Tag: XAU

  • Equities Extend Losses on Tariff Fears, But Forex Markets Hold Steady in Consolidation

    Equities Extend Losses on Tariff Fears, But Forex Markets Hold Steady in Consolidation


    US stock markets suffered another brutal session overnight, with NASDAQ leading the decline, shedding nearly -2%. All three major indexes closed below their respective 55 W EMAs, reinforcing the bearish case that the markets are now in a medium-term correction phase. This technical breakdown suggests that downside momentum is gaining traction, with investors recalibrating their expectations amid escalating economic uncertainty, particularly regarding the relentless stream of tariff threats.

    A major driver of the selloff remains the intensifying trade war, which shows no signs of slowing down. Tariff threats are mounting almost daily, as analysts argue that markets have yet to fully price in the potential economic fallout. The momentum of these escalations is expected to persist well into the second quarter, particularly with reciprocal tariffs set to take effect in April.

    The European Union has already signaled its intent to retaliate against US tariffs, and similar counter measures would be seen from other countries too. Beyond the EU response, additional tariffs are in the pipeline, targeting China with higher duties, and likely extending to non-border-related tariffs against Canada and Mexico. Japan could also find itself in Washington’s crosshairs, particularly over criticism about its weak currency. The sheer breadth of these tariff initiatives suggests that the market’s current adjustment may just be the beginning of a broader risk-off shift. Investors have just started offloading positions to hedge against further risks.

    Meanwhile, despite the turbulence in equities, currency markets have remained relatively steady. So far this week, the Sterling is currently the strongest performer, followed by Euro and Dollar. On the weaker end of the spectrum, Swiss Franc is the worst performer, trailed by Loonie and Aussie. Kiwi and Yen are positioned in the middle. However, almost all major currency pairs and crosses are still trading within last week’s range, suggesting that the forex market is in a consolidation phase.

    Looking ahead, today’s key data releases—UK GDP and the University of Michigan consumer sentiment and inflation expectations—will be closely watched. U.S. consumer sentiment has already plunged by -10 points over the past two months, reflecting the growing unease surrounding tariff policies. A further steep decline in sentiment could significantly heighten recession fears and deepen the market’s risk-off mood.

    In Asia, at the time of writing, Nikkei is up 0.87%. Hong Kong HSI is up 2.33%. China Shanghai SSE is up 1.71%. Singapre Strait Times is down -0.21%. Japan 10-year JGB yield is down -0.018 at 1.528. Overnight, DOW fell -1.30%. S&P 500 fell -1.39%. NADSAQ fell -1.96%. 10-year yield fell -0.044 to 4.274.

    NZ BNZ manufacturing hits 53.9 as recovery gains unexpected momentum

    New Zealand’s BusinessNZ Performance of Manufacturing Index rose from 51.7 to 53.9 in February, marking its highest level since August 2022.

    This solid improvement was driven by stronger production (52.4) and new orders (51.5), both also reaching their best levels since August 2022. Meanwhile, employment surged to 54.0, climbing 3.2 points from January and hitting its highest level since September 2021.

    Despite the stronger data, business sentiment remains cautious. The proportion of negative comments from respondents rose to 59.5% in February, up from 57.7% in January. Many manufacturers cited weak orders and sluggish sales as ongoing challenges, signaling that while expansion has resumed.

    BNZ’s Senior Economist Doug Steel welcomed the sustained improvement, noting that “pickup may be a bit faster than we are currently forecasting”.

    Gold hits record high, approaches 3000 amid ceasefire deadlock

    Gold’s up trend resumed overnight and surged to new record highs as the precious metal remains well-supported by escalating global uncertainties. The psychological 3000 level is now in sight as investors flock to the safe-haven asset. The rally is being fueled by multiple factors, including intensifying trade tensions, stalemate in Ukraine-Russia ceasefire negotiations, and the extended broad selloff in US stock markets.

    In particular, the latest developments surrounding the ceasefire talks between Russia and Ukraine have kept uncertainty high. Russian President Vladimir Putin stated that he agreed to the US-led ceasefire proposal in principle but stopped short of fully endorsing it.

    Putin indicated that further discussions with US President Donald Trump would be necessary to ensure that the ceasefire results in a “long-term peace” and addresses the “root causes” of the conflict. He also expressed skepticism, questioning whether the proposed 30-day ceasefire would be used to “supply weapons” or “train newly mobilized units,” and raised concerns over how violations would be monitored.

    Trump, in response, acknowledged that early reports from Russia were “going OK,” but added that “doesn’t mean anything until we hear what the final outcome is.”

    With the ceasefire deal still hanging in the balance, geopolitical risks stays high.

    Technically, the next near term target for Gold is 61.8% projection of 2584.24 to 2956.09 from 2832.41 at 3062.21.

    However, a key test lies ahead in the medium-term rising channel resistance, which has capped price advances since early 2024. Rejection at this level would still maintain gold’s bullish trend but keep its momentum in check.

    On the other hand, decisive breakout above the channel resistance would signal acceleration in Gold’s uptrend. In such a scenario, gold could quickly reach 100% projection level at 3204.26.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.4384; (P) 1.4418; (R1) 1.4477; More…

    Intraday bias in USD/CAD stays neutral as sideway trading continues. Price actions from 1.4791 high are seen as a corrective pattern, with rebound from 1.4150 as the second leg. On the upside, break of 1.4541 will target 100% projection of 1.4150 to 1.4541 from 1.4238 at 1.4629 and above. But for now, strong resistance is expected from 1.4791 to limit upside to bring the third leg. On the downside, break of 1.4238 will confirm that the third leg has 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.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:30 NZD Business NZ PMI Feb 53.9 51.4 51.7
    07:00 EUR Germany CPI M/M Feb F 0.40% 0.40%
    07:00 EUR Germany CPI Y/Y Feb F 2.30% 2.30%
    07:00 GBP GDP M/M Jan 0.10% 0.40%
    07:00 GBP Industrial Production M/M Jan -0.10% 0.50%
    07:00 GBP Industrial Production Y/Y Jan -0.70% -1.90%
    07:00 GBP Manufacturing Production M/M Jan 0.00% 0.70%
    07:00 GBP Manufacturing Production Y/Y Jan -0.40% -1.40%
    07:00 GBP Goods Trade Balance (GBP) Jan -17.1B -17.4B
    12:30 CAD Manufacturing Sales M/M Jan 2.00% 0.30%
    12:30 CAD Wholesale Sales M/M Jan 1.80% -0.20%
    14:00 USD UoM Consumer Sentiment Mar P 63.8 64.7
    14:00 USD UoM Inflation Expectations Mar P 3.50%

     



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  • Forex Steadies Despite Fresh Tariff Escalations, Euro Starting to Retreat

    Forex Steadies Despite Fresh Tariff Escalations, Euro Starting to Retreat


    Forex markets are holding steady in Asian session today, with major currency pairs and crosses all confined within yesterday’s ranges. This lack of movement comes despite a significant escalation in the US-led trade war, as newly effective 25% tariffs on all imported steel and aluminum products have prompted swift retaliation from key trading partners.

    In swift response, European Commission President Ursula von der Leyen announced that the EU would implement retaliatory tariffs of equal value, totaling USD 28B, on a range of U.S. goods beyond just metals. These measures, set to take effect on April 1, will target products including textiles, home appliances, and agricultural goods. Meanwhile, Canada—the largest supplier of steel and aluminum to the U.S.—is hitting back with USD 20.7B in countermeasures, including a 25% tariff on steel products and increased taxes on US imports ranging from computers and servers to sports equipment and cast-iron products.

    The UK has so far taken a more measured stance, with Prime Minister Keir Starmer stating that his government is adopting a “pragmatic approach” while keeping “all options on the table.” Australia, on the other hand, has opted against imposing retaliatory tariffs for now. Instead, Prime Minister Anthony Albanese has urged Australians to support local industries in response to Trump’s refusal to grant an exemption for Australian steel and aluminum.

    On the currency front, Swiss Franc is so far the weakest performer this week, followed by Loonie and then Dollar. Euro remains the strongest but has begun to pull back in some crosses, with Sterling and Kiwi following. Yen and Aussie are positioned in the middle.

    Technically, EUR/CAD could have formed a short term top at 1.5856, ahead of 200% projection of 1.4483 to 1.5058 from 1.4740 at 1.5890. Some consolidations would be seen with risk of deeper retreat to 55 4H EMA (now at 1.5470). But downside should be contained by 1.5401 support to bring rebound, and up trend resumption later.

    In Asia, at the time of writing, Nikkei is up 0.09%. Hong Kong HSI is down -1.44%. China Shanghai SSE is down -0.73%. Singapore Strait Times is down -0.03%. Japan 10-year JGB yield is up 0.017 at 1.541. Overnight, DOW fell -0.20%. S&P 500 rose 0.49%. NASDAQ rose 1.22%. 10-year yield rose 0.030 to 4.318.

    BoJ’s Ueda expects real wages to rise, boosting consumption

    BoJ Governor Kazuo Ueda signaled optimism about Japan’s economic outlook, telling the parliament today that “import-cost-driven inflation” is expected to moderate while wages continue to “rise steadily.” This shift could lead to an improvement in real wages and consumption, a critical factor for sustaining domestic demand.

    Ueda’s comments align with recent developments in Japan’s annual “shunto” wage negotiations, which have resulted in record pay hikes across major companies.

    Hitachi announced a record 6.2% rise in monthly wages, fully meeting union demands. Toyota’s key auto parts supplier, Denso, also committed to historic pay hikes, while Toyota itself stated that the overall wage increase for its manufacturing staff would match last year’s levels—the highest seen since 1999.

    Further clarity on the scale of wage hikes will come on March 14, when Rengo, Japan’s largest labor union federation representing 7 million workers, releases its preliminary report. Rengo had been seeking an average wage increase of 6.09%, up from last year’s 5.85%.

    US stocks find temporary support, but downside risks persist

    Risk sentiment showed signs of stabilization in the US overnight, with S&P 500 and NASDAQ posting gains. However, stocks are merely digesting recent steep losses rather than having a decisive turnaround.

    The reaction to lower-than-expected US consumer inflation data was relatively muted. The market’s cautious interpretation of the data is justified, as the latest CPI figures do not yet capture the full effects of tariff-related price pressures. There is still a lack clarity on how inflation will evolve under the new tariff regime, particularly when reciprocal tariffs come into play on April 2. Nevertheless, for the moment at least, disinflationary momentum is leaning in the Fed’s favor.

    Interestingly, market pricing has shifted the expected timing of Fed’s next rate cut back from May to June. Futures now show just 31% probability of a 25bps cut in May, while the odds for a June cut have climbed to 78%.

    Traders appear to believe Fed will need additional time to assess the economic impact of tariffs before making a policy move. From a timing perspective, June would align better with Fed’s next round of economic projections, allowing policymakers to incorporate more data into their decision-making.

    As for NASDAQ, oversold condition as seen in D RSI could start to slow downside momentum, and some near term consolidations cannot be ruled out. But risk will stay on the downside as long as 18604.46 resistance holds. Fall from 20204.58 is seen as a correction to the whole up trend from 10088.82 (2022 low) at least. It should extend to 38.2% retracement of 10088.82 to 20204.58 at 16340.36 before bottoming.

    Gold gains as markets await Russia’s response to ceasefire proposal

    Gold picked up momentum as investors closely monitor Kremlin’s response to the proposed ceasefire deal in Ukraine, as US officials head to Russia for negotiations.

    Russia has yet to publicly endorse an immediate ceasefire, but has indicated that it is reviewing the plan, and a phone call between US President Donald Trump and Russian President Vladimir Putin is on the table.

    However, Trump remains skeptical, stating that while he has received “positive messages” about the ceasefire, such reassurances “mean nothing” without concrete action from Putin.

    Trump also warned that if Putin refuses to sign the deal, the US could take “financially very bad” actions against Russia, likely hinting at severe sanctions.

    Ukrainian President Volodymyr Zelenskyy said earlier in the week that stronger Western financial and military support would follow should the ceasefire negotiations fail.

    Technically, Gold’s near term rebound from 2832.41 extended higher today and focus is now on 2956.09 resistance. Decisive break there will resume the larger up trend to 3000 psychological, and possibly further to 61.8% projection of 2584.24 to 2956.09 from 2832.41 at 3062.21.

    However, break of 2905.80 support should extend the corrective pattern from 2956.09 with another falling leg back to 2832.41 and possibly below.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 147.51; (P) 148.35; (R1) 149.10; More…

    Intraday bias in USD/JPY remains neutral for the moment, and more consolidations could be seen above 146.52. 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.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:00 AUD Consumer Inflation Expectations Mar 3.60% 4.60%
    00:01 GBP RICS Housing Price Balance Feb 11% 20% 22%
    07:30 CHF Producer and Import Prices M/M Feb 0.20% 0.10%
    07:30 CHF Producer and Import Prices Y/Y Feb -0.30%
    10:00 EUR Eurozone Industrial Production M/M Jan 0.80% -1.10%
    12:30 USD Initial Jobless Claims (Mar 7) 224K 221K
    12:30 CAD Building Permits M/M Jan -4.80% 11.00%
    12:30 USD PPI M/M Feb 0.30% 0.40%
    12:30 USD PPI Y/Y Feb 3.30% 3.50%
    12:30 USD PPI Core M/M Feb 0.30% 0.30%
    12:30 USD PPI Core Y/Y Feb 3.60% 3.60%
    14:30 USD Natural Gas Storage -46B -80B

     



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  • ‘Trumpcession’ Concerns Drag Dollar Down, Fed Rate Cut Bets Surge

    ‘Trumpcession’ Concerns Drag Dollar Down, Fed Rate Cut Bets Surge


    Dollar fell broadly today, an unusual development in contrast to recent rallies on escalating trade tensions and tariff announcements. Market sentiment soured as traders began to weigh the risks of a “Trumpcession,” a new term coined to describe the potential for US President Donald Trump’s policies to drive the economy into contraction or a full-blown recession.

    A major trigger for today’s shift in risk sentiment was the latest Atlanta Fed GDPNow estimate, which plummeted to -2.8% for Q1 2025, compared to -1.5% just days ago on February 28. This marks a dramatic deterioration in economic expectations, signaling that growth could already be already contracting at an alarming pace. Markets are increasingly recognizing that the tariff impact is not just theoretical—it is already weighing on consumption and business investment, and the effects could worsen in the coming months.

    The first round of US tariffs officially took effect today, with a 25% levy imposed on Canada and Mexico, alongside a 20% additional tariff on Chinese imports. While this was expected, the concern now is the snowball effect. With more tariffs looming—including reciprocal tariffs set for April 2 and possible new levies on Japan and China for alleged currency devaluation.

    Market pricing for Fed rate cuts is accelerating too. Fed fund futures now assign a 47% probability of a rate cut in May, up from just 26% a week ago. If economic data continues to deteriorate, expectations could quickly rise above 50%, signaling that markets believe Fed will have little choice but to step in and resume monetary easing sooner than anticipated.

    With overall sentiment on shakier ground, upcoming releases including tomorrow’s ISM services PMI and Friday’s non-farm payroll report have taken on added importance.

    In the currency markets, Dollar is currently the worst performer of the day, followed by Aussie and Sterling. Meanwhile, Swiss Franc is leading gains, followed by Yen and Euro. Kiwi and Loonie are trading in the middle of the pack.

    Technically, Gold reboounded strongly today following Dollar’s selloff. The development suggests that pull back from 2956.09 is merely a near term correction, and has completed at 2832.41, ahead of 38.2% retracement of 2584.24 to 2956.09 at 2814.04. Retest of 2956.09 should be seen next and break there will resume larger up trend towards 3000 psychological level.

    In Europe, at the time of writing, FTSE is down -0.75%. DAX is down -2.60%. CAC is down -1.68%. UK 10-year yield is down -0.068 at 4.444. Germanyu 10-year yield is down -0.027 at 2.466. Earlier in Asia, Nikkei fell -1.20%. Hong Kong HSI fell -0.20%. China Shanghai SSE rose 0.22%. Singapore Strait Times fell -0.28%. Japan 10-year JGB yield rose 0.018 to 1.428.

    Eurozone unemployment rate unchanged at 6.2% in Jan

    Eurozone unemployment rate was unchanged at 6.2% in January, coming in better than expectations of 6.3%. Across the broader EU, unemployment rate also held firm at 5.8%.

    According to Eurostat, the number of unemployed individuals stood at 12.824 million in the EU, of which 10.655 million were in the Eurozone.

    On a monthly basis, Eurozone unemployment fell by -42k, while the overall EU saw a more modest decline of -8k.

    RBA minutes: No commitment to further rate cuts

    The minutes from RBA’s February meeting reinforced the central bank’s cautious approach to monetary easing, making it clear that the recent 25bps rate cut to 4.10% does “not commit them to further reductions” in subsequent meetings.

    Policymakers acknowledged that inflation has been falling at a “somewhat faster pace than expected,” which helped ease concerns over upside risks. However, they stressed that the path to returning inflation to target while maintaining labor market gains is “not yet assured.” The Board ultimately deemed that the stronger case was to ease policy, given the downside risks to the economy.

    Despite the decision to cut, RBA members debated the risks of “easing policy too soon”, recognizing that a premature policy shift could lead to resurgence in inflation.

    They noted that if inflation proved “more persistent than expected,” holding the cash rate at 4.1% for an “extended period” or even tightening policy would be warranted.

    Australia retail sales rises 0.3% mom, driving by food-related spending

    Australia’s retail sales turnover rose 0.3% mom to AUD 37.08B in January, matched expectations.

    Robert Ewing, ABS head of business statistics, said: “While the pick-up in retail spending since mid-2024 has been boosted by more discretionary spending, this month’s rise is mostly driven by food-related spending.”

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 148.63; (P) 149.97; (R1) 150.83; More…

    USD/JPY’s fall from 158.86 resumed after brief consolidations and intraday bias is back on the downside. This decline is as the third leg of the corrective pattern from 161.94 high. Next target is 61.8% retracement of 139.57 to 158.86 at 146.32. Sustained break there will pave the way back to 139.57 low. For now, risk will remain on the downside as long as 151.29 resistance holds, in case of recovery.

    In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). In case of another fall, 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
    21:45 NZD Building Permits M/M Jan 2.60% -5.60%
    23:30 JPY Unemployment Rate Jan 2.50% 2.40% 2.40%
    23:50 JPY Capital Spending Q4 -0.20% 4.90% 8.10%
    23:50 JPY Monetary Base Y/Y Feb -1.80% -1.80% -2.50%
    00:30 AUD RBA Meeting Minutes
    00:30 AUD Current Account (AUD) Q4 -12.5B -11.0B -14.1B -13.9B
    00:30 AUD Retail Sales M/M Jan 0.30% 0.30% -0.10%
    05:00 JPY Consumer Confidence Index Feb 35 35.7 35.2
    10:00 EUR Eurozone Unemployment Rate Jan 6.20% 6.30% 6.30% 6.20%

     



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  • Safe-Haven Demand Fuels Dollar Rally Amid Trade, Geopolitical Turmoil

    Safe-Haven Demand Fuels Dollar Rally Amid Trade, Geopolitical Turmoil


    Market sentiment took a decisive turn for the worse last week, with risk aversion dominating across asset classes. The combination of deteriorating domestic economic conditions in the US and heightened global uncertainties has fueled concerns that risk appetite could weaken further. Equities faced renewed selling pressure, yields dropped sharply.

    Domestically, US economic data painted a troubling picture. Consumer confidence deteriorated sharply, while weak personal spending data and a rise in jobless claims suggested that the labor market could be facing new headwinds. With the economy looking increasingly fragile, concerns are mounting that the economy may struggle to maintain momentum, reinforcing speculation about Fed rate cuts.

    Externally, the risk of a full-blown trade war continues to escalate. US President Donald Trump doubled down on his aggressive tariff agenda, reaffirming the March 4 deadline for 25% tariffs on Canada and Mexico and indicating that the EU would be next in line with reciprocal tariffs.

    Geopolitical tensions also worsened, particularly after a dramatic Oval Office showdown between Trump, Vice President JD Vance, and Ukrainian President Volodymyr Zelenskiy. The meeting, initially expected to pave the way for a mineral deal between the US and Ukraine—potentially a step toward resolving the Russian invasion—ended in failure. With US-Ukraine relations strained and no clear resolution in sight, uncertainty in the region remains elevated.

    On the bright side, markets have scaled up expectations for a Fed rate cut in the first half of the year. However, it’s unclear whether additional monetary easing will truly bolster risk sentiment or simply underscore the extent of the economic challenges ahead. A rate cut could offer short-term relief for risk assets, but it might also underscore fears of an impending downturn in domestic activity.

    In the forex market, Dollar emerged as the clear winner for the week, benefiting from risk aversion rather than rate expectations. Sterling and Swiss Franc followed as the next strongest currencies, with the UK seemingly avoiding US tariff threats and the Franc gaining from both risk aversion and Euro weakness. At the other end of the spectrum, commodity currencies struggled, with New Zealand Dollar leading the declines, followed by Australian and Canadian Dollars. Meanwhile, Euro ended in a mixed manner, with the initial post-German election boost fading as tariff threats weighed. Yen also struggled to extend its rally, leaving it stuck in the middle of the performance ladder.

    Investors Pin Hopes on Fed Easing as Stocks Sell Off, But Is Relief Temporary?

    US equity markets ended February on a weak note, with NASDAQ suffering a sharp -3.5% weekly decline despite a late recovery. S&P 500 also lost nearly -1%, while DOW managed to close about 1% higher, benefiting from recovery after leading the selloff earlier in the month. However, the broader market sentiment remained fragile.

    For the entire month, NASDAQ dropped -4%, marking its worst monthly performance since April 2024. S&P 500 fell -1.5%, while the DOW ended down -1.6%. Several factors weighed on market sentiment, including intensifying trade war risks, particularly as the scheduled 25% tariffs on Canada and Mexico approach on March 4. The more consequential reciprocal tariffs, set to take effect on April 2, also remain a source of significant uncertainty.

    US economic data further exacerbated concerns, with sharp decline in consumer confidence, jump in jobless claims, and contraction in personal spending, all pointing to risk of extended weakness in household demand. These indicators have fueled doubts about the strength of US consumption, which remains a critical driver of economic growth.

    With these headwinds and decline in PCE core inflation as released on Friday, expectations for another Fed rate cut in the first half of the year continued to rise. Fed fund futures now price in a 94% probability of a 25bps cut to 4.00%-4.25% in June, up significantly from 63% just a week ago. This growing optimism about resumed Fed easing has provided some support to market sentiment. But it remains unclear whether it will be enough to reverse the pre-dominating risk-off mood or merely slow the pace of decline.

    Technically, NASDAQ is tentatively drawing support from 38.2% retracement of 15708.53 to 20204.58 at 18487.09. Strong rebound from current level, followed by firm break of 55 D EMA (now at 19440.85) will suggest that the corrective pattern from 20204.58 has completed. That will also keep the medium term up trend intact for another rally through 20204.58 at a later stage.

    However, sustained break of 18487.09 will raise the chance that a larger scale correction has already started. In the bearish case, NASDAQ should be correcting whole uptrend from 10088.82 (2022 low). Further break of 55 W EMA (now at 17866.91) will confirm this bearish case and pave the way to 38.2% retracement of 10088.82 to 20204.58 at 16340.36.

    Risk Aversion Drags Yields Down, But Lifts Dollar Higher

    Risk aversion was also evident in the US bond markets, with 10-year Treasury yield tumbling sharply to its lowest level since December. The sharp drop highlights growing concerns over economic uncertainty and trade tensions.

    Technically, current development suggests that rise from 3.603 (2024 low) has completed at 4.809 already, well ahead of 4.997 (2023 high). Current fall is seen as another downleg in the sideway corrective pattern from 4.997. Deeper decline is expected to 61.8% retracement of 3.603 to 4.809 at 4.063 next. Risk will stay on the downside as long as 55 D EMA (now at 4.452) holds, in case of recovery.

    Dollar Index clear reacted more to risk aversion than falling yields and Fed cut expectations. The’s strong bounce towards the end of the week and the break of 55 D EMA (now at 107.31) suggests that fall from 110.17 has completed at 106.12. That came after defending 38.2% retracement of 100.15 to 110.17 at 106.34. Further rise should be seen to 108.52 resistance. Firm break there will target a retest on 110.17 high.

    In the bigger picture, Dollar Index is holding comfortably above 55 W EMA (now at 105.37), and thus rise from 100.15 and 99.57 should still be intact. Break of 110.17 will pave the way back to 114.77 (2022 high) at a later stage.

    NZD/USD and AUD/USD Sink, Eye 2025 Lows for Support

    Kiwi and Aussie were the worst-performing currencies last week, each losing around -2.4% against the greenback. With risk sentiment deteriorating downside pressure on these two currencies could persistent. The key focus now is whether risk aversion would intensify and push NZD/USD and AUD/USD through this year’s lows to resume the long term down trend. There these key support levels could offer a breather to them.

    Technically, NZD/USD’s steep decline last week suggests that corrective rebound from 0.5515 should have completed at 0.5571 already. Retest of 0.5515 should be seen next. Strong support from there could bring rebound to extend the corrective pattern with another rising leg. But outlook will stay bearish as long as 38.2% retracement of 0.6378 to 0.5515 at 0.5848 holds. Firm break of 0.5515 will resume the long term down trend to 61.8% projection of 0.7463 to 0.5511 from 0.6378 at 0.5172.

    Similarly, AUD/USD’s corrective rebound from 0.6087 should have completed at 0.6407. Retest of 0.6087 low should be seen next. Strong rebound from there would extend the corrective pattern with another rising leg. But outlook will stay bearish as long as 38.2% retracement of 0.6941 to 0.6087 at 0.6413 holds. Firm break of 0.6087 will resume the long term down trend to 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806.

    Bitcoin and Gold Tumble on Risk-Off Sentiment

    Bitcoin and Gold struggled under renewed risk aversion last week, extending their losses in line with broader market weakness. While Gold retains a comparatively better outlook, both assets remain vulnerable to ongoing volatility.

    Bitcoin suffered a sharp fall, decisively breaking 89127 support, confirming medium-term topping at 109571. The current slide is seen as a correction of the entire uptrend from the 15452 (2022 low). Deeper decline toward 55 W EMA (now at 74129) is expected.

    Strong support could emerge from the 73812 cluster zone (38.2% retracement of 15452 to 109571 at 73617) to bring rebound, at least first attempt. However, downside risks remain as long as 55 D EMA (now at 95288) caps any recovery.

    Decisive break of 73617/73812 zone could extended the decline to 50k mark, which is close to 49008 support and 61.8% retracement at 51405.

    By contrast, Gold’s outlook is less overtly bearish. 2956.09 is seen as a short term top only, for now. Subsequent pullback is viewed primarily as a correction of the rise from 2584.24. Strong support might be seen from 55 D EMA (now at 2792.05) to bring rebound, and set the base for uptrend resumption at a later stage.

    However, considering that Gold was just rejected by 3000 psychological level sustained trading below 55 D EMA would argue that larger scale correction in underway. In the bearish case, Gold could be starting a medium term decline back to 55 W EMA (now at 2522.33).

    EUR/USD Weekly Outlook

    EUR/USD reversed after edging higher to 1.0527 last week, and the development suggests that consolidation from from 1.0176 has already completed. Initial bias stays on the downside this week for retesting 1.0176/0210 support zone first. Firm break there will resume whole fall from 1.1213, and carry larger bearish implications. On the upside, above 1.0419 minor resistance will turn intraday bias neutral. But outlook will stay bearish as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds.

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

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



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  • Markets Reel Under Trade War Fears, Dollar Gains Traction, Gold Falls

    Markets Reel Under Trade War Fears, Dollar Gains Traction, Gold Falls


    Global stock markets are under heavy selling pressure as risk-off sentiment dominates the final trading day of February. The selloff intensified across major indices, with Japan’s Nikkei plunging -3% and Hong Kong’s Hang Seng Index down -2.8%, following the steep declines in US equities overnight. Investors are increasingly wary of escalating trade tensions, which could further weigh on the fragile global recovery.

    Market sentiment took a sharp hit after confirmation that the 25% US tariffs on Mexico and Canada will take effect on March 4. The more consequential reciprocal tariffs, set for April 2, have also drawn attention, particularly with US President Donald Trump threatening to extend a 25% tariff on European Union imports.

    NASDAQ was the hardest hit among US indices, tumbling -2.78%, with semiconductor giant Nvidia leading the declines with an -8.5% drop. Despite reporting strong quarterly earnings, the company is facing increased concerns that it won’t be immune to the broader trade war, particularly if Taiwan’s chip industry comes under new US tariff measures. Given Nvidia’s dominant role in the AI sector, any disruption in its supply chain could ripple through the entire tech sector.

    In the currency markets, Dollar is now firmly leading the weekly performance rankings after its sharp rally overnight. Swiss Franc follows as the second-strongest, while Sterling also benefits from the broader selloff in Euro. Meanwhile, commodity-linked currencies are bearing the brunt of risk aversion, with New Zealand Dollar plunging the most, followed by Australian and Canadian Dollars. While Euro and Yen are positioned in the middle of the performance spectrum, the single currency is looking rather vulnerable.

    Technically, Gold’s extended decline is another confirmation of the Dollar’s underlying strength. The break of 2876.93 support confirms short-term topping at 2956.09, just below the key psychological 3000 level, with bearish divergence in 4H MACD.

    Deeper correction should be seen to 38.2% retracement of 2584.24 to 2956.09 at 2814.04. Rebound from there indicate that it’s just a near term correction, and keep the larger up trend intact. However, sustained break of 2814.04 will suggest that a larger scale correction is already unfolding.

    In Asia, at the time of writing, Nikkei is down -2.97%. Hong Kong HSI is down -2.58%. China Shanghai SSE is down -1.11%. Singapore Strait Times is down -0.72%. Japan 10-year JGB yield is down -0.023 at 1.373. Overnight, DOW fell -0.45%. S&P 500 fell -1.59%. NASDAQ fell -2.78%. 10-year yield rose 0.036 to 4.285.

    BoJ’s Uchida: Yield rise reflects market’s views on economic and global developments

    Speaking in parliament today, BoJ Deputy Governor Shinichi Uchida said recent rise in JGB yields “reflects the market’s view on the economic and price outlook, as well as overseas developments.”

    “There’s no change to our stance on short-term policy rates and government bond operations,” he emphasized, adding that the bond holdings “continue to exert a strong monetary easing effect” on the economy.

    When asked whether the prospect of further rate hikes and tapering would continue to drive yields higher, Uchida responded that it is ultimately “up to markets to decide.”

    Japan’s Tokyo CPI slows to 2.2% yoy in Feb, industrial production down -1.1% mom in Jan

    Tokyo’s core CPI (ex-food) slowed to 2.2% yoy in February, down from 2.5% yoy and below market expectations of 2.3% yoy. This marks the first decline in four months, largely due to the reintroduction of energy subsidies. Meanwhile, core-core CPI (ex-food and energy) held steady at 1.9% yoy. Headline CPI slowed from 3.4% yoy to 2.9% yoy.

    In the industrial sector, production contracted by -1.1% mom in January, a sharper decline than the expected -0.9%. Manufacturers surveyed by Japan’s Ministry of Economy, Trade, and Industry anticipate a strong 5.0% mom rebound in February, followed by a -2.0% mom drop in March.

    On the consumer front, retail sales grew 3.9% yoy in January, slightly missing the 4.0% yoy forecast, but still pointing to resilient domestic demand.

    Fed’s Hammack signals cautious approach, stresses policy patience

    Cleveland Fed President Beth Hammack said Fed has the “luxury of being patient” given the strength of the labor market and the uneven progress in reducing inflation.

    In a speech overnight, she noted that while inflation has moderated, it remains above the 2% target, and policymakers are not yet confident that price pressures will fully subside. As a result, she expects the federal funds rate to stay steady “for some time”.

    Hammack acknowledged that the current policy stance has helped ease inflation, but she warned that risks remain. While Fed anticipates a gradual return to 2% inflation over the medium term, she stressed that this is “far from a certainty.”

    She suggested Fed will need to take a “patient approach” in monitoring how inflation and the labor market adjust before making any policy changes.

    Fed’s Harker says one inflation report shouldn’t sway policy in either direction

    Philadelphia Fed President Patrick Harker noted in a speech overnight that recent inflation data continues to show an uneven path toward the 2% target. He acknowledged that January’s consumer price data came in hotter than expected, marking the fastest increase in 18 months.

    However, he stressed that policymakers should “not be moved to act, in either direction” based on a single month’s data.

    Harker reaffirmed his stance that the Fed’s current policy rate remains sufficiently restrictive to keep inflation in check without undermining overall economic stability.

    Despite inflation’s persistence, Harker remains optimistic about the economic outlook. He stated, “I am of a position that we let monetary policy continue to work.”

    Looking ahead

    Germany will release CPI flash, import prices, retail sales and unemployment in European session. Swiss will release KOF economic barometer.

    Later in the day, Canada will publish GDP. Focus is also on US PCE inflation, goods trade balance and Chicago PMI.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6207; (P) 0.6261; (R1) 0.6291; More…

    AUD/USD’s fall from 0.6407 accelerated lower today and intraday bias stays on the downside for retesting 0.6087 low. Decisive break there will resume larger decline from 0.6941. On the upside, above 0.6284 minor resistance will turn intraday bias neutral first. But outlook will remain bearish as long as 38.2% retracement of 0.6941 to 0.6087 at 0.6413 holds, in case of recovery.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6505) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Tokyo CPI Y/Y Feb 2.90% 3.40%
    23:30 JPY Tokyo CPI Core Y/Y Feb 2.20% 2.30% 2.50%
    23:30 JPY Tokyo CPI Core-Core Y/Y Feb 1.90% 1.90%
    23:50 JPY Industrial Production M/M Jan P -1.10% -0.90% -0.20%
    23:50 JPY Retail Trade Y/Y Jan 3.90% 4.00% 3.70% 3.50%
    00:30 AUD Private Sector Credit M/M Jan 0.50% 0.60% 0.60%
    05:00 JPY Housing Starts Y/Y Jan -2.60% -2.50%
    07:00 EUR Germany Import Price Index M/M Jan 0.70% 0.40%
    07:00 EUR Germany Retail Sales M/M Jan 0.10% -1.60%
    07:45 EUR France Consumer Spending M/M Jan -0.80% 0.70%
    07:45 EUR France GDP Q/Q Q4 -0.10% -0.10%
    08:00 CHF KOF Economic Barometer Feb 102.1 101.6
    08:55 EUR Germany Unemployment Change Jan 15K 11K
    08:55 EUR Germany Unemployment Rate Jan 6.20% 6.20%
    13:00 EUR Germany CPI M/M Feb P 0.40% -0.20%
    13:00 EUR Germany CPI Y/Y Feb P 2.30% 2.30%
    13:30 CAD GDP M/M Dec 0.30% -0.20%
    13:30 USD Personal Income M/M Jan 0.30% 0.40%
    13:30 USD Personal Spending Jan 0.20% 0.70%
    13:30 USD PCE Price Index M/M Jan 0.30% 0.30%
    13:30 USD PCE Price Index Y/Y Jan 2.50% 2.60%
    13:30 USD Core PCE Price Index M/M Jan 0.30% 0.20%
    13:30 USD Core PCE Price Index Y/Y Jan 2.60% 2.80%
    13:30 USD Goods Trade Balance (USD) Jan P -114.9B -122.0B
    13:30 USD Wholesale Inventories Jan P 0.10% -0.50%
    14:45 USD Chicago PMI Feb 40.3 39.5

     



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  • Dollar Gathers Momentum, Gold Cools Off, Market Jitters Ahead?

    Dollar Gathers Momentum, Gold Cools Off, Market Jitters Ahead?


    Dollar appears to be gathering steam for a stronger, sustainable near-term rebound, although the precise catalyst remains unclear. One contributing factor an undercurrent of risk aversion, which is reflected in the broad selloff in the Australian and New Zealand Dollars. Yet, the overall market picture is mixed, as US stock futures inch higher and Treasury yields hold steady, hardly signaling a deep risk-off move or robust safe-haven flows.

    Another explanation points to traders positioning ahead of Nvidia’s earnings release, due after the bell. With the AI-driven rally serving as a key theme for tech stocks, any surprise in the results could influence wider market sentiment, thereby affecting the currency markets. Additionally, speculation is building around the upcoming March 4 tariff deadline, when US levies on Canada and Mexico—postponed for a month to address border and fentanyl issues—are set to take effect.

    At present, the greenback tops the leaderboard for the day, followed by Sterling and Loonie. Aussie and Kiwi lag, with Swiss Franc also underperforming. Euro and Yen are holding middle ground.

    Technically, considering bearish divergence condition in 4H MACD, a short term top could already be in place in Gold at 2956.09, ahead of 3000 psychological level. Firm break of 2876.93 support should confirm this case, and bring deeper correction to 38.2% retracement of 2584.24 to 2956.09 at 2814.04. If realized, that would be a confirmation for Dollar’s rebound.

    In Europe, at the time of writing, FTSE is up 0.65%. DAX is up 1.69%. CAC is up 1.32%. UK 10-year yield is down -0.0316 at 4.483. Germany 10-year yield is down -0.032 at 2.429. Earlier in Asia, Nikkei fell -0.25%. Hong Kong HSI rose 3.27%. China Shanghai SSE rose 1.02%. Singapore Strait Times fell -0.20%. Japan 10-year JGB yield fell -0.0098 to 1.367.

    German Gfk consumer sentiment drops to -24.7, no sign of recovery yet

    Germany’s GfK Consumer Sentiment Index for March declined further from -22.6 to -24.7, missing expectations of -21.1.

    February data showed income expectations plunging -4.3 points to -5.4, marking a 13-month low, while the economic outlook for the next 12 months improved slightly by 2.8 points to 1.2.

    According to Rolf Bürkl, consumer expert at NIM, the data highlights that “no signs of a recovery” are visible in German consumer sentiment. He noted that headline index has been stuck at a low level since mid-2024, with “great deal of uncertainty among consumers and a lack of planning security”.

    Australia’s monthly CPI holds at 2.5%, core measures edge higher

    Australia’s monthly CPI was unchanged at 2.5% yoy in January, falling short of expectations for a slight uptick to 2.6%.

    However, underlying inflation pressures showed signs of persistence, with CPI excluding volatile items and holiday travel rising from 2.7% yoy to 2.9% yoy. Trimmed mean CPI edged up from 2.7% yoy to 2.8% yoy.

    These figures suggest that while headline inflation appears stable, core price pressures are still lingering, reinforcing RBA’s cautious stance on further easing.

    The largest contributors to annual inflation included food and non-alcoholic beverages (+3.3% yoy), housing (+2.1% yoy), and alcohol and tobacco (+6.4% yoy).This was partly offset by a notable decline in electricity prices, which fell -11.5% yoy.

    AUD/USD Mid-Day Report

    Daily Pivots: (S1) 0.6325; (P) 0.6341; (R1) 0.6360; More…

    AUD/USD’s break of 0.6327 support should confirm short term topping at 0.6407, on bearish divergence condition in 4H MACD. Corrective rebound should have completed just ahead of 38.2% retracement of 0.6941 to 0.6087 at 0.6413. Intraday bias is back on the downside for retesting 0.6087 low. For now, risk will stay on the downside as long as 0.6407 holds, in case of recovery.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6505) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 AUD Monthly CPI Y/Y Jan 2.50% 2.60% 2.50%
    00:30 AUD Construction Work Done Q4 0.50% 0.80% 1.60% 2.00%
    07:00 EUR Germany GfK Consumer Sentiment Mar -24.7 -21.1 -22.4 -22.6
    09:00 CHF UBS Economic Expectations Feb 3.4 17.7
    15:00 USD New Home Sales Jan 677K 698K
    15:30 USD Crude Oil Inventories 2.5M 4.6M

     



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  • Sterling Unmoved by CPI Surprise, Gold to Try 3000 Again ahead of FOMC Minutes

    Sterling Unmoved by CPI Surprise, Gold to Try 3000 Again ahead of FOMC Minutes


    The forex markets remain rather indecisive today. Traders are paring back expectations for BoE rate cuts after UK inflation surged to a 10-month high. A March rate cut is now off the table, and markets are no longer fully pricing in two BoE cuts this year. However, this shift has provided only minimal support for the British pound, as broader market sentiment remains cautious.

    Meanwhile, Dollar is mildly firmer but lacks strong upside momentum. Traders are now focused on FOMC minutes, which are expected to reaffirm that Fed is in no rush to cut rates. Current Fed funds futures show a 55% probability that rates will remain at 4.25-4.50% through the first half of 2025, a view that is unlikely to change much without further clarity on President Donald Trump’s fiscal and trade policies.

    In the commodities market, Gold surged to a record high, approaching the critical 3000 psychological level for another attempt. This marks a key inflection point—a decisive break above 3,000 could pave the way to 61.8% projection of 1810.26 to 2789.92 from 2584.24 at 3189.66.

    However, failure to sustain gains above 3000 could lead to deeper pullback. Firm break 2876.93 support should set up correction back towards 2789.92 resistance turned support instead.

    In Europe, at the time of writing, FTSE is down -0.61%. DAX is down -1.16%. CAC is down -0.84%. UK 10-year yield is up 0.0696 at 4.629. Germany 10-year yield is up 0.058 at 2.558. Earlier in Asia, Nikkei fell -0.27%. Hong Kong HSI fell -0.14%. China Shanghai SSE rose 0.81%. Singapore Strait Times rose 0.22%. Japan 10-year JGB yield rose 0.0038 to 1.440.

    ECB’s Schnabel: Rate Cut Pause May Be Approaching

    ECB Executive Board member Isabel Schnabel suggested in an FT interview that the central bank is approaching a point where it “may have to pause or halt” rate cuts.

    While she refrained from making a firm prediction for upcoming policy meetings, she acknowledged that the ECB needs to “start that discussion”.

    Schnabel highlighted that the degree of monetary restriction “has come down significantly”, to the extent that policymakers can “no longer say with confidence” that ECB’s stance remains restrictive.

    She defended the ECB’s gradual and cautious approach, arguing that domestic inflation remains high, wage growth is still elevated, and energy price shocks continue to impact inflation expectations.

    ECB’s Panetta: Eurozone economic weakness more persistent than expected

    Italian ECB Governing Council member Fabio Panetta acknowledged that economic weakness in the Eurozone is proving “more persistent than we expected”, as the long-anticipated consumption-driven recovery has yet to materialize.

    After two consecutive quarters of stagnation, he noted that “tensions in the manufacturing sector, employment is giving signs of weakening”

    Panetta also highlighted the downside risks to inflation stemming from weak growth. However, he also noted that upside inflation risks remain, primarily from energy costs.

    UK CPI surges to 3.0%, highest since March 2024

    UK headline CPI accelerated to 3.0% yoy in January, up from 2.5% yoy and exceeding market expectations of 2.8% yoy. This marks the highest inflation level since March 2024, reinforcing concerns that price pressures remain persistent.

    Core inflation also surged, with CPI excluding energy, food, alcohol, and tobacco rising to 3.7% yoy, up from 3.2% yoy in December.

    Meanwhile, CPI goods inflation edged higher from 0.7% yoy to 1.0% yoy, while CPI services inflation climbed from 4.4% yoy to 5.0% yoy.

    RBNZ cuts by 50bps, signals further easing through 2025

    RBNZ cut the Official Cash Rate (OCR) by 50bps to 3.75%, as widely expected, while maintaining a clear easing bias.

    The central bank stated that “if economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.” According to the latest projections, the OCR is expected to decline to 3.1% by year-end and remain at that level until early 2028.

    RBNZ acknowledged that economic activity remains subdued, though it expects growth to recover in 2025, driven by lower interest rates encouraging spending. However, elevated global economic uncertainty is likely to weigh on business investment. The bank also noted that inflation is expected to be volatile in the near term, influenced by a weaker exchange rate and higher petrol prices.

    Regarding global risks, the RBNZ flagged concerns and warned that higher global tariffs could slow growth in key trading partners, dampening demand for New Zealand exports and weakening domestic economic momentum over the medium term.

    However, the impact on inflation is “ambiguous”, depending on factors such as trade diversion, supply-chain adjustments, and financial market reactions.

    Australian wages growth slow 0.7% qoq, pressures easing

    Australia’s wage price index rose 0.7% qoq in Q4, marking a slowdown from 0.9% qoq and missing expectations of 0.8% qoq. This matches the lowest quarterly growth since March 2022, reinforcing signs that wage pressures are easing, albeit still elevated.

    On an annual basis, wages increased 3.2% yoy, making it the slowest pace since Q3 2022. Private sector wage growth came in at 3.3% yoy, the weakest since Q2 2022. Public sector wages rose 2.8% yoy, falling below 3% for the first time since Q2 2023.

    BoJ’s Takata: Gradual policy shifts should continue beyond January hike

    BoJ Board Member Hajime Takata emphasized the need for the central bank to continue to “implement gear shifts gradually, even after the additional rate hike decided in January 2025”, to mitigate the risk of rising prices and financial market overheating.

    Takata noted in a speech today that as “positive corporate behavior” persists, BoJ should consider a “further gear shift” in policy.

    He highlighted three key risks that could drive prices above BoJ’s baseline scenario: a stronger wage-price cycle, inflationary pressures from domestic factors, and market volatility, especially in the exchange rates, stemming from a recovery in the US economy.

    Nevertheless, due to uncertainties surrounding the US economy and the challenge of identifying the neutral interest rate, Takata advocated for a “vigilant approach”.

    Japan’s trade deficit widens as imports surge, exports to China drop

    Japan’s trade deficit expanded sharply in January, reaching JPY -2.759T, the largest shortfall in two years, as imports surged 16.7% yoy, far exceeding the expected 9.3% yoy gain.

    Meanwhile, exports rose 7.2% yoy, falling slightly short of the 7.7% yoy forecast, with strong shipments to the U.S. (+18.1% yoy) offset by a -6.2% yoy decline in exports to China.

    On a seasonally adjusted basis, exports declined -2.0% mom to JPY 9.253T, while imports climbed 4.7% mom to JPY 10.109T, leading to a JPY -857B trade deficit.

    GBP/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.2587; (P) 1.2609; (R1) 1.2637; More…

    GBP/USD dips mildly today but stays in established tight range. Intraday bias remains neutral, and focus stays on 38.2% retracement of 1.3433 to 1.2099 at 1.2609. Rejection by this level will keep near term outlook bearish. Break of 1.2331 support will suggest that the rebound from 1.2099 has completed as a correction, and bring retest of 1.2099 low. However, firm break of 1.2609 will raise the chance of near term reversal, and target 61.8% retracement at 1.2923.

    In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD PPI Input Q/Q Q4 -0.90% 1.40% 1.90%
    21:45 NZD PPI Output Q/Q Q4 -0.10% 1.10% 1.50%
    23:50 JPY Machinery Orders M/M Dec -1.20% 0.30% 3.40%
    23:50 JPY Trade Balance (JPY) Jan -0.86T -0.24T -0.03T -0.22T
    00:30 AUD Wage Price Index Q/Q Q4 0.70% 0.80% 0.80% 0.90%
    01:00 NZD RBNZ Rate Decision 3.75% 3.75% 4.25%
    07:00 GBP CPI M/M Jan -0.10% -0.30% 0.30%
    07:00 GBP CPI Y/Y Jan 3.00% 2.80% 2.50%
    07:00 GBP Core CPI Y/Y Jan 3.70% 3.70% 3.20%
    07:00 GBP RPI M/M Jan -0.10% -0.10% 0.30%
    07:00 GBP RPI Y/Y Jan 3.60% 3.70% 3.50%
    07:00 GBP PPI Input M/M Jan 0.80% 0.70% 0.10% 0.20%
    07:00 GBP PPI Input Y/Y Jan -0.10% -0.50% -1.50% -1.30%
    07:00 GBP PPI Output M/M Jan 0.50% 0.20% 0.10% -0.20%
    07:00 GBP PPI Output Y/Y Jan 0.30% 0.10% 0.10% -0.10%
    07:00 GBP PPI Core Output M/M Jan 0.30% 0%
    07:00 GBP PPI Core Output Y/Y Jan 1.50% 1.50% 1.60%
    09:00 EUR Eurozone Current Account (EUR) Dec 38.4B 30.2B 27.0B 25.1B
    13:30 USD Building Permits Jan 1.48M 1.45M 1.48M
    13:30 USD Housing Starts Jan 1.37M 1.39M 1.50M
    19:00 USD FOMC Minutes

     



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  • Gold Nears 3000 as Muted Reaction to Metal Tariffs Fades, Fed Powell in Focus

    Gold Nears 3000 as Muted Reaction to Metal Tariffs Fades, Fed Powell in Focus


    Dollar is trading is a mildly firmer tone while Gold inches closer to the key 3000 psychological level after US President Donald Trump officially raised tariffs on aluminum and steel imports. However, the broader market reaction has been relatively subdued. Major US equity indexes managed to post modest gains overnight, and 10-year Treasury yield also recovered. Investor sensitivity to trade war escalations has somewhat diminished. The next test will be whether Trump’s upcoming reciprocal tariff announcement will trigger a similar lackluster response.

    In his proclamation on Monday, Trump lifted tariff rate on aluminum to 25% from the previous 10% and eliminating previous country-specific exemptions, including quota agreements and product-specific exclusions for both metals. The measures are set to take effect on March 4.

    Although Trump insisted there would be “no exceptions,” he later softened the tone and indicated the possibility of an exemption for Australia, citing that nation’s trade deficit with the US. As a result, uncertainty remains over how many countries or products may ultimately be exempt from the higher tariffs.

    Markets are now awaiting further details on Trump’s reciprocal tariff plan, expected to be unveiled between Tuesday and Wednesday. The plan could impose new duties on a range of imports to match tariffs levied by trading partners, with the EU particularly at risk due to its 10% tariff on American cars—much higher than the US’s 2.5% tariff on imported vehicles.

    In addition to trade policy developments, the focus is also on Fed Chair Jerome Powell’s Congressional testimony later today, followed by release of key US CPI data tomorrow. Powell’s remarks could provide further insight into the Fed’s rate outlook, particularly whether policymakers are shifting toward an even longer pause in monetary easing given recent strength in the labor market and lingering inflation risks.

    On the currency front, Dollar is currently the strongest major currency so far this week, followed by Aussie and then Swiss franc. Kiwi is the worst performer, trailed by Sterling and then Yen. Euro and Loonie are trading in the middle.

    Technically, immediate focus in on Gold’s reaction from 3000 psychological level, as well as 38.2% projection of 1810.26 to 2789.92 from 2584.24 at 2958.47. Strong resistance could be seen from there to limit upside on first attempt. Break of 2852.31 support would indicate that pullback is underway back to 2789.92 resistance turned support and possibly below. However, sustained break of 3000 would pave the way to next target at 61.8% projection at 3189.66 before topping.

    In Asia, Japan is on holiday. Hong Kong HSI is down -0.72%. China Shanghai SSE is down -0.16%. Singapore Strait Times is down -0.41%. Overnight, DOW rose 0.38% S&P 500 rose 0.67%. NASDAQ rose 0.98%. 10-year yield rose 0.006 to 4.493.

    Australia’s Westpac consumer sentiment ticks up, RBA to start cutting this month

    Australia’s Westpac Consumer Sentiment Index rose slightly by 0.1% mom to 92.2 in February. While consumer mood improved significantly in the second half of 2024, the past three months have shown stagnation.

    Westpac noted that financial pressures on households persist and a more uncertain global economic climate has also played a role in dampening optimism.

    RBA is likely to begin policy easing at its next meeting on February 17–18. Westpac highlighted that recent economic data on core inflation, wage growth, and household consumption indicate that inflation is “returning to target faster” than previously expected.

    These factors provide RBA with the confidence to initiate a 25bps rate cut this month, marking the first step in what is expected to be a “moderate” easing cycle through 2025.

    Australian NAB business confidence rebounds to 4, but conditions remain weak

    Australia’s NAB Business Confidence index made a strong recovery in January, rising from -2 to 4 and returning to positive territory. However, despite this uptick in sentiment, underlying business conditions deteriorated.

    Business Conditions index dropped from 6 to 3, marking a notable slowdown. Within this, trading conditions slipped from 10 to 6, while profitability conditions turned negative, falling from 4 to -2. On a more positive note, employment conditions edged up slightly from 4 to 5.

    Cost pressures remained a key concern for businesses. Purchase cost growth eased to 1.1% on a quarterly equivalent basis, down from 1.4%. Labor cost growth picked up slightly to 1.8%. Meanwhile, final product price growth held steady at 0.8%, while retail price inflation inched up to 0.9%. Businesses are struggling to fully pass on rising costs to consumers.

    NAB Chief Economist Alan Oster noted that while confidence improved, it is uncertain whether this momentum will be sustained. Elevated cost pressures, particularly on wages and input costs, continue to weigh on overall business conditions.

    BoE’s Mann: Larger rate cut needed to send clear market signal

    BoE MPC member Catherine Mann explained her unexpected vote for a 50bps rate cut last week. Speaking to the Financial Times, she emphasized that “Demand conditions are quite a bit weaker than has been the case”, prompting a reassessment of her stance on inflation risks.

    She now sees inflationary pressures easing faster, with pricing trends aligning closely to 2% target in the year ahead. This marks a notable shift from her previously hawkish position, which had consistently supported maintaining restrictive monetary policy.

    A key reason for her preference for a larger cut was the need to deliver a stronger signal to financial markets. She argued that a half-point move would help “cut through the noise” and provide clearer guidance on the need for looser financial conditions in the UK.

    “To the extent that we can communicate what we think are the appropriate financial conditions for the UK economy, a larger move is a superior communication device,” she noted.

    Mann’s stance aligns her with Swati Dhingra, the most dovish member of the MPC, who also advocated for a 50bps cut to 4.25% at last week’s meeting. The final decision was a more measured 25bps reduction to 4.50%.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6245; (P) 0.6267; (R1) 0.6299; More…

    AUD/USD is bounded in sideway trading in tight range and intraday bias remains neutral. With 0.6329 resistance intact, outlook will stay bearish. On the downside, break of 0.6239 minor support will turn bias back to the downside for retesting 0.6087 low. However, firm break of 0.6329 will bring stronger rebound to 38.2% retracement of 0.6941 to 0.6087 at 0.6413, even just as a corrective move.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6516) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 AUD Westpac Consumer Confidence Feb 0.10% -0.70%
    00:30 AUD NAB Business Confidence Jan 4 -2
    00:30 AUD NAB Business Conditions Jan 3 6
    11:00 USD NFIB Business Optimism Jan 104.6 105.1
    13:30 CAD Building Permits M/M Dec 2.30% -5.90%

     



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  • Yen Rises on Strong Wage Data, Gold Continues March to 3000

    Yen Rises on Strong Wage Data, Gold Continues March to 3000


    Japanese Yen gained significant ground in the Asian session, supported by stronger-than-expected nominal wage growth, which bolstered the likelihood of further BoJ rate hikes. Additionally, continued rise in real wages for the second consecutive month, despite being largely driven by seasonal bonuses, adds to the argument that wage pressures could help sustain inflation near the 2% target.

    Supporting this outlook, BoJ monetary affairs director Kazuhiro Masaki told parliament that the central bank is prepared to continue adjusting monetary support and raising rates if underlying inflation progresses toward its 2% target. These remarks reaffirm the expectation that Japan’s interest rate normalization will proceed gradually but steadily this year.

    While Yen leads gains in the forex market, overall sentiment is mixed, with trade war concerns temporarily fading into the background. Canadian Dollar is currently the strongest performer this week, followed by Yen and Swiss Franc. Dollar lags behind as the weakest, joined by Euro and New Zealand Dollar. Sterling and Australian Dollar are treading a middle ground .

    With trade-related uncertainty easing, attention is now shifting back toward key economic events. US ISM Services PMI is due later today. Tomorrow, BoE is expected to announce a 25bps rate cut, but the MPC voting split and economic projections will be crucial in setting future rate expectations. To close the week, US Non-Farm Payrolls and Canada’s employment report will be in focus on Friday.

    Technically, Gold’s record run continues with strong momentum and remains on track to 3000 psychological level, which is close to 38.2% projection of 1810.26 to 2789.92 from 2584.24 at 3074.07. Attention is on whether Gold would lose momentum on overbought condition as it approaches this level. But in any case, outlook will stay bullish as long as 2772.04 support holds.

    In Asia, at the time of writing, Nikkei is down -0.10%. Hong Kong HSI is down -0.69%. China Shanghai SSE is down -0.36%. Singapore Strait Times is down -0.14%. Japan 10-year JGB yield is up 0.0191 at 1.295. Overnight, DOW rose 0.30%. S&P 500 rose 0.72%. NASDAQ rose 1.35%. 10-year yield fell -0.030 to 4.513.

    Fed’s Jefferson and Daly signal no urgency for rate cuts

    Fed Vice Chair Philip Jefferson reaffirmed the cautious approach to policy easing, stating that while a “gradual reduction” in monetary policy restraint towards neutral remains the most likely scenario, there is no urgency to change the current stance.

    “I do not think we need to be in a hurry to change our stance,” he said in a speech overnght.

    He emphasized that policy decisions will continue to be guided by incoming data and the evolving economic outlook, noting that monetary policy is “not on a preset course.”

    Jefferson outlined a “range of scenarios” for future policy moves. If economic activity remains robust and inflation fails to sustainably decline toward 2% target, Fed could maintain its restrictive stance for longer. Conversely, if the labor market weakens unexpectedly or inflation cools faster than expected, the central bank may need to ease policy at a quicker pace.

    Meanwhile, San Francisco Fed President Mary Daly echoed similar sentiments, describing the US economy as “in a very good place.” She emphasized that the central bank is in a strong position to “wait and see” before making any policy moves.

    Japan’s nominal wage growth surges 4.8% yoy in Dec, real wages rise for second month

    Japan’s labor market showed strong wage growth in December, with labor cash earnings surging 4.8% yoy, significantly above expectations of 3.8% yoy and accelerating from 3.9% yoy in the prior month. This marks the 36th consecutive month of annual wage increases.

    Regular pay, which includes base salaries, rose 2.7% yoy, while special cash earnings—mainly reflecting winter bonuses—jumped 6.8% yoy, providing an additional boost to workers’ disposable income.

    Real wages, which adjust for inflation, climbed 0.6% yoy, marking the second straight month of positive growth. This improvement comes despite a notable acceleration in consumer inflation, with the price index used to calculate real wages—excluding rent but including fresh food—rising 4.2% yoy, up from 3.4% yoy in November and reaching the highest level since January 2023.

    China’s Caixin PMI services PMI drops to 51.0

    China’s Caixin Services PMI slipped to 51.0 in January, down from 52.2 and below expectations of 52.3. PMI Composite also edged lower from 51.4 to 51.1, marking a four-month low, as both manufacturing and services sectors struggled to gain momentum.

    According to Caixin Insight Group, while supply and demand conditions showed improvement, services growth lagged behind, pointing to weaker consumer activity.

    Wang Zhe, Senior Economist added, “Employment in both sectors fell significantly, and overall price levels remained subdued, particularly factory-gate prices in manufacturing.”

    New Zealand’s unemployment rate rises to 5.1%

    New Zealand’s labor market softened further in Q4, with unemployment rate climbing from 4.8% to 5.1%, in line with expectations and marking the highest level since 2016, excluding the brief spike following the 2020 Covid lockdown.

    Employment fell by -0.1% in the quarter, slightly better than the expected -0.2% decline, but still reflecting ongoing weakness in job creation. Meanwhile, wage growth continued to moderate, with the labor cost index rising 0.6% qoq, bringing the annual rate down to 3.3% from 3.8%.

    The latest data supports the case for further monetary easing by RBNZ, which remains committed to swiftly bringing the OCR down from the current 4.25% toward neutral level. A 50bps rate cut is still widely anticipated at the upcoming policy meeting this month.

    USD/JPY Daily Outlook

    Daily Pivots: (S1) 153.84; (P) 154.68; (R1) 155.18; More…

    USD/JPY’s fall from 158.86 short term top resumed by breaking through 153.70 and intraday bias is back on the downside. Deeper decline should be seen to 38.2% retracement of 139.57 to 158.86 at 151.49. Strong support could be seen from there to bring rebound. But further fall will remain in favor as long as 155.51 resistance holds, in case of recovery. Sustained break of 151.49 will raise the chance of bearish reversal.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Employment Change Q4 -0.10% -0.20% -0.50% -0.60%
    21:45 NZD Unemployment Rate Q4 5.10% 5.10% 4.80%
    21:45 NZD Labour Cost Index Q/Q Q4 0.60% 0.60% 0.60%
    23:30 JPY Labor Cash Earnings Y/Y Dec 4.80% 3.80% 3.00% 3.90%
    00:30 JPY Services PMI Jan F 53 52.7 52.7
    01:45 CNY Caixin Services PMI Jan 51 52.3 52.2
    07:45 EUR France Industrial Output M/M Dec -0.10% 0.20%
    08:50 EUR France Services PMI Jan F 48.9 48.9
    08:55 EUR Germany Services PMI Jan F 52.5 52.5
    09:00 EUR Eurozone Services PMI Jan F 51.4 51.4
    09:30 GBP Services PMI Jan F 51.2 51.2
    10:00 EUR Eurozone PPI M/M Dec 0.50% 1.60%
    10:00 EUR Eurozone PPI Y/Y Dec -0.10% -1.20%
    13:15 USD ADP Employment Change Jan 149K 122K
    13:30 USD Trade Balance (USD) Dec -97.1B -78.2B
    13:30 CAD Trade Balance (CAD) Dec 0.4B -0.3B
    14:45 USD Services PMI Jan F 52.8 52.8
    15:00 USD ISM Services PMI Jan 54.2 54.1
    15:30 USD Crude Oil Inventories 2.4M 3.5M

     



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  • Markets Stabilize, But Trade Risks Persist as US Imposes China Tariffs, Beijing Strikes Back

    Markets Stabilize, But Trade Risks Persist as US Imposes China Tariffs, Beijing Strikes Back


    Global markets found some stability after the US agreed to a 30-day delay on tariffs against Mexico and Canada following agreements on fentanyl trafficking and border security measures. However, trade tensions remain elevated as Washington proceeded with the additional 10% tariff on all Chinese imports. In response, China retaliated by imposing a 15% tariff on US coal and LNG, along with a 10% levy on crude oil, farm equipment, and select automobiles, set to take effect on February 10.

    Further escalation could be on the horizon, as US President Donald Trump signaled that additional tariff hikes on China remain a possibility unless Beijing takes further steps to curb fentanyl exports. Meanwhile, trade friction with the EU is also building. Trump hinted over the weekend that European imports could be his next target, prompting EU leaders at a summit in Brussels to prepare countermeasures while expressing willingness for negotiations. Developments on both fronts will be closely monitored in the days ahead.

    In the currency markets, Canadian Dollar is leading gains for the week so far, rebounding strongly following the tariff delay. Japanese Yen follows as the second-strongest performer, benefiting from risk aversion, while British Pound holds up well. On the weaker side, New Zealand Dollar is underperforming, followed by Euro and Australian Dollar. Dollar has retraced most of its earlier gains and is now trading in the middle of the performance rankings alongside Swiss Franc.

    Technically, Gold hit another record high on risk aversion yesterday after initial volatility. For now, outlook will stay bullish as long as 2730.34 support holds. Next target is 38.2% projection of 1810.26 to 2789.92 from 2584.24 at 3074.07, which is close to 3000 psychological. This level will be crucial in determining the underlying momentum of Gold.

    In Asia, at the time of writing, Nikkei is up 0.82%. Hong Kong HSI is up 1.76%. China is still on holiday. Singapore Strait Times is down -0.13%. Japan 10-year JGB yield is up 0.0228 at 1.272. Overnight, DOW fell -0.28%. S&P 500 fell -0.76%. NASDAQ fell -1.20%. 10-year yield fell -0.026 to 4.543.

    CAD rebounds as US pauses tariffs for 30 days

    Canadian Dollar rebounded sharply after US President Donald Trump announced a 30-day pause on planned tariffs against Canadian imports, just hours after implementing a similar delay for Mexico.

    The decision came after negotiations between Trump and Canadian Prime Minister Justin Trudeau, who confirmed that Canada would take aggressive new measures to combat fentanyl trafficking, including deploying nearly 10,000 personnel to reinforce border security. Canada also committed to appointing a “Fentanyl Czar”, classifying cartels as terrorist organizations, and launching a Canada-US “Joint Strike Force” targeting organized crime and money laundering.

    Markets welcomed the de-escalation, as the tariff pause removes immediate downside risks for the Canadian economy. Trump emphasized that the suspension is conditional on further progress in security measures and that an “Economic deal with Canada” may still need to be structured.

    Technically, a short term top is likely formed at 1.4791 in USD/CAD after this week’s strong volatility. More sideway trading should now be seen in the near term. However, outlook will continue to stay bullish as long as 1.4260 cluster support holds (38.2% retracement of 1.3418 to 1.4791 at 1.4267), which is also close to 55 D EMA (now at 1.4267). USD/CAD’s up trend is still in favor to resume at a later stage when the consolidation completes.

    Fed officials stress patience on rate cuts amid tariff uncertainty

    A trio of Fed officials cautioned that new broad-based tariffs could add upward pressure to consumer and producer prices, suggesting a slower pace of rate cuts than previously anticipated.

    Boston Fed President Susan Collins highlighted yesterday that tariffs on both final and intermediate goods risk inflating costs throughout supply chains, requiring “patient” policy decisions.

    “It’s really appropriate for policy to be patient, careful, and there’s no urgency for making additional adjustments, especially given all of the uncertainty, even though, of course, we’re still somewhat restrictive,” Collins said.

    Chicago Fed President Austan Goolsbee also stressed “a ton of uncertainty,” warning that a premature return to lower rates could reignite inflation.

    “We’ve got to be a little more careful and more prudent of how fast rates could come down because there are risks that inflation is about to start kicking back up again,” Goolsbee said.

    Meanwhile, Atlanta Fed President Raphael Bostic noted that any tariff-related surge in prices or inflation expectations might warrant close monitoring before further easing steps are taken.

    BoJ’s Ueda prioritizes underlying inflation trends, not short-term volatility

    BoJ Governor Kazuo Ueda reiterated the central bank’s commitment to achieving its 2% inflation target on a sustained basis, emphasizing that the focus remains on underlying inflation rather than temporary price fluctuations.

    Speaking before parliament, Ueda highlighted that BoJ filters out one-off factors such as fuel and volatile fresh food prices when assessing inflation trends.

    However, he acknowledged “that process at times could be difficult”, reinforcing the need for careful analysis before making policy adjustments.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6130; (P) 0.6184; (R1) 0.6279; More…

    Intraday bias in AUD/USD is turned neutral as it recovered notably after dipping to 0.6087. Some consolidations would be seen first. But outlook will stay bearish as long as 0.6329 resistance holds. Break of 0.6087 will resume larger decline from 0.6941. Next target is 61.8% projection of 0.6687 to 0.6130 from 0.6329 at 0.5985.

    In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6511) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    21:45 NZD Building Permits M/M Dec -5.60% 5.30% 4.90%
    23:50 JPY Monetary Base Y/Y Jan -2.50% -0.50% -1.00%
    15:00 USD Factory Orders M/M Dec -0.70% -0.40%

     



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  • Dollar Slumps as Risk-On Mood Prevails Under Trump’s First Week

    Dollar Slumps as Risk-On Mood Prevails Under Trump’s First Week


    Dollar ended the week as the worst-performing major currency, largely weighed down by strong risk-on sentiment that took hold after President Donald Trump’s first week in office. Investors had anticipated more aggressive trade measures from the new administration, but Trump instead struck a relatively softer tone on tariffs, leading to improved risk appetite in equities and other growth-sensitive assets. Meanwhile, the extended consolidation in US Treasury yields offered little help to the greenback.

    The delayed implementation of tariffs has been a major factor buoying market optimism. In the absence of immediate trade disruptions, stocks continued their robust rally, while Treasury yields remained in a rangebound consolidation phase. Until Trump shows concrete follow-through on his tariff threats, the dominant trends of rising equity prices and a softer Dollar appear likely to remain intact.

    Among the other major currencies, Yen finished the week as the second worst performer. Briefly, anticipation of a BoJ rate hike lent the yen some support, but once the hike was finally delivered, Yen returned to a downbeat mode as risk-seeking flows dominated. Swiss Franc was also soft, lacking safe-haven demand in this upbeat environment. But Loonie was the third worst performer, dragged down by specific concerns that Trump’s tariff policies would target key Canadian exports.

    On the other side of the spectrum, identifying a clear winner among Euro, Sterling, Aussie, and Kiwi is a bit difficult. Sterling may have a slight edge, helped by reduced US trade threats and encouraging PMI reports. Euro is similarly supported by easing tariff concerns and improving economic indicators. At the same time, Aussie and Kiwi have found a boost from Trump’s softer stance on China, coupled with a favorable risk environment. It may take another week or two for these four to sort out their relative strength, but for the moment, they continue to benefit from Dollar weakness and positive sentiment across global markets.

    US Stocks Soar to Record as Trump’s First Week Brings Tariff Delays

    US stocks extended their strong near-term rally last week, as S&P 500 notched fresh record highs while DOW and the NASDAQ Composite followed closely behind. The robust performance across all three major indexes, which each notched their second consecutive positive week, signals a resurgence in the bull market after a brief December pullback. S&P 500 and Nasdaq rose by 1.7%, while DOW outperformed with a 2.2% weekly gain, reflecting broad-based optimism among investors.

    From our perspectives, the major factor driving this renewed optimism is President Donald Trump’s restraint on initiating tariffs, at least so far. Despite months of trade-related rhetoric, the first week of his presidency ended without any clear action to impose levies on major U.S. trading partners, even including China. Trump’s softer tone, particularly when asked about tariffs on China—he told Fox News “I’d rather not have to use it”—has bolstered hopes that strict trade measures might be delayed, imposed in a more controlled way, or even significantly scaled back.

    Indeed, the earliest date for tariff implementation against Canada, Mexico, and China is February 1, but there is no guarantee that any decision will be finalized that quickly. Further delays remain plausible. Tariffs on other trading partners might not even come until after a formal review, following the timeline laid out in a presidential memorandum. Given that reports from these reviews are due on April 1, additional tariff changes, if they occur, may not take effect until 30 to 60 days after that date—pushing any significant shifts into late spring or early summer. This timeline has helped calm fears of a near-term inflation spike, which, in turn, reduces the odds of Fed feeling compelled to return to monetary policy tightening.

    Compounding the positive sentiment is Trump’s commentary at the World Economic Forum in Davos. He emphasized his view that lower oil prices should prompt the Fed to cut interest rates “immediately”—though most economists and market participants view this more as presidential wishful thinking rather than a credible policy signal. In reality, oil prices only retreated slightly last week, and technical indicators still suggest that crude has more room to rise. In particular, WTI (West Texas Intermediate) has maintained the robust uptrend since December, with prospect of continued upside.

    Geopolitical factors could also buoy oil prices further, especially ongoing tensions centered on Russia and Iran. According to Citi, “heightened, sustained geopolitical risks in Iran/Russia-Ukraine could potentially wipe out the 2025 oil balance surplus.” Citi went on to revise its quarterly Brent forecasts upward to USD 75 per barrel in the first quarter, USD 68 in the second, USD 63 in the third, and USD 60 in the fourth. These projections suggested that any near term pullback in oil might remain shallow, which complicates the global inflation picture.

    Meanwhile, market traders are largely ignoring Trump’s request for Fed to cut rates. Fed funds futures currently project around a 98% probability that the central bank will keep its benchmark rate steady at 4.25-4.50% during the upcoming meeting at the end of January. The futures market also prices in roughly a 70% chance of one more rate cut in June, to a 4.00-4.25% range, but indicates no further easing for the rest of 2025 and well into 2026.

    Unless inflation surprises to the upside—whether via unexpected tariff moves or a significant oil price shock—monetary policy looks set to remain on a cautious but steady path down. For now, that sense of stability, combined with a lack of immediate trade disruptions, continues to support the bullish sentiment on Wall Street.

    Dollar Index Extends Pullback as Yields Consolidate and Stocks Surge

    S&P 500’s up trend resumed last week by breaking through 6099.97 resistance. Further rally is expected as long as 55 D EMA (now at 5938.64) holds, in case of retreat. Next target is 61.8% projection of 5119.26 to 6099.97 from 577.3.31 at 6379.38.

    In the bigger picture, the key question is whether S&P 500 could power through long term channel resistance (now at around 6400) and sustain above there. If it could, the up trend could further accelerate towards 138.2% projection of 2191.86 to 4818.62 from 3491.58 at 7121.76 in the medium term

    10-year yield recovered after initial dip to 4.552 but overall outlook is unchanged. Consolidation pattern from 4.809 should continue with risk of deeper pull back to 55 D EMA (now at 4.458) and possibly below. But strong support should be seen from 38.2% retracement of 3.603 to 4.809 at 4.348 to contain downside and bring rebound. Rise from 3.603 is expected to resume at a later stage to retest 4.997 high.

    Dollar’s correction from 110.17 extend lower and breached 55 D EMA (now at 107.32). While some support might be seen from 55 D EMA to bring recovery, risk will continue to stay on the downside as long as 110.17 holds. Correction/consolidation in yields and strong risk-on sentiment would continue to give Dollar Index some pressure in the near term.

    Nevertheless, while deeper fall is in favor, downside should be contained by 38.2% retracement of 100.15 to 100.17 at 106.34 to bring rebound. Rise form 100.15 is expected to resume through 110.17 to retest 114.77 high at a later stage.

    Gold is among the biggest beneficiaries of Dollar’s near term weakness. The pickup in momentum as seen in D MACD is raising the chance of up trend resumption. Decisive break of 2789.92 would extend the long term up trend to 138.2% projection of 1160.17 to 2074.84 from 1614.60 at 2878.67, or even further to 161.8% projection at 3094.53.

    Nevertheless, firm break of 2724.60 resistance turned support should revive our original view, and extend the corrective pattern from 2789.92 with a third leg towards 2536.67 support before up trend resumption.

    WTI crude oil extended the retreat form 81.01 short term top last week. While deeper fall cannot ruled out, near term outlook will stay bullish as long as 55 D EMA (now at 73.34) holds. Rise from 65.63 is expected to resume through 81.01 at a later stage.

    Current preferred interpretation is that consolidation pattern from 95.50 (2023 high) has completed with three waves down to 65.63 (2024 low). Firm break of 87.84 resistance would solidify this bullish case, and at least bring a retest of 95.50 key resistance.

    EUR/USD Weekly Outlook

    EUR/USD’s rebound from 1.0176 short term bottom accelerated higher last week and there is no sign of topping yet. Initial bias stays on the upside this week for 38.2% retracement of 1.1213 to 1.0176 at 1.0572 sustained break of 1.0572 will raise the chance of bullish reversal, and target 61.8% retracement at 1.0817. On the downside break of 1.0371 minor support will retain near term bearishness and bring retest of 1.0176 low.

    In the bigger picture, outlook is mixed as fall from 1.1274 (2023 high) could either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. Strong support from 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will favor the former case, and sustained break of 55 W EMA (now at 1.0722) will argue that the third leg might have started. However, sustained trading below 1.0199 will favor the latter case and bring retest of 0.9534 low.

    In the long term picture, down trend from 1.6039 remains in force with EUR/USD staying well inside falling channel, and upside of rebound capped by 55 M EMA (now at 1.0973). Consolidation from 0.9534 could extend further and another rising leg might be seem. But as long as 1.1274 resistance holds, eventual downside breakout would be mildly in favor.



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  • Dollar Softness Continues as Forex Markets Tread Calm Waters

    Dollar Softness Continues as Forex Markets Tread Calm Waters


    The forex markets remain unusually quiet today, with Dollar staying soft despite multiple attempts to rebound. The greenback has only managed meaningful gains against the weaker Yen and the struggling Canadian Dollar, while failing to build momentum against other major currencies. With little in the way of significant economic data on the calendar today, trading is expected to remain subdued. However, volatility could resurface, probably just temporarily, later in the week, with BoJ’s anticipated rate hike and key PMI releases from major economies slated for Friday.

    Loonie, nonetheless, could see movement today, with retail sales data due. BoC is widely expected to cut rates by 25 bps at its upcoming meeting next Wednesday, a view supported by a Reuters survey where 25 out of 31 economists forecast such a move. Additionally, median expectations point to another 25 bps cut in March, followed by a further reduction later in the year, bringing the overnight rate to 2.50%.

    For USD/CAD, however, the real driver for a decisive range breakout, beyond brief jitters, would lie in developments surrounding US-Canada trade relations. The market awaits details of tariffs expected to be announced on February 1, including their scope and which products will be affected.

    So far this week, Yen has been the weakest performer, followed by Dollar and Loonie. At the other end of the spectrum, the Kiwi remains the strongest, while Euro and Aussie. Sterling and Swiss are still stuck in middle positions.

    A key development this week has been the sharp decline in USD/CNH, which is viewed as a sign of a stabilizing risk sentiment toward global trade. Technically, a short term top should be formed at 7.3694, just ahead of 7.3745 key resistance (2022 high). More consolidative is expected in the near term with risk of deeper pull back. But downside should be contained by 38.2% retracement of 6.9709 to 7.3694 at 7.2172. Eventual upside break remains in favor.

    Gold surges on Dollar weakness, Silver lags

    Gold prices surged past 2750 mark this week, supported largely by a weaker Dollar. The overall market sentiment is on a relatively calmer backdrop, with US President Donald Trump’s decision to delay tariff implementations contributed to easing trade-related fears. Additionally, geopolitical tensions receded as a ceasefire between Israel and Hamas took hold earlier in the week.

    Hence, as whether Gold can break its record high of 2789 will depend largely on the depth of Dollar’s correction in the coming days.

    Technically, Gold’s rebound from 2536.67 is currently seen as the second leg of the corrective pattern from 2789.92 high. Strong resistance could be seen from this resistance to limit upside. Break of 2689.21 support will argue that the third leg of the pattern has started back towards 2536.67 support. Nevertheless, decisive break of 2789.92 will confirm up trend resumption.

    Silver’s performance, by comparison, has been relatively subdued. Its recovery from 28.74 remains weak and corrective in nature. For now, as long as 32.30 resistance holds, fall from 34.84 is still in favor to resume at a later stage, to 26.44 cluster support zone.

    Japan posts first trade surplus in six months

    Japan recorded a trade surplus of JPY 130.9B in December, the first surplus in six months, driven by a 2.8% yoy rise in exports to JPY 9.91T. Imports also jumped, rising 1.8% yoy to JPY 9.8T.

    However, exports to the two largest trading partners saw declines, with shipments to China falling by -3.0% yoy and to the US by 2.1% yoy.

    On a month-on-month seasonally adjusted basis, exports rose 6.3% mom to JPY 9.44T. Imports increased 2.2% mom to JPY 9.47T, resulting in a seasonally adjusted trade deficit of JPY 33B.

    For the entirety of 2024, Japan’s trade deficit narrowed significantly, shrinking by 44% from the previous year to JPY -5.33T. Exports reached a record high of JPY 107.09T, up 6.2%, bolstered by strong demand for vehicles and semiconductor-related products. Imports also rose by 1.8% to JPY 112.42T.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.4322; (P) 1.4357; (R1) 1.4412; More…

    Range trading continues in USD/CAD and intraday bias remains neutral. Further rise is expected as long as 1.4260 support holds. Break of 1.4516 will resume larger up trend to 1.4667/89 key resistance zone. Nevertheless, firm break of 1.4260 will turn bias to the downside for deeper pullback to 55 D EMA (now at 1.4205) and below.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY Trade Balance (JPY) Dec -0.03T -0.64T -0.38T -0.39T
    13:30 USD Initial Jobless Claims (Jan 17) 220K 217K
    13:30 CAD Retail Sales M/M Nov 0.20% 0.60%
    13:30 CAD Retail Sales ex Autos M/M Nov 0.10% 0.10%
    15:00 EUR Eurozone Consumer Confidence Jan P -14 -15
    15:30 USD Natural Gas Storage -270B -258B
    16:00 USD Crude Oil Inventories -0.1M -2.0M

     



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  • Cautious Trade Dominates as Dollar Holds Steady, Yen Leads, Gold Jumps

    Cautious Trade Dominates as Dollar Holds Steady, Yen Leads, Gold Jumps


    Activity in the forex markets has turned relatively subdued today, with no clear trend emerging as traders shift into a cautious stance. With no top-tier economic data scheduled for the rest of the week, attention is turning to the impending inauguration of US President-elect Donald Trump next Monday. The spotlight is squarely on his anticipated tariff policies, which could have profound implications for global trade and economic stability.

    Yen holds its position as the strongest currency of the day, buoyed by increasing speculation of a potential rate hike from the Bank of Japan at its meeting next week. BoJ Governor Kazuo Ueda’s consistent messaging has reinforced market expectations, with traders pricing in a higher likelihood of policy tightening.

    Swiss Franc ranks second best, benefiting from decline in European benchmark yields. Dollar is the third-best performer, continuing to consolidate against its peers. The greenback’s movements were unaffected by slightly worse-than-expected US jobless claims and retail sales data.

    On the downside, New Zealand Dollar has overtaken Sterling as the weakest currency of the day. Pound remains under pressure following disappointing GDP data but has not faced aggressive selling. Meanwhile, Australian Dollar is the third weakest, while Euro and Canadian Dollar trade in mixed fashion.

    Technically, Gold’s rally this week suggests that choppy rebound from 2536.67 is actually still in progress. Further rise is now in favor through 2725.95 resistance in the near term. However, this rise is seen as the second leg of the corrective pattern from 2789.92. Hence, upside should be below this high. Break of 55 D EMA (now at 2643.87) will argue that the third leg has started to 2536.67 support and below.

    US initial jobless claims falls to 217k vs exp 210k

    US initial jobless claims rose 14k to 217k in the week ending January 11, above expectation of 210k. Four-week moving average of initial claims fell -750 to 213k.

    Continuing claims fell -18k to 1859k in the week ending January 4. Four-week moving average of continuing claims fell -1k to 1867k.

    US retail sales rise 0.4% mom in Dec, ex-auto sales up 0.4% mom

    US retail sales rose 0.4% mom to USD 729.2B in December, below expectation of 0.5% mom. Ex-auto sales rose 0.4% mom to USD 586.3B, below expectation of 0.5% mom. Ex-gasoline sales rose 0.4% mom to USD 676.8B. Ex-auto & gasoline sales rose 0.4% mom to USD 533.9B.

    Total sales for the October through December period were up 3.7% from the same period a year ago.

    ECB Minutes: Gradual easing essential to monitor disinflation check points

    ECB’s December 11–12 meeting minutes noted that while the 25 bps rate cut decided at the meeting was widely supported, some members argued for a more aggressive 50 bps reduction.

    Some policymakers contended that a larger rate cut would have better addressed Eurozone’s weakening economic projections, with one noting that “successive projection exercises have shown increasing downside risks to growth.”

    However, the majority concurred that a smaller, measured cut aligned with the “controlled pace of easing” and provided a “sense of the direction” of the path of interest rates.

    The minutes emphasize while projections were conditional on a further rate cut in January, the meeting underscored that “data dependency precluded any foregone conclusions.”

    The minutes also stated that the “measured pace of interest rate cuts” was essential to ensure that ECB could “pass critical checkpoints to verify disinflation remains on track.” Furthermore, it was highlighted that optionality must be preserved to address risks that could derail inflation stabilization, including geopolitical tensions, global trade disruptions, and energy price volatility.

    Nevertheless, “if the baseline projection for inflation is confirmed over the next few months and quarters,” the minutes noted, a “gradual dialing back of policy restrictiveness” would be appropriate.

    Eurozone goods exports fall -1.6% yoy in Nov, imports down -1.0% yoy

    Eurozone goods exports fell -1.6% yoy to EUR 248.3B in November. Good imports fell -1.0% yoy to EUR 231.9B. Trade balanced showed a EUR 16.4B surplus. Intra-Eurozone trade fell -7.0% yoy to EUR 214.8B.

    In seasonally adjusted term, goods exports rose 3.2% mom to EUR 240.6B.Goods imports rose 0.7% mom to EUR 227.8B. Trade balance widened from October’s EUR 7.0B to EUR 12.9B, larger than expectation of EUR 7.2B. Intra-Eurozone trade fell -1.7% mom to EUR 210.4B.

    UK GDP grows only 0.1% mom in Nov, with mixed sector performance

    UK’s economy posted modest growth in November, with GDP increasing by 0.1% mom, but slightly missing market expectations of 0.2%. Nevertheless, this marked a positive turnaround from the -0.1% mom contraction in October.

    Sectoral performance was mixed, with services, the largest contributor to the economy, inching up by 0.1% mom, while production fell by -0.4% mom. Construction activity, however, provided a brighter spot, rising 0.4% mom during the month.

    Despite November’s modest gains, the broader economic picture remains subdued. Over the three months to November 2024, real GDP showed no growth compared to the three months to August. Services, which account for a significant portion of the UK’s output, stagnated over this period. Production output contracted by -0.7%, offsetting the 0.2% growth seen in construction.

    BoJ’s Ueda reiterates rate hike debate for next week’s policy meeting

    BoJ Governor Kazuo Ueda indicated today, for the second time this week, that the central bank will “debate whether to raise interest rates” at its upcoming January 23-24 policy meeting. This marks the second time in this week that Ueda has emphasized

    Ueda’s comments come as BoJ prepares its new quarterly economic report, which will serve as the basis for its policy decision. While the Governor has not committed to a specific outcome, the repeated message signals that a rate hike is a plausible scenario, barring any significant market shocks tied to the January 20 inauguration of U.S. President-elect Donald Trump.

    Market sentiment, nevertheless, remains divided on the timing of the anticipated hike. A recent poll conducted between January 8-15 shows that 59 out of 61 economists expect BoJ to raise rates to 0.50% by the end of March. Yet, only 20 foresee the move occurring at this month’s meeting.

    Japan’s PPI holds steady at 3.8% as import prices turn positive

    Japan’s PPI held steady at 3.8% yoy in December, meeting market expectations and maintaining the previous month’s pace. Key drivers included a sharp 31.8% yoy rise in agricultural goods prices, fueled by soaring rice costs.

    Energy costs also contributed significantly, with electric power, gas, and water prices climbing 12.9% year-on-year. This uptick comes as the government phases out subsidies designed to mitigate rising utility and gasoline prices.

    Yen-based import prices turned positive, rising 1.0% yoy after three months of declines. While modest, this reversal underscores the lingering effects of Yen depreciation, which was recorded at -0.1% mom.

    Australia’s employment grows 56.3k in Dec, showing continuous resilience

    Australia’s labor market displayed resilience in December as employment surged by 56.3k, significantly exceeding expectations of a 15.0k increase. Number of unemployed people also rose by 10.3k, contributing to a slight uptick in the unemployment rate from 3.9% to 4.0%, in line with forecasts.

    Participation rate climbed to a record high of 67.1%, up from 67.0%, reflecting an expanding labor force. Additionally, employment-to-population ratio rose by 0.1 percentage point to a new peak of 64.5%, showcasing the labor market’s capacity to absorb more workers. Monthly hours worked increased by 0.5% mom, equivalent to 10 million additional hours.

    This data supports the view that the labor market’s earlier signs of easing have stabilized in the second half of 2024. Robust employment growth, consistent levels of average hours worked, and unchanged or lower levels of labor underutilization compared to a year ago affirm the ongoing strength of the job market.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0248; (P) 1.0302; (R1) 1.0344; More…

    EUR/USD is still engaged in consolidations above 1.0176 and intraday bias stays neutral. With 1.0435 resistance intact, outlook remains bearish and further decline is expected. On the downside, break of 1.0176 will resume the fall from 1.1213 and target 61.8% projection of 1.1213 to 1.0330 from 1.0629 at 1.0083. However, considering bullish convergence condition in 4H MACD, firm break of 1.0435 will confirm short term bottoming, and turn bias back to the upside for stronger rebound.

    In the bigger picture, fall from 1.1274 (2023 high) should either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. In both cases, sustained break of 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will pave the way back to 0.9534. For now, outlook will stay bearish as long as 1.0629 resistance holds, even in case of strong rebound.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY PPI Y/Y Dec 3.80% 3.80% 3.70% 3.80%
    00:00 AUD Consumer Inflation Expectations Jan 4.00% 4.20%
    00:01 GBP RICS Housing Price Balance Dec 28% 28% 25%
    00:30 AUD Employment Change Dec 56.3K 15.0K 35.6K 28.2K
    00:30 AUD Unemployment Rate Dec 4.00% 4.00% 3.90%
    07:00 EUR Germany CPI M/M Dec F 0.50% 0.40% 0.40%
    07:00 EUR Germany CPI Y/Y Dec F 2.60% 2.60% 2.60%
    07:00 GBP GDP M/M Nov 0.10% 0.20% -0.10%
    07:00 GBP Industrial Production M/M Nov -0.40% 0.10% -0.60%
    07:00 GBP Industrial Production Y/Y Nov -1.80% -1.00% -0.70%
    07:00 GBP Manufacturing Production M/M Nov -0.30% 0.20% -0.60%
    07:00 GBP Manufacturing Production Y/Y Nov -1.20% -0.30% 0.00%
    07:00 GBP Goods Trade Balance (GBP) Nov -19.3B -18.0B -19.0B -19.3B
    10:00 EUR Eurozone Trade Balance (EUR) Nov 12.9B 7.2B 6.1B 7.0B
    12:30 EUR ECB Meeting Accounts
    13:15 CAD Housing Starts Y/Y Dec 231K 250K 262K 267K
    13:30 USD Initial Jobless Claims (Jan 10) 217K 210K 201K 203K
    13:30 USD Retail Sales M/M Dec 0.40% 0.50% 0.70% 0.80%
    13:30 USD Retail Sales ex Autos M/M Dec 0.40% 0.50% 0.20%
    13:30 USD Import Price Index M/M Dec 0.10% -0.10% 0.10%
    13:30 USD Philadelphia Fed Manufacturing Jan 44.3 -8.5 -16.4
    15:00 USD NAHB Housing Market Index Jan 47 46
    15:00 USD Business Inventories Nov 0.10% 0.10%
    15:30 USD Natural Gas Storage -260B -40B

     



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