helped markets conclude that the immediate economic damage from the tariff standoff is more modest than feared.

    Looking ahead, the 90-day tariff truce, set to expire in early July, becomes the next major milestone for investors. There are tentative signs of progress on trade negotiations, including fresh signals from China that it may be open to returning to the table. While expectations for a zero-tariff outcome remain low, the fear of escalation to a worst-case scenario has clearly eased. Markets appear to be pricing in a more constructive path, even if slow-moving and politically complex.

    At the same time, expectations for Fed policy are undergoing a recalibration. With the labor market holding firm and inflation still persistent, the urgency for another rate cut has diminished. Fed fund futures are now pricing just a 35% chance of a cut in June — down sharply from 63% a week ago and nearly 80% at the start of April. Importantly, this moderation in rate cut bets is being absorbed without negative market reaction, signaling that investors are comfortable with Fed remaining on hold for longer.

    Technically, S&P 500’s rally from the 4835.04 low is seen as the second leg in the medium-term pattern from 6147.43 record high. Further upside is favored in the near term as long as 5433.24 support holds. But significant resistance around 6147.43 to bring the third leg of the pattern.

    In the bigger picture, the long term up trend remains intact. S&P 500 is well supported by long term rising channel, and managed to defend 4818.62 resistance turned support (2022 high).

    An upside breakout is possible during the second half of the year. But that would depend on two key elements: the resolution of trade uncertainty and continued economic resilience.

    If July’s truce deadline passes without escalation — or better yet, with concrete de-escalation — and economic data remains firm, then a new record would be on the horizon.

    Yields Rise on Risk-On Flow, But Dollar Fails to Ride the Wave

    US 10-year Treasury yield staged a rally rebound on Friday, in tandem with equities. Unlike previous yield spikes driven by capital flight, this surge appears rooted in a rotation out of safe-haven assets and into equities, as risk appetite returned.

    Technically, 10-year yield’s pull back from 4.592 has likely completed with three waves down to 4.124. Break of 4.407 resistance will solidify this bullish case. Rise from 3.886 could then be resuming through 4.592 resistance to 100% projection of 3.886 to 4.592 from 4.124 at 4.830.

    In contrast, Dollar has failed to capitalize on either yield strength or reduced recession anxiety. Expectations for Fed to keep interest rates elevated longer may provide some underlying support. But if risk sentiment continues to improve, demand for USD as a defensive play may continue to weaken, even as yield support holds.

    Technically, firm break of 100.27 resistance in Dollar Index will bring stronger rebound back to 55 D EMA (now at 102.51). But strong resistance should be seen from 38.2% retracement of 110.17 to 97.92 at 102.60 to limit upside.

    Bullish Case Continue to Build for AUD/JPY, with 94.94 Fibonacci Target in Insight

    AUD/JPY ended last week as the top winner and gained 1.56%, on a potent mix of risk-on sentiment and changes in monetary policy outlooks.

    Aussie’s strength was reinforced by Q1 inflation data from Australia. On the one hand, the trimmed mean CPI returned to RBA’s 2–3% target range for the first time since 2021, cementing expectations of a May rate cut. However, stronger than expected headline CPI reading, and renewed goods inflation pressures points to a cautious and gradual easing path, rather than an aggressive cycle.

    In contrast, Yen suffered after BoJ left rates unchanged and sharply downgraded its growth forecast for fiscal 2025, slashing it by more than half. Additionally, core inflation projections were revised lower, raising the risk of falling short of the 2% target again. The downgrade has pushed back expectations of any near-term rate hikes. A June move now looks off the table.

    Technically, the developments continue to affirm the case that corrective fall from 109.36 (2024 high) has completed with three waves down to 86.03.

    Further rally should be seen in the near term as long as 90.57 support holds, to 38.2% retracement of 109.36 to 86.03 at 94.94. Sustained break there will pave the way to 61.8% retracement at 100.44.

    However, rejection by 94.94 fibonacci resistance, followed by break of 90.57 support, will dampen this bullish view and bring retest of 86.03.

    EUR/USD Weekly Outlook

    EUR/USD gyrated lower last week but recovered after hitting 1.1265. Initial bias remains neutral this week first. On the downside, below 1.1265 will resume the corrective fall from 1.1572 short term top. But downside should be contained by 38.2% retracement of 1.0176 to 1.1572 at 1.1039. On the upside, break of 1.1424 will suggest that the correction has completed and bring retest of 1.1572 high.

    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 1.0776) 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 1.1300) 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.



    Source link

  • 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.



    Source link

  • Relief Rally Continues, Yet Fragile Geopolitics May Limit Momentum

    Relief Rally Continues, Yet Fragile Geopolitics May Limit Momentum


    Global financial markets are trading with a cautiously positive tone today, with modest gains across Europe and US futures pointing to a higher open. Investor sentiment has improved on the back of US President Donald Trump stepping back from recent aggressive rhetoric—both toward Fed Chair Jerome Powell and on tariffs against China. The perceived softening in tone has provided much-needed relief after weeks of heightened tension, leading to a reversal in safe-haven flows and helping risk assets stabilize.

    In the currency space, European majors are lagging, with Euro and Pound among the worst performers of the day. This weakness partly reflects the broader pullback in safe-haven demand but is also driven by disappointing PMI services data. Both Eurozone and the UK saw service sector activity slip back into contraction. Conversely, Aussie and Kiwi are leading the pack, buoyed by the improved risk mood. Dollar is mixed—holding steady alongside Loonie and Yen. Traders are closely watching whether the recent dollar weakness has bottomed out.

    One development that has raised eyebrows is the abrupt cancellation of a planned diplomatic meeting in London involving US Secretary of State Marco Rubio, European leaders, and Ukraine. The talks were meant to address an endgame to Russia’s war in Ukraine but were downgraded to a lower-level “technical” discussion after Rubio withdrew. Reports suggest sharp divisions between Washington and European allies, particularly over Trump’s proposals to recognize Russian control over Crimea and large parts of eastern Ukraine—conditions deemed unacceptable by Europe. Observers suggest this could mark a significant shift in US posture, from active mediator to a more unilateral stance, further straining transatlantic cohesion over the handling of the war in Ukraine.

    Technically, the focus of Dollar Index will be on 100.27 resistance in coming days. Firm break there should confirm short term bottoming at 97.92, and open up further rebound back to 38.2% retracement of 110.17 to 97.92 as a corrective move. However, before that, risk will stay on the downside for extending recent decline through 97.92 sooner rather than later.

    In Europe, at the time of writing, FTSE is up 1.20%. DAX is up 2.45%. CAC is up 2.07%. UK 10-year yield is down -0.054 at 4.506. Germany 10-year yield is up 0.028 at 2.476. Earlier in Asia, Nikkei rose 1.89%. Hong Kong HSI rose 2.37%. China Shanghai SSE fell -0.10%. Singapore Strait Times rose 0.97%. Japan 10-year JGB yield rose 0.013 to 1.324.

    UK PMI composite plunges to 48.2, recession fears, pressures BoE to cut rates

    The UK private sector contracted sharply in April, with the flash PMI Composite falling from 51.5 to 48.2, the lowest reading in 29 months. PMI Manufacturing dropped from 45.3 to 44.0, a 20-month low. PMI Services slipped from 52.5 to 48.9, the weakest in 27 months.

    According to S&P Global’s Chris Williamson, the downturn marks the steepest fall in output in nearly two and a half years, with data now pointing to a potential quarterly GDP decline of -0.3%.

    Also, business sentiment has sunk to its lowest level since late 2021, and even beneath the post-Brexit vote lows. The slump in exports, tied to weak global demand and escalating trade tensions, is adding to domestic burdens. Rising staffing costs—partly due to changes in National Insurance and minimum wage rules—have further squeezed margins.

    The sharp contraction and collapsing sentiment pose “red flags” for policymakers and could tip BoE toward cutting rates at its upcoming May meeting.

    Eurozone PMI Composite slips to 50.1, services contract but manufacturing unfazed by tariffs

    Eurozone economy showed signs of stagnation in April as its Composite PMI slipped to 50.1, down from 50.9 in March—a four-month low. The decline was driven primarily by a downturn in the services sector, which contracted for the first time in five months, with the PMI falling from 51.0 to 49.7. In contrast, manufacturing showed unexpected resilience, with PMI ticking up slightly from 48.6 to 48.7, reaching a 27-month high.

    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted that manufacturers appear “not too fazed” by the recent imposition of broad US tariffs, including 10% general duties and 25% on autos.

    He pointed to falling energy prices, driven in part by US recession fears, and planned increases in defence spending as factors supporting the manufacturing sector. However, the decline in services activity has dragged down overall output, pushing the Eurozone economy into what de la Rubia called “stagnation territory.”

    ECB may find some comfort in the latest inflation signals. While input costs in services remained elevated, the pace of selling price increases eased. In the goods sector, input prices fell, breaking a four-month trend of rising costs, while output prices saw only a modest rise.

    At the country level, both Germany and France mirrored the regional trend, with manufacturing output gaining but services activity declining.

    Japan’s PMI composite rises to 51.1, service leads while manufacturing drags

    Japan’s flash PMI data for April signaled a return to growth in the private sector, with Composite PMI rising from 48.9 to 51.1. The recovery was driven primarily by a rebound in the services sector, where activity rose to 52.2 from 50.0. Meanwhile, manufacturing remained in contraction, though the pace of decline eased slightly, with the PMI inching up from 48.4 to 48.5.

    According to S&P Global’s Annabel Fiddes, the divergence between sectors reflected subdued factory output versus strengthening service demand.

    A closer look at new business trends revealed further divergence. Manufacturers reported the sharpest drop in new orders in over a year, driven by falling foreign demand and persistent concerns over tariffs and client spending. In contrast, service providers saw their strongest rise in new work since January.

    Still, inflationary pressures were strong across the board, with input costs rising at the fastest pace in two years, prompting firms to pass on those costs to customers via higher selling prices.

    Overall optimism for output over the next year fell to its lowest level since August 2020, during the early phase of the COVID-19 crisis.

    Australia’s PMI composite dips to 51.4, cost pressures emerge

    Australia’s flash PMI data for April showed continued, albeit slower, expansion in the private sector, with Manufacturing PMI slipping from 52.1 to 51.7 and Services PMI easing from 51.6 to 51.4. The Composite PMI also declined slightly from 51.6 to 51.4.

    Despite the modest pullback, S&P Global’s Jingyi Pan noted that domestic demand remained a “strong proponent” of business activity, supporting further job creation across sectors. The data suggests a solid start to Q2, underpinned by internal momentum, even as external headwinds mount.

    However, the impact of US tariffs are starting to show. Export performance weakened, and manufacturers reported “intensification of cost pressures” due to currency fluctuations.

    In response, many firms passed on higher costs to clients, pushing overall selling price inflation to a nine-month high.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 140.44; (P) 141.05; (R1) 142.22; More…

    Intraday bias in USD/JPY remains mildly on the upside at this point. Rebound from 139.87 short term bottom could extend higher. But overall risk will stay on the downside as long as 38.2% retracement of 158.86 to 139.87 at 147.12 holds. On the downside, decisive break of 139.26 will carry larger bearish implications.

    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.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:00 AUD Manufacturing PMI Apr P 51.7 52.1
    23:00 AUD Services PMI Apr P 51.4 51.6
    00:30 JPY Manufacturing PMI Apr P 48.5 48.7 48.4
    00:30 JPY Services PMI Apr P 52.2 50
    04:30 JPY Tertiary Industry Index M/M Feb 0.00% 0.50% -0.30% 1.40%
    06:00 UK Public Sector Net Borrowing (GBP) Mar 16.4B 15.4B 10.7B 12.3B
    07:15 EUR France Manufacturing PMI Apr P 48.2 47.7 48.5
    07:15 EUR France Services PMI Apr P 46.8 47.6 47.9
    07:30 EUR Germany Manufacturing PMI Apr P 48 47.5 48.3
    07:30 EUR Germany Services PMI Apr P 48.8 50.3 50.9
    08:00 EUR Eurozone Manufacturing PMI Apr P 48.7 47.4 48.6
    08:00 EUR Eurozone Services PMI Apr P 49.7 50.4 51
    08:30 GBP Manufacturing PMI Apr P 44 44 44.9
    08:30 GBP Services PMI Apr P 48.9 51.4 52.5
    09:00 EUR Eurozone Trade Balance (EUR) Feb 21.0B 14.9B 14.0B 14.4B
    12:30 CAD New Housing Price Index M/M Mar 0.00% 0.00% 0.10%
    13:45 USD Manufacturing PMI Apr P 49.3 50.2
    13:45 USD Services PMI Apr P 52.9 54.4
    14:00 USD New Home Sales Mar 679K 676K
    14:30 USD Crude Oil Inventories 1.6M 0.5M
    18:00 USD Fed’s Beige Book

     



    Source link

  • Dollar Rout Deepens; Gold Charges Toward 3500, or Even 4000?

    Dollar Rout Deepens; Gold Charges Toward 3500, or Even 4000?


    The broad selloff in US assets resumed overnight as market confidence took another blow from escalating political pressure on Fed. Major US stock indexes ended the session deep in the red, while 10-year Treasury yields surged back above 4.4%. The Dollar Index also plunged to a fresh three-year low, continuing its dramatic collapse.

    The key catalyst: another public attack by US President Donald Trump, who took to Truth Social to call Fed Chair Jerome Powell a “major loser” and demanded that interest rates be cut “NOW” to avoid a economic slowdown. Trump’s renewed rhetoric has intensified concerns about Fed’s independence at a time of high uncertainty due to his own tariff policies.

    The central bank has so far resisted political pressure, and more Fed officials are set to speak today. Markets expect them to defend the institution’s autonomy and reaffirm their data-dependent approach. Given the current policy fog, particularly surrounding Trump’s shifting trade stance, officials are likely to emphasize the need for further clarity before making any policy adjustments.

    Meanwhile, the 90-day truce on Trump’s “reciprocal tariffs” continues with little meaningful progress in negotiations. Even talks with Japan, one of America’s closest allies, remain stalled. Japanese Prime Minister Shigeru Ishiba stated on Monday that substance matters more than speed in any trade agreement. Additionally, Ishiba vowing not to concede on core issues such as car safety standards and agricultural access. Finance Minister Katsunobu Kato is expected to travel to Washington later this week for discussions with US Treasury Secretary Scott Bessent, with currency issues on the agenda.

    Tensions with China continue to escalate. The Chinese Ministry of Commerce issued a sharp warning that Beijing will retaliate against any countries that cooperate with the US in ways that undermine China’s interests. China’s message reinforces the view that global trade friction is far from resolved, despite temporary pauses.

    Against this backdrop, Gold continues to surge as investors flee to safety. The precious metal’s record-breaking rally shows no signs of slowing, with momentum firmly in upside acceleration.

    Technically, further rise is expected as long as 3283.69 support holds. Next target is 100% projection of 1810.26 to 2789.92 from 2584.24 at 3563.90. Firm break there will pave the way to 138.2% projection at 3938.13, which is close to 4000 psychological level.

    Overall in the currency markets, Dollar is currently the worst performer by a mild, followed by Loonie and then Sterling. Yen is the strongest one, followed by Kiwi and then Euro. Swiss Franc and Aussie are positioning in the middle.

    In Asia, at the time of writing, Nikkei is down -0.07%. Hong Kong HSI is up 0.20%. China Shanghai SSE is up 0.38%. Singapore Strait Times is up 0.90%. Japan 10-year JGB yield is up 0.023 at 1.312. Overnight, DOW fell -2.48%. S&P 500 fell -2.36%. NASDAQ fell -2.55%. 10-year yield rose 0.072 to 4.405.

    Dollar Index crashes to 3-year low; 95 support holds long-term fate

    Dollar Index broke through an important support overnight as recent decline accelerated, and hit the lowest level in three years. The selloff reflects a deepening flight out of US assets, as confidence continues to erode. A major driver of the decline has been US President Donald Trump’s ongoing public attacks on Fed, which have increasingly undermined perceptions of central bank independence and rattled investor trust in US policy credibility.

    Technically, the break of 99.57 (2023 low) confirms resumption of the downtrend from 114.77 (2022 high). Near term outlook will now stay bearish as long as 100.27 resistance holds. Next target is 100% projection of 114.77 to 99.57 from 110.17 at 94.97.

    This support zone around 95 psychological level is especially significant, as it aligns with the long term rising channel support that dates back to 2011.

    Decisive break of 95 ahead could firstly trigger further medium term downside acceleration. More importantly, that could also mark the end of the broader uptrend that began from 2008 low at 70.69.

    Such a structural breakdown would open the door for sustained weakness with medium-term downside targets around the 89.20–90.00 range, with risk of entering a new secular downtrend in the years ahead.

    New Zealand posts surprise NZD 970m trade surplus as exports surge 19%

    New Zealand recorded stronger-than-expected trade surplus of NZD 970m in March, far exceeding forecasts of NZD 80m. The surprise was driven by a robust 19% yoy increase in goods exports, which rose by NZD 1.2B to NZD 7.6B. Imports also grew, up 12% yoy to NZD 6.6B.

    Export performance was particularly strong across key trading partners. Shipments to China rose by NZD 371m (23% yoy), while exports to the US and the EU grew by 22% yoy and 51% yoy respectively. Exports to Japan also increased 11% yoy, although shipments to Australia dipped slightly, down -0.47% yoy.

    On the import side, the largest increases came from the US, with a 48% yoy jump worth NZD 243m. This was followed by China and the EU, which posted 14% yoy and 19% yoy gains respectively. Imports from South Korea bucked the trend, falling -12% yoy.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 140.18; (P) 141.16; (R1) 141.85; More…

    Intraday bias in USD/JPY remains on the downside for the moment. Current fall from 158.86 is in progress for 139.57 support. Strong support could seen from 139.26 fibonacci level to bring rebound. On the upside, above 141.60 minor resistance will turn intraday bias neutral first. However, decisive break of 139.26 will carry larger bearish implications, and target 138.2% projection of 158.86 to 146.52 from 151.20 at 134.14.

    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.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:45 NZD Trade Balance (NZD) Mar 970M 80M 510M 392M
    12:30 CAD Industrial Product Price M/M Mar 0.30% 0.40%
    12:30 CAD Raw Material Price Index M/M Mar 0.00% 0.30%
    14:00 EUR Eurozone Consumer Confidence Apr P -15 -15

     



    Source link

  • 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.



    Source link

  • 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.



    Source link

  • Markets Rush to Safe Haven as Tariff Clock Ticks Down

    Markets Rush to Safe Haven as Tariff Clock Ticks Down


    While US investors managed to stay relatively composed through most of last week, the calm cracked heading into the weekend. Stocks saw extended selloffs, Treasury yields dropped, and Gold surged to yet another record high — all classic signs of a decisive flight to safety. With risk appetite now clearly under pressure, traders are no longer waiting to see what happens next. They’ve begun positioning defensively ahead of April 2, dubbed “Liberation Day,” when the US is expected to announce sweeping reciprocal tariffs.

    That looming event, along with inevitable retaliatory measures from trading partners, has injected a fresh wave of uncertainty into the outlook. Risk-off sentiment is likely to dominate US markets in the near term, at least until the full scale of the tariff fallout becomes clear — including possible re-retaliations.

    A big question is whether European markets, which showed notable resilience through March, can continue to defy the global jitters. Stocks in Germany and the UK have largely outperformed US peers, and Euro has led major currencies higher for the month. But the divergence might be tested soon, especially if the trade conflict spills into sectors crucial to the Eurozone’s export-heavy economy.

    Meanwhile, forex markets have remained relatively stable, with most major pairs stuck inside the prior week’s ranges. Kiwi was the lone exception. However, late-week price action across several currency pairs — particularly EUR/USD — suggests that breakouts may be imminent. The common currency is showing signs of bullish potential, with traders watching closely to see whether March strength can evolve into something even more meaningful.

    Ultimately, April could be a make-or-break month for the Euro. Either it confirms a genuine bullish turn, reversing the multi-decade downtrend, or it becomes just another short-lived bounce in a longer-term bearish cycle. Otherwise, the March rally risks being remembered as another false dawn in the common currency’s struggle to reverse its long-term decline.

    Wall Street Sinks as Markets Front-Run Trump’s “Liberation Day” Tariff Blitz

    US equities closed out the week with sharp losses, as fears over the looming escalation in trade tensions and persistent inflation sent risk sentiment spiraling. S&P 500 fell -1.53% on the week, while DOW dropped -0.96%. Tech bore the brunt of the selloff, with NASDAQ sliding -2.59%. That puts the NASDAQ on track for a painful monthly decline of over -8%, which would mark its worst monthly performance since December 2022.

    The market is being squeezed from two ends. On one side, uncertainty over the scope and scale of US tariffs is weighing on sentiment. On the other, resilient inflation data, especially in core readings, is reinforcing expectations that Fed will keep interest rates higher for longer. Together, these twin pressures are raising fears of a broader slowdown in consumer spending, business investment, and overall economic growth, with the risk of tipping the US into recession.

    Trump’s steel and aluminum tariffs have already been in place, but tensions intensified last week as he announced a fresh 25% levy on imported cars and auto parts. That was a mere prelude to what he has dubbed “Liberation Day” on April 2, when the broader reciprocal tariff regime is expected to be unveiled. Stock markets may already be bracing for impact, with traders possibly front-running the announcement, despite the usual quarter-end rebalancing flows.

    The broader concern is that even after the April 2 announcement, the tariff saga won’t be over. Canada and the EU are almost certain to respond with retaliations, and China’s stance remains unclear. Others, like the UK and Australia, are expected to hold back. But should retaliation begin to pile up, there is every chance that Trump will double down with even more aggressive measures, setting off a full-blown global trade war.

    Still, there is a glimmer of hope. If current market anxiety is more about the “uncertainty” surrounding tariffs rather than the “actual impact” of tariffs themselves, there may be room for a sentiment rebound once the details are made clear — hopefully sometime in Q2.

    But that’s a big assumption, and one that relies heavily on the scope, implementation, and global response to the tariffs.

    Technically, S&P 500’s rebound from 5504.65 should have completed at 5786.95, ahead of falling 55 D EMA (now at 5833.15). Focus for the next few days will be back on 5504.65 support. Firm break there will resume the corrective decline from 6147.47 high to 38.2% retracement of 3491.58 to 6147.43 at 5132.89. Strong support should be seen there to contain downside and bring rebound, at least on first attempt.

    Similarly, NASDAQ’s corrective recovery from 17238.23 should have completed at 18281.13, ahead of falling 55 D EMA (now at 18608.86). Break of 17238.23 in the next week days will resume the corrective fall from 20204.58 to 38.2% retracement of 10088.82 to 20204.58 at 16340.36. Strong support should be seen there to bring rebound, at least on first attempt. However, firm break there will pave the way to 15708.53 support next.

    Yields Tumble on Safe Haven Flows, Dollar Index Relatively Resilient

    US 10-year Treasury yields fell sharply on Friday, even as core PCE inflation surprised to the upside. The data highlighted persistent inflationary pressures, with the core PCE accelerating to 2.8% yoy, above expectations and well above Fed’s 2% target. Typically, such data would push yields higher as markets price out rate cuts. However, Friday’s yield decline suggests a different narrative dominated—one of risk aversion.

    Technically, corrective recovery from 4.106 could have already completed at 4.387 after hitting falling 55 D EMA (now at 4.3650). Break of 4.174 support will argue that the whole decline from 4.809 is ready to resume through 4.106 short term bottom. Next target will then be 61.8% projection of 4.809 to 4.106 from 4.387 at 3.952, which is below 4% psychological level.

    More importantly, the next fall will solidify that decline from 4.809 is another leg inside the medium term pattern from 4.997 (2023 high) with risk of extending to 3.603 (2024 low) and below.

    Dollar Index only dipped slightly on Friday and the development argues that corrective recovery from 103.19 might still extend. But even in case of another rise, upside should be limited by 55 D EMA (now at 105.64). Break of 103.19 will resume the fall from 110.17 to 100.15 support next.

    Crucially, the next fall will further solidify the case that decline from 110.17 is the third leg of the pattern from 114.77 (2022 high). Break of 100.15 support will pave the way through 99.57 (2023 low) to 100% projection of 114.77 to 99.57 from 110.17 at 94.97.

    March Belongs to Europe, But Can Momentum Survive April’s Storm?

    Despite rising global trade tensions and the looming threat of reciprocal US tariffs, European currencies and assets have emerged as the standout performers for March. In the equity space, major European indices like Germany’s DAX and the UK’s FTSE have remained relatively insulated from the sharp selloff seen on Wall Street.

    Meanwhile, Euro has led the charge in the currency markets, with Sterling and, to a lesser extent, Swiss Franc following closely. The coming weeks will be critical in determining whether this resilience in European markets can be sustained or even turn into renewed momentum.

    Technically, with 8474.41 resistance turned support intact, FTSE’s price actions from 8908.82 are viewed as a sideway consolidation pattern only. Larger up trend is expected resume through 8908.82 to 100% projection of 7404.08 to 8474.41 from 8002.34 at 9072.67 at a later stage.

    As for the stronger DAX, outlook is staying bullish with 22226.34 support intact, which is close to 55 D EMA (now at 22150.63). Another rise is till expected to 161.8% projection of 14630.21 to 18892.92 from 17024.82 at 23921.87, or even further to 24000 psychological level.

    It’s also important for EUR/USD. The near term pull back from 1.0953 could have already completed at 1.0731, ahead of 38.2% retracement of 1.0358 to 1.0953 at 1.0726. Break of 1.0857 minor resistance should affirm this bullish case, and push EUR/USD through 1.0953 to resume the whole rally from 1.0176.

    More significantly, the next rally would set up EUR/USD for a test on key resistance between 1.1274 (2023 high) and multi-decade falling channel resistance (now at around 1.1380). This resistance zone is crucial to determine whether EUR/USD is reversing the long term down trend.

    USD/JPY Weekly Outlook

    USD/JPY recovered further to 151.20 last week but retreated sharply ahead of 151.29 cluster resistance (38.2% retracement of 158.86 to 146.52 at 151.23). Initial bias remains neutral first and outlook stay bearish. On the downside, below 149.53 minor support will argue that the corrective recovery has completed and bring retest of 146.52 low. Firm break there will resume whole fall from 158.86. However, firm break of 151.23/9 will turn bias back to the upside for 154.79 resistance instead.

    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 136.94).



    Source link

  • 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.



    Source link

  • 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).



    Source link

  • 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.



    Source link