Tag: Yields

  • Fragile Trade Progress and CPI Ahead Keep Risk Appetite in Check

    Fragile Trade Progress and CPI Ahead Keep Risk Appetite in Check


    Asian equities edged modestly higher on Wednesday, lifted by the announcement that US and Chinese officials reached a “framework” to implement the Geneva trade consensus and advance commitments made in the latest Trump-Xi phone call. While officials from both sides struck an optimistic tone, the agreement remains preliminary, lacking substantive details on thornier issues.

    US Commerce Secretary Howard Lutnick confirmed that the deal would still require presidential approval on both sides before moving forward. One of the key elements of the framework involves China’s rare-earth exports, a pivotal issue as the US seeks to stabilize supply chains. Lutnick said the US expects export restrictions to be eased, with reciprocal rollback of recent US technology export bans to China.

    However, the broader market reaction was muted. The US Court of Appeals allowed Trump’s contested tariffs to remain in place pending further legal review, undermining hopes of swift tariff rollback. The ruling enables the continued enforcement of “Liberation Day” tariffs, which apply to imports from major partners. This legal backdrop, coupled with still-fragile diplomatic progress, reinforces the market’s caution.

    In the currency markets, the overall tone is mixed, with Swiss Franc and Dollar leading as the day’s strongest performers so far, followed by Loonie. On the other end, risk-sensitive currencies Kiwi and Aussie are softer, alongside Sterling. Euro and Yen are positioning in the middle of the pack. Despite modest equity gains, this is far from a full-fledged risk-on environment.

    Attention now shifts to two major US events: US CPI report and 10-year Treasury note auction. The inflation data will serve as a critical barometer for how much of the tariff impact is bleeding into consumer prices. Simultaneously, the Treasury auction will test investor appetite for government debt amid lingering concerns over deficits, erratic trade policies, and rising issuance needs.

    In Asia, at the time of writing, Nikkei is up 0.50%. Hong Kong HSI is up 0.92%. China Shanghai SSE is up 0.55%. Singapore Strait Times is down -0.51%. Japan 10-year JGB yield is down -0.017 at 1.463. Overnight, DOW rose 0.25%. S&P 500 rose 0.55%. NASDAQ rose 0.63%. 10-year yield fell -0.008 to 4.474.

    Inflation data and treasury auction pose twin tests for US Bond Market

    Two major events in the US are closely watched today. The May CPI report and the USD 39B 10-year Treasury auction converge to test sentiment in the bond market.

    The May CPI will offer the clearest signal yet of whether tariffs are beginning to filter through to consumer prices. Economists expect a 0.2% mom gain, with annual headline inflation accelerating to 2.5%. Core CPI, is projected to rise 0.3% mom and accelerate to 2.9% yoy.

    While today’s CPI reading will provide an initial glimpse, the real acceleration in prices may come in June as tariffs ripple through supply chains. The unpredictability of Trump’s trade strategy, frequent shifts between escalation and truce, could delay the impact but increasing its persistence. Fed’s challenge is not only identifying if inflation is returning, but determining whether it’s sticky enough to warrant policy action beyond holding rates steady.

    Meanwhile, the 10-year Treasury auction will act as a referendum on fiscal credibility. With swelling deficits, an uncertain trade outlook, and ballooning spending commitments—including the administration’s touted “big, beautiful” infrastructure and defense budgets—investors will be watching bid-to-cover ratios and indirect bidder participation for signs of strain. A weak auction could rekindle fears of waning demand for US debt, driving yields higher and possibly stoking volatility across asset classes.

    Technically, the 10-year yield has remained within a broad range since peaking at 4.997 in 2023. While it spiked to 4.629% in May following Moody’s downgrade of the US credit rating, the move was limited and quickly retraced. As long as the 4.809 resistance level caps upside attempts, the bond market appears relatively calm—though not immune to future shocks.

    Japan’s CGPI cools to 3.2% in May, but food inflation continue to rise

    Japan’s corporate goods price index slowed more than expected in May, easing from 4.1% to 3.2% yoy, versus the anticipated 3.5% yoy. The decline reflects the broader disinflationary trend in upstream prices, aided by the recent rebound in Yen. Yen-based import price index plunged -10.3% yoy, a sharper drop than April’s -7.3% yoy.

    Falling raw material costs were evident across sectors, with steel prices down -4.8% yoy, chemicals -3.1% yoy, and non-ferrous metals -2.1% yoy

    However, consumer-related categories showed more persistence in inflation. Prices of food and beverages accelerated to 4.2% yoy from April’s 4.0% yoy, suggesting that inflationary stickiness in essential goods remains a challenge despite broader producer-side cooling.

    USD/CAD Daily Outlook

    Daily Pivots: (S1) 1.3650; (P) 1.3689; (R1) 1.3711; More…

    Intraday bias in USD/CAD remains neutral at this point. Considering bullish convergence condition in 4H MACD, firm break of 1.3741 will indicate short term bottoming at 1.3633. Intraday bias will turn back to the upside for stronger rebound to 1.4014 resistance, as a correction to fall from 1.4791. Nevertheless, decisive break of 61.8% projection of 1.4414 to 1.3749 from 1.4014 at 1.3603 will pave the way to 100% projection at 1.3349.

    In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 resistance holds. Firm break of 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727 will pave the way back to 61.8% retracement at 1.3069.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY PPI Y/Y May 3.20% 3.50% 4.00% 4.10%
    12:30 CAD Building Permits M/M Apr 0.30% -4.10%
    12:30 USD CPI M/M May 0.20% 0.20%
    12:30 USD CPI Y/Y May 2.50% 2.30%
    12:30 USD CPI Core M/M May 0.30% 0.20%
    12:30 USD CPI Core Y/Y May 2.90% 2.80%
    14:30 USD Crude Oil Inventories -2.4M -4.3M

     



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  • Yen Crushed as Super-Long JGB Yields Plunge on Supply Cut Speculation

    Yen Crushed as Super-Long JGB Yields Plunge on Supply Cut Speculation


    Yen is under intense selling pressure today, dragged down by a sharp plunge in super-long JGB yields. The 30-year yield closed at 2.836%, down significantly from 3.165% just days ago. This abrupt move followed a Reuters report suggesting that the Ministry of Finance may reduce super-long bond issuance as part of a potential tweak to its bond program. Discussions with market participants are expected to conclude by mid- to late-June, after which the MOF will formalize its decision.

    The reported consideration comes in response to a surge in super-long yields to multi-decade highs, which had mirrored global trends, particularly a selloff in US long bonds. A reduction in supply could help stabilize Japan’s long-end, which has come under additional pressure amid political calls for fiscal stimulus ahead of July’s upper house elections. Prime Minister Shigeru Ishiba faces growing demands for tax cuts and expansive spending measures, both of which could further exacerbate Japan’s already heavy debt load and add pressure on government financing costs.

    This bond market adjustment has compounded Yen weakness, particularly as global risk appetite revives. European equities are rallying, with DAX hitting a fresh record high, and US equity futures are pointing higher as well. This upswing in sentiment is fueling a rebound in Dollar, while Euro and Sterling are also firming against most peers. In contrast, the Swiss franc is underperforming, second only to Yen on the downside today. However, commodity currencies like Aussie, Kiwi and Loonie are showing muted reactions, failing to capitalize on the improved mood.

    Technically, one focus now is whether EUR/CHF’s rebound from 0.9291 could extend through 0.9419 resistance. In this case, that would signal resumption of rise from 0.9218. Next near term target will be 100% projection of 0.9218 to 0.9445 from 0.9291 at 0.9518.

    In Europe, at the time of writing, FTSE is up 0.72%. DAX is up 0.70%. CAC is up 0.09%. UK 10-year yield is down -0.005 at 4.678. Germany 10-year yield is down -0.018 at 2.544. Earlier in Asia, Nikkei rose 0.51%. Hong Kong HSI rose 0.43%. China Shanghai SSE fell -0.18%. Singapore Strait Times rose 0.53%. Japan 10-year JGB yield fell -0.03 to 1.466.

    US durable goods orders fall -6.3% mom, but core shows resilience

    US durable goods orders fell sharply by -6.3% mom in April to USD 296.3B, driven primarily by a steep -17.1% mom drop in transportation equipment. The headline decline, while severe, was less than the expected -8.0%.

    Orders excluding defense also posted a significant decline of -7.5% mom to USD 279.3B.

    However, the underlying picture was somewhat more stable. Orders excluding the often-volatile transportation component rose by 0.2% mom to USD 197.5B, beating expectations of a flat reading.

    This suggests that while large-ticket and defense-related items dragged the headline figure lower, private sector investment in capital goods is holding up better than feared.

    Fed’s Kashkari leans cautious on tariff shock, favors holding rates to anchor inflation expectations

    Speaking at the IMES conference in Japan, Minneapolis Fed President Neel Kashkari addressed the growing internal debate within Fed over how to respond to the inflationary effects of new US tariffs.

    He noted that some policymakers advocate “looking through” these price shocks, viewing them as “transitory”, akin to a one-time upward shift in the price level rather than persistent inflation. That approach would favor cutting interest rates to support economic activity during the adjustment period.

    However, Kashkari expressed skepticism toward this lenient view. He emphasized that trade negotiations are “unlikely to be resolved quickly”., warning of a prolonged period of elevated uncertainty and the risk of retaliatory measures.

    Tariffs on intermediate goods could lead to delayed but persistent inflationary pressure as cost increases pass through to final goods over time.

    Given these risks, Kashkari said he finds the case for holding rates steady more persuasive, especially in light of the need on “defending long-run inflation expectations”.

    While current policy is likely “only modestly restrictive”, he argued that caution is warranted until the full effects of tariffs become clearer.

    ECB’s Holzmann: Should pause rate cut until at least September

    Austrian ECB Governing Council member Robert Holzmann cautioned against further rate cuts in the near term, citing heightened uncertainty from the US-EU trade conflict and a belief that monetary policy is no longer the main drag on economic activity.

    Arguing that “moving further south would be more risky than staying where we are,” Holzmann said there is no justification for easing in June or July and suggested waiting until at least September before reassessing the need for further action.

    Holzmann also pointed to a notable rise in estimates of the neutral interest rate since early 2022, stating that ECB’s current policy stance is already “at least at the neutral level.”

    In his view, lower rates would provide little economic benefit, as lingering uncertainty, not borrowing costs, is the key factor suppressing growth.

    ECB’s Villeroy and Simuks Signal June rate cut

    Comments from ECB Governing Council members today reinforced expectations for a rate cut in June, as inflation continues to moderate across the Eurozone.

    French central bank chief François Villeroy de Galhau noted that policy normalization is “probably not complete,” and hinted that the upcoming ECB meeting is likely to deliver further action. He pointed to France’s May inflation reading of just 0.6% as a “very encouraging sign of disinflation in action”

    Separately, Lithuania’s Gediminas Šimkus struck a dovish tone, stating that the balance of inflation risks has shifted to the downside, citing trade frictions with the US and a stronger Euro as deflationary forces. He added that current borrowing costs sit at the upper bound of the neutral range, leaving room for more rate reductions.

    German Gfk consumer sentiment edges higher to -19.9, mood remains extremely low

    Germany’s GfK Consumer Sentiment rose for the third straight month, reaching -19.9 in June, its highest reading since November 2024, but slightly below expectations of -19.7. In May, income expectations surged 6.1 pts to 10.4, the best since October last year. Economic expectations climbed 2.9 pts to 13.1, their highest since April 2023.

    According to Rolf Bürkl of the NIM, the mood remains “extremely low,” with uncertainty still elevated due to global trade tensions, stock market volatility, and persistent fears of another year of economic “stagnation”. These concerns are encouraging households to prioritize saving over spending.

    BoJ’s Ueda highlights persistent food inflation and trade uncertainty

    In his remarks at the BoJ-IMES Conference, BoJ Governor Kazuo Ueda highlighted a fresh wave of price pressures, particularly from food, has emerged in Japan recently. Rice prices nearly doubling year-on-year and broader non-fresh food categories climbing 7%.

    While BoJ expects the latest food-driven inflation spike to be transitory, Ueda acknowledged that underlying inflation now hovers closer to the 2% mark than in previous years, warranting heightened vigilance.

    BoJ retains its baseline scenario that underlying inflation will gradually return to the 2% target over time. However, given the evolving backdrop of supply-driven shocks and heightened global uncertainty, Ueda reiterated that any adjustment in the degree of monetary easing will hinge on incoming data.

    “Considering the extremely high uncertainties, it is important for us to judge whether the outlook will be realized, without any preconceptions,” Ueda emphasized.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 142.35; (P) 142.72; (R1) 143.20; More…

    USD/JPY recovered notably today but stays below 144.31 minor resistance. Intraday bias remains neutral first. On the upside, firm break of 144.31 will argue that fall from 148.64 has completed as a corrective pullback. Intraday bias will be turned back to the upside for 148.64 resistance next. Nevertheless, rejection by 144.31 will keep risks on the downside. Below 142.10 will target a retest on low.

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

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:01 GBP BRC Shop Price Index Y/Y May -0.10% 0.00% -0.10%
    23:50 JPY Corporate Service Price Index Y/Y Apr 3.10% 3.00% 3.10% 3.30%
    06:00 CHF Trade Balance (CHF) Apr 6.36B 5.55B 6.35B 6.29B
    06:00 EUR Germany GfK Consumer Sentiment Jun -19.9 -19.7 -20.6 -20.8
    09:00 EUR Eurozone Economic Sentiment May 94.8 94 93.6
    09:00 EUR Eurozone Industrial Confidence May -10.3 -11 -11.2 -11
    09:00 EUR Eurozone Services Sentiment May 1.5 1.4
    09:00 EUR Eurozone Consumer Confidence May F -15.2 -15.2 -15.2
    12:30 USD Durable Goods Orders Apr -6.30% -8.00% 7.50%
    12:30 USD Durable Goods Orders ex Transport Apr 0.20% 0.00% -0.40%
    13:00 USD S&P/CS Composite-20 HPI Y/Y Mar 4.50% 4.50%
    13:00 USD Housing Price Index M/M Mar 0.20% 0.10%
    14:00 USD Consumer Confidence May 87.1 86

     



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  • US Deficit Jitters Roil Markets as Yields Surge, Dollar Sinks, Bitcoin Hits Record

    US Deficit Jitters Roil Markets as Yields Surge, Dollar Sinks, Bitcoin Hits Record


    The dominant driver in global markets at the moment is rising concern over the US fiscal deficit. 30-year yield surged toward 5.1% overnight, its highest level since October 2023. 10-year yield also breached the 4.6% mark for the first time in months. Equity markets responded accordingly, with major US indexes closing sharply lower. Gold has broken above 3330, supported additionally by geopolitical uncertainty. Bitcoin hit a new all-time high. Both reflected risk-hedging demand and a search for alternatives.

    In the currency markets, Dollar is suffering, now the worst performer among majors for the week. Meanwhile, commodity currencies like Aussie, Kiwi, and Loonie are struggling near the bottom of the FX board, a reflection of broader risk aversion. Yen leads the pack, joined by Swiss Franc and Euro, as investors seek safety outside the US. Sterling is trading in the middle.

    This spike in long-dated yields has sent a clear signal: investors are becoming increasingly uneasy about the US’s worsening debt profile and its implications for long-term stability. A poorly received 20-year bond auction only amplified these fears, fueling speculation that appetite for US debt is waning just as supply pressures are set to increase.

    On the trade front, tensions remain high. Japan’s Finance Minister Katsunobu Kato labeled recent US tariffs as “regrettable” and reiterated Tokyo’s position that no trade deal would be worthwhile unless automobile duties are scrapped. At the G7 meeting in Banff, Kato and US Treasury Secretary Scott Bessent agreed that the dollar-yen exchange rate should reflect market fundamentals. However, the lack of concrete progress raises doubts over any near-term breakthrough in US-Japan trade talks.

    Technically, US 10-year yield’s break of 4.592 resistance confirms resumption of whole rally from 3.886. Near term outlook will stay bullish as long as 4.388 support holds. Further rally should be seen to 100% projection of 3.886 to 4.592 from 4.124 at 4.830. Further selloff in US treasuries could keep US stocks and Dollar pressured.

    In Asia, at the time of writing, Nikkei is down -0.94%. Hong Kong HSI is down -1.05%. China Shanghai SSE is down -0.13%. Singapore Strait Times is down -0.42%. Japan 10-year JGB yield is up 0.031 at 1.552. Overnight, DOW fell -1.91%. S&P 500 fell -1.61%. NASDAQ fell -1.41%. 10-year yield rose 0.115 to 4.596.

    Looking ahead, Eurozone PMI flash, Germany Ifo business climate, and UK PMI flash will be the main focus in European session. ECB will also release monetary policy meeting accounts. Later in the day, US jobless claims and PMI flash will be the main feature.

    BoJ’s Noguchi: Must tread carefully with step-by-step policy normalization

    BoJ board member Asahi Noguchi emphasized the importance of a “measured, step-by-step” pace in raising interest rates, stressing the need to carefully assess the economic impact of each hike before proceeding further.

    Noguchi also addressed the upcoming interim review of BoJ’s bond tapering strategy, indicating that he sees no need for any major adjustments to the current plan, which runs through March 2026.

    He noted that the central bank should approach its long-term reduction in the balance sheet with flexibility, taking the time needed to ensure stability while maintaining the capacity to respond to “sudden market swings”.

    Any emergency increase in bond purchases, he noted, would be strictly conditional and “only be implemented during times of severe market disruption.”

    Japan’s PMI composite falls to 49.8, private sector contracts again

    Japan’s private sector activity fell back into contraction in May, with PMI Composite declining from 51.2 to 49.8. Manufacturing output edged higher from 48.7 to 49.0, but remained below the neutral 50 mark. The services sector, however, lost more momentum, with its PMI falling from 52.4 to 50.8.

    The decline in composite output reflects weakening domestic and external demand, as new business volumes fell for the first time in nearly a year.

    S&P Global’s Annabel Fiddes noted that elevated uncertainty around trade policy and foreign demand weighed heavily on business confidence, which sank to its second-lowest level since the pandemic’s onset.

    Australia’s PMI Composite slips to 50.6; firms cite election drag on demand

    Australia’s private sector showed signs of slowing in May, with PMI Composite falling from 51.0 to a 3-month low of 50.6. Manufacturing index held steady at 51.7. But services weakened from 51.0 to 50.5, its lowest level in six months.

    According to S&P Global’s Andrew Harker, the sluggishness may be tied in part to election-related uncertainty, which “contributed to slower growth of new orders”. Still, firms remained cautiously optimistic, continuing to hire at a “solid pace”. With the political noise expected to ease, attention will turn to whether demand picks up in the months ahead.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.1286; (P) 1.1324; (R1) 1.1369; More…

    EUR/USD’s rally from 1.1064 is in progress and intraday bias stays on the upside. Correction from 1.1572 could have completed at 1.1064 already. Further rise should be seen to retest 1.1572 high first. Firm break there will resume larger up trend. Next near term target will be 61.8% projection of 1.0176 to 1.1572 from 1.1064 at 1.1927. On the downside, break of 1.1217 minor support will delay the bullish case and turn intraday bias neutral again.

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0818) holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:00 AUD Manufacturing PMI May P 51.7 51.7
    23:00 AUD Services PMI May P 50.5 51
    23:50 JPY Machinery Orders M/M Mar 13.00% -1.60% 4.30%
    00:30 JPY Manufacturing PMI May P 49 49 48.7
    00:30 JPY Services PMI May P 50.8 52.4
    06:00 GBP Public Sector Net Borrowing (GBP) Apr 17.7B 16.4B
    07:15 EUR France Manufacturing PMI May P 48.9 48.7
    07:15 EUR France Services PMI May P 47.7 47.3
    07:30 EUR Germany Manufacturing PMI May P 49 48.4
    07:30 EUR Germany Services PMI May P 49.5 49
    08:00 EUR Eurozone Manufacturing PMI May P 49.4 49
    08:00 EUR Eurozone Services PMI May P 50.4 50.1
    08:00 EUR Germany IFO Expectations May 88.3 87.4
    08:00 EUR Germany IFO Current Assessment May 87 86.4
    08:00 EUR Germany IFO Business Climate May 87.7 86.9
    08:30 GBP Manufacturing PMI May P 46.2 45.4
    08:30 GBP Services PMI May P 50 49
    11:30 EUR ECB Meeting Accounts
    12:30 CAD Industrial Product Price M/M Apr -0.50% 0.50%
    12:30 CAD Raw Material Price Index Apr -2.20% -1%
    12:30 USD Initial Jobless Claims (May 16) 230K 229K
    13:45 USD Manufacturing PMI May P 50.2
    13:45 USD Services PMI May P 50.8
    14:00 USD Existing Home Sales Apr 4.10M 4.02M
    14:30 USD Natural Gas Storage 118B 110B

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

    Moody’s Downgrade Casts Shadow Over Dollar and Treasuries

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

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

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

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

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

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

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

    EUR/USD Weekly Outlook

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

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0818) holds.

    In the long term picture, the case of long term bullish reversal is building up. Sustained break of falling channel resistance (now at around 1.1300) will argue that the down trend from 1.6039 (2008 high) has completed at 0.9534. A medium term up trend should then follow even as a corrective move. Next target is 38.2% retracement of 1.6039 to 0.9534 at 1.2019.



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  • Dollar Rally Stalls, Market Cools, Trade Optimism Tempered by Reality

    Dollar Rally Stalls, Market Cools, Trade Optimism Tempered by Reality


    Global markets showed signs of fatigue overnight as trade optimism gave way to a more cautious tone. In the US, the S&P 500 eked out another gain, turning positive for the year, while DOW lagged and closed modestly lower. The divergence reflects a market still digesting the implications of recent trade developments. In Asia, stock markets also lacked direction, with investors reluctant to chase risk without clearer signs of progress on the trade front.

    Despite the positive headlines, investors are coming to terms with the reality that any new trade deal with China is unlikely to resemble a full rollback to pre-conflict conditions. Even if an agreement is reached, it will likely involve layered provisions and protracted enforcement timelines, making the short-term benefits less impactful. Meanwhile, trade discussions with the EU remain stalled, and Brussels is preparing countermeasures should negotiations not advance in the near future. The fragmented state of trade diplomacy is leaving markets in a holding pattern, particularly as geopolitical and political uncertainties remain elevated.

    That said, there is cautious hope that more preliminary deals could emerge soon. Market chatter suggests Switzerland, India, and Japan might be next in line for early-stage agreements. Though, like the recent UK deal, these are likely to be agreements in principle rather than fully ratified pacts, requiring extended negotiations before they take effect.

    Adding to the anticipation, US National Economic Council Director Kevin Hassett said President Donald Trump is expected to announce a new trade deal upon returning from his Middle East trip. According to Hassett, around 25 negotiations are currently underway, with at least one nearing final confirmation.

    Dollar’s rally also lost much momentum, despite extended rise in 10-year yield. Technically, Dollar’s bounce earlier in the week look more like part of a corrective rise, then a genuine bullish reversal. As for 10-year yield, rise from 3.886 might be ready to resume with corrective pullback from 4.592 completed at 4.124. Further rally is now in favor to retest 4.592 first. Firm break there will confirm this bullish case and target 100% projection of 3.86 to 4.592 from 4.124 at 4.830.

    As for currency performance this week, Aussie is now leading the pack, followed by Kiwi, and then Loonie. Yen remains the weakest, trailed by Swiss Franc and Euro. Dollar and British Pound are trading in the middle of the pack.

    In Asia, at the time of writing, Nikkei is down -0.33%. Hong Kong HSI is up 1.42%. China Shanghai SSE is up 0.35%. Singapore Strait Times is down -0.22%. Japan 10-year JGB yield is up 0.008 at 1.457.

    Overnight, DOW fell -0.64%. S&P 500 rose 0.72%. NASDAQ rose 1.61%. 10-year yield jumped 0.042 to 4.499.

    Japan’s PPI rises 4% yoy in April, record high for 8th straight month

    Japan’s PPI rose 4.0% year-on-year in April, easing slightly from 4.3% yoy in March and matching market expectations. Despite the modest slowdown, the index climbed to a fresh record high of 126.3, marking the eighth consecutive month of new highs, highlighting persistent cost pressures at the wholesale level.

    However, the data also showed little immediate impact from the sweeping US tariffs announced in early April, thanks in part to the 90-day suspension.

    Japan’s Yen-based import price index fell sharply by -7.2% yoy in April, following a -2.4% yoy decline in March. The drop suggests that Yen’s appreciation during the market turmoil have helped shield Japanese importers from some of the price shocks, at least for now.

    Australian wage growth accelerates to 3.4% yoy in Q1, led by public sector

    Australia’s Wage Price Index rose by 0.9% qoq in Q1, slightly above market expectations of 0.8% qoq. Public sector saw a stronger 1.0% qoq gain, outpacing the 0.9% qoq rise in private sector.

    On an annual basis, wages grew by 3.4%, up from 3.2% in the previous quarter, marking the first uptick in annual wage growth since mid-2024.

    The uptick in annual wage growth was driven primarily by the public sector, which saw a notable increase to 3.6% yoy from 2.9% yoy in Q4. Private sector wage growth was steady at 3.3% yoy.

    AUD/USD Daily Report

    Daily Pivots: (S1) 0.6395; (P) 0.6437; (R1) 0.6513; More…

    AUD/USD is staying in range below 0.6511 and intraday bias remains neutral. On the upside, firm break of 0.6511 will resume the rally from 0.5913 to 61.8% retracement of 0.6941 to 0.5913 at 0.6548. However, break of 0.6356 support should confirm short term topping. Intraday bias will be turned back to the downside for 38.2% retracement of 0.5913 to 0.6511 at 0.6283.

    In the bigger picture, as long as 55 W EMA (now at 0.6441) holds, down trend from 0.8006 (2021 high) should resume later to 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. However, sustained trading above 55 W EMA will argue that a medium term bottom was already formed, and set up further rebound to 0.6941 resistance instead.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:50 JPY PPI Y/Y Apr 4.00% 4.00% 4.20% 4.30%
    01:30 AUD Wage Price Index Q/Q Q1 0.90% 0.80% 0.70%
    06:00 EUR Germany CPI M/M Apr F 0.40% 0.40%
    06:00 EUR Germany CPI Y/Y Apr F 2.10% 2.10%
    12:30 CAD Building Permits M/M Mar 1.00% 2.90%
    14:30 USD Crude Oil Inventories -2.0M -2.0M

     



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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    EUR/USD Weekly Outlook

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

    In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0776) holds.

    In the long term picture, the case of long term bullish reversal is building up. Sustained break of falling channel resistance (now at around 1.1300) will argue that the down trend from 1.6039 (2008 high) has completed at 0.9534. A medium term up trend should then follow even as a corrective move. Next target is 38.2% retracement of 1.6039 to 0.9534 at 1.2019.



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  • A Whirlwind Week Leaves US Assets Reeling Amid Tariff Turmoil

    A Whirlwind Week Leaves US Assets Reeling Amid Tariff Turmoil


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Stock Rebound Preserves Uptrend, But Recession Could Break the Spell

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

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

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

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

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

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

    Dollar Index Cracks 100 Psychological Level, Heading to 95?

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

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

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

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

    USD/CAD Weekly Outlook

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

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

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



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  • Safe Havens Surge, Treasury Rout Deepens, US Assets Hit by Relentless Selloff

    Safe Havens Surge, Treasury Rout Deepens, US Assets Hit by Relentless Selloff


    The brief moment of optimism following the US tariff truce has quickly faded, as financial markets buckle again under renewed pressure. US stocks closed sharply lower overnight, wiping out a large portion of Wednesday’s historic rebound. The risk-off tone spilled into Asia, though unevenly—Japan saw steep losses, Singapore posted moderate declines, while Hong Kong and China held relatively steady. Overall, the ongoing huge volatility suggests that global markets are far from stabilizing.

    The trade war narrative has shifted into a far more dangerous phase. The US confirmed that tariffs on Chinese imports were immediately raised to 125% after China responded with an 84% rate of its own. That brings total US duties on Chinese goods to a staggering 145%. At these levels, the tariff figures themselves become much less relevant. The policy is signaling a structural decoupling of the world’s two largest economies.

    Yet, the most alarming development is unfolding in the US Treasury market as 10-year yield surged past 4.45% mark again in Asian trading. This sharp reversal from the temporary calm after the US paused some reciprocal tariffs for 90 days is stoking fears of deeper structural issues in bond markets. This trouble in Treasuries has drawn comparisons to the 2020 “dash-for-cash” and the 2022 UK gilt crisis.

    In the currency markets, the flight to safety is clear, just not into Dollar. Swiss Franc surged to its highest level against the greenback since 2015, while Euro and Yen also strengthened markedly. Altogether, markets appear to be undergoing a synchronized flush-out of US assets, with investors dumping stocks, Dollar, and even Treasuries.

    Technically, Gold defied gravity again and surged to new record high above 3200 market. For now, further rise is expected as long as 3103.02 support holds, or in short 3100 mark. Next target is 161.8% projection of 2293.45 to 2789.92 from 2584.24 at 3387.52.

    In Asia, at the time of writing, Nikkei is down -4.36%. Hong Kong HSI is up 0.76%. China Shanghai SSE is up 0.32%. Singapore Strait Times is down 1.94%. Japan 10-year JGB yield is up 0.024 at 4.46. Overnight, DOW fell -2.50%. S&P 500 fell -3.46%. NASDAQ fell -4.31%. 10-year yield fell -0.006 to 4.394.

    Fed’s Goolsbee: No playbook for tariff shock, rate path uncertain but likely lower

    Speaking overnight, Chicago Fed President Austan Goolsbee said that nothing is “off the table”, including rate hikes, cuts, or holds. The sheer scale of recent trade developments creates a stagflationary shock, and there is “not a generic playbook” for how a central bank should respond to.

    Also, Goolsbee noted a key challenge: the data being released now may not yet fully reflect the evolving reality on the ground. That’s why he believes Fed must closely monitor both hard data and soft indicators, especially as lag effects complicate interpretation.

    Despite the tariff-related uncertainty, Goolsbee still sees rates trending lower over the next one to two years. Nevertheless, he stressed that should long-run inflation expectations begin to drift, “any central bank almost has to address that… regardless of what the other conditions are.”

    Fed’s Collins: Tariff-driven price pressures may delay further policy normalization

    Boston Fed President Susan Collins said in a speech overnight that keep interest rate at current level is “appropriate for the time being” due to the “highly uncertain environment.”

    Collins acknowledged that “renewed price pressures” from tariffs could “delay further normalization of policy”.

    “Confidence is needed that the tariffs are not destabilizing inflation expectations,” she emphasized.

    She added that any “preemptive action” to support growth would require a “compelling” signal that economic activity is deteriorating more than expected.

    Although she expects inflation to gradually return to the 2% target, she acknowledged that core inflation may rise “well above” 3% in the near term due to higher import costs. In her view, the Fed must remain vigilant to ensure these pressures do not become entrenched.

    NZ BNZ manufacturing falls to 53.2, new orders signal trouble ahead

    New Zealand’s BusinessNZ Performance of Manufacturing Index slipped slightly from 54.1 to 53.2 in March, but remained firmly in expansion territory. Production climbed to 54.2, the highest level since December 2021. Employment also posted a robust 54.7, marking its strongest result since mid-2021. However, a decline in new orders, which dipped below the 50-neutral mark to 49.6, raises concerns about the durability of this rebound.

    BusinessNZ’s Catherine Beard acknowledged the resilience in activity and employment, but highlighted persistent challenges. Despite improving sentiment, nearly 58% of surveyed manufacturers cited negative conditions, pointing to weak demand, fewer new orders, and uncertainty across both domestic and export channels.

    BNZ Senior Economist Doug Steel noted that the PMI data supports the case for manufacturing GDP growth in early 2025. Still, he cautioned that risks to the outlook are clearly tilted to the downside, “given recent extreme volatility on global markets following rapidly evolving US-driven trade policy changes.”

    USD/CHF Daily Outlook

    Daily Pivots: (S1) 0.8120; (P) 0.8350; (R1) 0.8467; More…

    Intraday bias in USD/CHF remains on the downside as current selloff accelerates again. Break of 161.8% projection of 0.9196 to 0.8757 from 0.8854 at 0.8144 will target 200% projection at 0.7976 next. On the upside, above 0.8358 support turned resistance will turn intraday bias neutral and bring consolidations first, before staging another decline.

    In the bigger picture, the break of 0.8332 (2023 low) confirms resumption of long term down trend from 1.0342 (2017 high). Next target is 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9196 at 0.8075. Firm break there will target 100% projection at 0.7382.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    22:30 NZD Business NZ PMI Mar 53.2 53.9 54.1
    23:50 JPY Money Supply M2+CD Y/Y Mar 0.80% 1.20% 1.20%
    06:00 EUR Germany CPI M/M Mar F 0.30% 0.30%
    06:00 EUR Germany CPI Y/Y Mar F 2.20% 2.20%
    06:00 GBP GDP M/M Feb 0.10% -0.10%
    06:00 GBP Industrial Production M/M Feb 0.10% -0.90%
    06:00 GBP Industrial Production Y/Y Feb -2.30% -1.50%
    06:00 GBP Manufacturing Production M/M Feb 0.20% -1.10%
    06:00 GBP Manufacturing Production Y/Y Feb -2.40% -1.50%
    06:00 GBP Index of Services 3M/3M Feb 0.50% 0.40%
    06:00 GBP Goods Trade Balance (GBP) Feb -17.9B -17.8B
    12:30 USD PPI M/M Mar 0.20% 0.00%
    12:30 USD PPI Y/Y Mar 3.30% 3.20%
    12:30 USD PPI Core M/M Mar 0.30% -0.10%
    12:30 USD PPI Core Y/Y Mar 3.60% 3.40%
    14:00 USD UoM Consumer Sentiment Apr P 55 57
    14:00 USD UoM Inflation Expectations Apr P 5.00%

     



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  • From Trade War to Bond Shock: Global Markets Face Multi-Front Crisis

    From Trade War to Bond Shock: Global Markets Face Multi-Front Crisis


    The relentless selling pressure in global markets shows no sign of abating, with European stocks and US futures once again under fire today. China’s latest retaliatory move to hike tariffs on US goods from 34% to 84% has reignited investor fears, just as the US implemented its own increase to a staggering 104% on Chinese imports. The ongoing trade war escalation between the world’s two largest economies is now moving rapidly from trade tension to a global financial shock.

    China is clearly signaling it has no intention of backing down. Beyond higher tariffs, Beijing’s commerce ministry added multiple US entities to an export control list and labeled several more as “unreliable.” It also filed a pointed complaint with the WTO, accusing Washington’s “reckless move” of destabilizing global trade.

    An unusual element of this market meltdown is the rare simultaneous collapse of all major US assets: stocks, Dollar, and Treasuries. In particular, yields on the 10-year note have surged back above 4.4%, up from 3.9% just last week. This sharp move has sparked fears of forced liquidation, margin calls on leveraged positions, which could drastically tighten up liquidity in the markets.

    Market watchers have floated multiple theories as explanations for the sudden jump in yields. Some see it as a predictable consequence of the US push to reduce bilateral trade imbalances, which may curb or even reverse foreign demand for American debt. Besides, Treasuries could become a retaliatory tool in a geopolitical standoff. While each theory differs in detail, all point to an erosion of liquidity and confidence in a market once considered the bedrock of global finance.

    Technically, 10-year yield’s break above 4.387 resistance is alarming. It suggests that fall from 4.809 has completed as a three-wave corrective move at 3.886. Risk will now stay heavily on the upside as long as 55 D EMA (now at 4.321) holds. Further rally could be seen back to 4.809 resistance. Firm break there could pave the way back to 4.997 high.

    In the currency markets, Dollar is again the worst performer of the day. Sterling and Kiwi trail close behind, the latter pressured further by RBNZ’s rate cut and its dovish forward guidance. Yen and Swiss Franc are once again the preferred safe havens, with the Aussie showing surprising resilience—likely more a pause in its decline than a sign of strength. Euro and Loonie sit somewhere in the middle.

    At the time of writing, FTSE is down -3.57%. DAX is down -4.03%. CAC is down -4.07%. UK 10-year yield is up 0.199 at 4.818. Germany 10-year yield is down -0.005 at 2.622. Earlier in Asia, Nikkei fell -3.93%. Hong Kong HSI rose 0.68%. China Shanghai SSE rose 1.31%. Singapore Strait Times fell -2.18%. Japan 10-year JGB yield rose 0.003 to 1.282.

    ECB’s Villeroy: Trade uncertainty threatens financial stability, strengthens case for rate cut

    French ECB Governing Council member Francois Villeroy de Galhau warned today that mounting economic uncertainty from escalating trade tensions is posing risks to financial stability, particularly increasing credit risks for some financial institutions.

    While he emphasized the resilience of French banks, he noted that leveraged hedge funds could come under significant liquidity pressure.

    Writing in his annual letter to President Macron, Villeroy assured that both Bank of France and ECB are “fully mobilised” to safeguard financial stability and ensure adequate liquidity.

    Speaking to journalists, Villeroy said the recent US announcement of sweeping “reciprocal” tariffs only adds to the case for further monetary easing. “We still have room to cut rates,” he stated.

    ECB’s Knot: Trade war a stagflationary shock, inflation impact will rise over time

    Dutch ECB Governing Council member Klaas Knot warned today that the escalating trade war constitutes a “negative supply shock” and should be considered “stagflationary” in nature.

    Knot also cautioned that as time progresses, the economic impact is more likely to “more inflationary rather than deflationary”.

    ECB’s priority, he said, is to monitor how and when these tariffs start to meaningfully affect economic activity and corporate decision-making. However, next week’s policy meeting would be too soon to revise projections.

    Knot also noted that despite the growing market stress, financial market functioning has so far been “preserved”. He credited the hedge fund sector’s proactive deleveraging for this resilience, saying they were well-prepared for the turbulence and capable of meeting margin calls—unlike in past market episodes.

    BoJ’s Ueda: Rate hikes still on table, but trade uncertainty clouds outlook

    BoJ Governor Kazuo Ueda reaffirmed today that the central bank remains open to further rate hikes if Japan’s economic recovery continues as projected. He added that current trends in both the economy and inflation are “roughly in line” with BoJ’s forecasts.

    He added that the policy board will make decisions with a “without pre-conception” mindset, and assess whether the outlook materializes as expected.

    However, Ueda flagged growing concerns over trade developments globally, warning of “heightening uncertainty over developments in each country’s trade policy”.

    “We need to pay due attention to risks,” he warned.

    RBNZ cuts 25bps, trade barriers as downside risk to both growth and inflation

    RBNZ delivered a widely expected 25bps cut in the Official Cash Rate, bringing it to 3.50%. The policy statement highlighted that the recently announced global trade barriers create “downside risks to the outlook for economic activity and inflation” in New Zealand.

    The central bank noted that with inflation close to the midpoint of its target range, it is in the “best position” to respond to economic shifts. RBNZ added it has “has scope to lower the OCR further as appropriate”, depending on how the impact of tariffs evolves.

    This leaves the door wide open for further easing, particularly if global economic headwinds intensify or domestic data disappoints.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 145.46; (P) 146.79; (R1) 147.61; More…

    Intraday bias in USD/JPY is back on the downside with break of 144.54 support. Fall from 158.86 is resuming to 158.86 to 146.52 from 151.20 at 143.57. Break there will target 139.57 low. On the upside, break of 148.13 resistance is needed to indicate short term bottoming. Otherwise, risk will stay on the downside 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), 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
    02:00 NZD RBNZ Interest Rate Decision 3.50% 3.50% 3.75%
    05:00 JPY Consumer Confidence Index Mar 34.1 34.9 35
    06:00 JPY Machine Tool Orders Y/Y Mar P 11.4% 3.50%
    14:00 USD Wholesale Inventories Feb F 0.30% 0.30%
    14:30 USD Crude Oil Inventories 2.2M 6.2M
    18:00 USD FOMC Minutes

     



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  • Market Turmoil Unleashed as Global Tariff Battlelines Drawn

    Market Turmoil Unleashed as Global Tariff Battlelines Drawn


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Will 100 Be the Savior for Sliding Dollar Index?

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

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

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

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

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

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

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

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

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

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

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

    AUD/CAD and AUD/NZD in free fall

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

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

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

    USD/JPY Weekly Outlook

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

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

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



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  • Tariff Sparks Risk Exodus; Euro Rises as Preferred Shelter

    Tariff Sparks Risk Exodus; Euro Rises as Preferred Shelter


    Risk-off sentiment swept across global financial markets today following the U.S. announcement of sweeping reciprocal tariffs. The sheer scale, complexity, and breadth of the trade measures surprised investors and rattled confidence. Equities in Europe and Japan suffered broad losses, but the brunt of the selloff appears to be landing squarely on US markets, where the mood has sharply deteriorated.

    Now the spotlight turns to whether bargain hunters will step in to stabilize equity markets and provide some relief through the rest of the week. Without a decisive rebound, there is a real risk that the current slide could deepen into a prolonged selloff through the rest of April, especially if the anticipated retaliation from global trading partners begins to materialize in the coming days.

    In currency markets, Dollar is being dumped across the board. Aussie is also among the weakest, likely suffering from its exposure to China. Surprisingly, Sterling joined the bottom three, mostly due to heavy selling against Euro and Swiss Franc.

    The standout performers are clearly the traditional safe-havens: Yen, Swiss Franc. Notably, Euro is emerging as the key substitute for the greenback in terms of liquidity and market depth. Loonie and Kiwi are holding in the middle.

    Technically, US 10-year yield’s strong break of 4.106 support confirms resumption of the whole decline from 4.809. Risk will now stay heavily on the downside as long as 4.226 resistance holds. Next target is 61.8% projection of 4.809 to 4.106 from 4.387 at 3.952.

    Strong support is anticipated there as it’s close to 4% mark. However, firm break of 3.952, especially sustained trading below the critical 4% psychological threshold — would likely deal a heavy blow to sentiment and spark even deeper losses in risk assets.

    In Europe, at the time of writing, FTSE is down -1.38%. DAX is down -2.13%. CAC is down -2.80%. UK 10-year yield is down -0.111 at 4.536. Germany 10-year yield is down -0.079 at 2.644. Earlier in Asia, Nikkei fell -2.77%. Hong Kong HSI fell -1.52%. China Shanghai SSE fell -0.24%. Singapore Strait Times fell -0.30%. Japan 10-year JGB yield fell -0.129 to 1.351.

    US initial jobless claims fall to 219k vs exp 225k

    US initial jobless claims fell -6k to 219k in the week ending March 29, below expectation of 224k. Four-week moving average of initial claims fell -1k to 223k.

    Continuing claims rose 56k to 1903k in the week ending March 22, highest since November 13, 2021. Four-week moving average of continuing claims rose 3k to 1871k.

    ECB Accounts: March debate leaves April meeting open to cut or hold

    ECB’s March 5-6 meeting accounts revealed a heated debate among Governing Council members over both the 25bps rate cut decision and the tone of accompanying communications.

    With considerable uncertainty clouding the outlook—ranging from global trade policy to persistent services inflation—many policymakers urged caution, particularly in avoiding language that could be construed as forward guidance. The balance of risks, especially from tariff escalations and uneven disinflation, made it clear that any commitment to further cuts would be premature.

    A few members were only willing to support the March rate cut on the condition that the policy statement “avoided any indication of future cuts or of the future direction of trave”.

    This led to a debate on whether to remove the phrase “monetary policy remains restrictive”. In the end, Chief Economist Philip Lane’s proposed compromise—“monetary policy is becoming meaningfully less restrictive”—was broadly accepted.

    This phrasing was viewed as neutral enough to reflect the evolving inflation outlook without implying a preset path.

    Crucially, the ECB emphasized that the revised language should not signal the outcome of April’s meeting. “Both a cut and a pause” are “on the table, depending on the incoming data.

    ECB’s Nagel and Stournaras warn of economic fallout from US tariffs

    Bundesbank President Joachim Nagel issued a strong warning today, saying the US administration’s new tariff measures “endanger global economic stability.”

    Nagel emphasized the need for strong alliances and fewer trade barriers to tackle today’s global challenges, adding that the US is pursuing a “completely different direction” with economic policies that could leave many losers—especially within its own borders.

    Echoing these concerns, Greek ECB Governing Council member Yannis Stournaras said the US tariffs are expected to weigh on Eurozone GDP growth rate by 0.3% to 0.4% in the first year, though he noted that the broader inflation outlook remains unaffected.

    Stournaras added that the US tariffs were “not an obstacle” to an ECB rate cut in April.

    Eurozone PPI rises 0.2% mom, 3.0% yoy in Feb

    Eurozone PPI rose 0.2% mom and 3.0% yoy in February. The monthly gain was primarily driven by a 0.4% mom increase in prices for intermediate goods, alongside smaller rises in energy (0.2% mom) and capital goods (0.2% mom) prices. Prices for durable consumer goods slipped slightly, down -0.1% mom, while non-durable consumer goods posted a mild 0.1% mom uptick. Excluding energy, total industrial prices increased by 0.2% mom.

    Across the broader EU, PPI rose 0.3% mom on the month and 3.1% yoy. The strongest monthly gains were recorded in Estonia (+9.5%), Romania (+4.8%), and Bulgaria (+2.5%), while declines were seen in Ireland (-4.9%), France, and Slovakia (both -0.8%).

    Eurozone PMI composite finalized at 50.9, steady but shaky

    Eurozone’s private sector continued to show signs of stabilization in March, with PMI Composite finalized at 50.9 — the highest in seven months — up from February’s 50.2. PMI Services was finalized at 51.0, up from prior month’s 50.6.

    Among the major economies, Germany stood out with a 10-month high at 51.3, while France remained in contraction despite improving to a five-month high at 48.0.

    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, acknowledged that recession fears that loomed late last year are now giving way to cautious optimism. The Eurozone has managed to stay in growth territory for three straight months.

    Still, he warned that this fragile recovery could be easily thrown “off course again” by external shocks — namely, the newly announced US reciprocal tariffs.

    UK PMI services finalized at 52.5, outlook and employment subdued

    UK PMI Services was finalized at 52.5 in March, up from 51.0 in February, marking the highest level since August 2024. PMI Composite also improved to 51.5, a five-month high.

    The modest recovery in overall business activity was driven primarily by strength in the technology and financial services sectors, according to Tim Moore at S&P Global. However, this was offset by notable weakness in manufacturing, which experienced its steepest decline in output since October 2023.

    However, service providers expressed limited optimism about the near-term outlook, with confidence levels hovering near two-year lows. The labor market also continued to show signs of strain, with March marking the sixth consecutive month of job losses due to hiring freezes and redundancies.

    Price pressures remain a concern. The inflation indicators within the survey suggest that cost and pricing pressures in the services sector are still running significantly hotter than the pre-pandemic decade.

    Swiss CPI unchanged at 0.3% yoy in Mar, misses expectations

    Swiss consumer inflation remained subdued in March, with headline CPI unchanged on the month, below the expected 0.1% mom rise. Core CPI (excluding fresh and seasonal products, energy and fuel) rose just 0.1% mom. The breakdown showed a -0.1% mom decline in domestic product prices, offset somewhat by a 0.5% mom rise in prices of imported products.

    On an annual basis, headline CPI held steady at just 0.3% yoy, missing expectations for an uptick to 0.5% yoy. Core inflation also remained unchanged at 0.9% yoy. The slight increase in domestic product inflation from 0.9% yoy to 1.0% yoy suggests some persistence in local cost pressures. But overall imported inflation remains deeply negative at -1.7% yoy, down from -1.5% yoy.

    Japan’s PMI composite finalized at 48.9, back in contraction

    Japan’s services sector lost momentum in March, with the final PMI Services reading falling to the neutral mark of 50.0, down sharply from 53.7 in February. Composite PMI dropped to 48.9—its lowest since November 2022—signaling contraction in overall private sector activity.

    S&P Global’s Annabel Fiddes noted that while new orders and export business in services remained in growth territory, market conditions had clearly softened.

    Additionally, input costs across the private sector rose at the fastest pace in seven months, and output price inflation remained historically elevated.

    Business sentiment also deteriorated, with overall optimism about the year-ahead outlook for output falling to its lowest since January 2021.

    China’s Caixin PMI services rises to 51.9, but deflation and jobs remain concerns

    China’s Caixin Services PMI ticked up to 51.9 in March from 51.4, while Composite PMI rose to 51.8 from 51.5, marking the 17th consecutive month of expansion.

    According to Caixin Insight Group’s Wang Zhe, both supply and demand showed improvement, particularly in manufacturing. However, service sector employment dragged overall job growth, and price pressures remained weak.

    Despite signs of recovery and a stable start to the year, persistent deflationary pressures and a sluggish job market continue to weigh on sentiment. Wang noted that weak domestic demand and cautious market expectations were limiting momentum.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0785; (P) 1.0855; (R1) 1.0929; More…

    EUR/USD’s rally accelerates to as high as 1.1145 so far, and met 61.8% projection of 1.0358 to 1.0953 from 1.0731 at 1.1099 already. Intraday bias stays on the upside. Sustained trading above 1.1099 will pave the way 1.1274 key resistance, and probably further to o 100% projection at 1.1326. On the downside, below 1.1002 minor support will turn intraday bias neutral and bring consolidations, before staging another rise.

    In the bigger picture, prior strong break of 55 W EMA (now at 1.0692) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0731 support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    00:30 JPY Services PMI Mar F 50 49.5 49.5
    01:30 AUD Trade Balance (AUD) Feb 2.97B 5.40B 5.62B 5.16B
    01:45 CNY Caixin Services PMI Mar 51.9 51.6 51.4
    06:30 CHF CPI M/M Mar 0 0.10% 0.60%
    06:30 CHF CPI Y/Y Mar 0.30% 0.50% 0.30%
    07:50 EUR France Services PMI Mar 47.9 46.6 46.6
    07:55 EUR Germany Services PMI Mar 50.9 50.2 50.2
    08:00 EUR Eurozone Services PMI Mar 51 50.4 50.4
    08:30 GBP Services PMI Mar 52.5 53.2 53.2
    09:00 EUR Eurozone PPI M/M Feb 0.20% 0.40% 0.80% 0.70%
    09:00 EUR Eurozone PPI Y/Y Feb 3% 1.80% 1.70%
    11:30 EUR ECB Meeting Accounts
    11:30 USD Challenger Job Cuts Y/Y Mar 204.80% 103.20%
    12:30 CAD Trade Balance (CAD) Feb -1.5B 2.5B 4.0B 3.1B
    12:30 USD Initial Jobless Claims (Mar 28) 219K 225K 224K 225K
    12:30 USD Trade Balance (USD) Feb -122.7B -110.0B -131.4B -130.7B
    13:45 USD Services PMI Mar F 54.3 54.3
    14:00 USD ISM Services PMI Mar 53.1 53.5
    14:30 USD Natural Gas Storage 27B 37B

     



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  • Euro Slips on Soft CPI, US 10 Year Yields Sink

    Euro Slips on Soft CPI, US 10 Year Yields Sink


    Global markets are trading with a mixed tone today as investors brace for the long-awaited reciprocal tariff announcement from the US tomorrow. Asian stocks staged a moderate recovery from Monday’s selloff, while European indexes are also slightly in black. However, US futures are coming under renewed pressure. Meanwhile, Gold continues to shine amid the unease, extending its record-breaking rally and coming just shy of the 3150 mark.

    Currency markets remain cautious but active. Selling pressure has rotated toward Euro and Sterling, with the common currency slightly more pressured by today’s lower-than-expected Eurozone core CPI print. Sterling is also softening, along with Loonie.

    On the other hand, Yen and Swiss Franc are regaining strength, both benefiting from renewed risk-off flows. Dollar is treading water, with a mixed performance. Aussie and Kiwi are holding their ground for now, underpinned by stronger-than-expected Chinese manufacturing PMI data.

    The Washington Post reported that Trump administration is still weighing several options for its tariff rollout, including a sweeping 20% levy on most imports or a country-by-country “reciprocal” model. While no final decision has been made, the scope could significantly alter global supply chains. Markets are likely to remain defensive until more clarity emerges, especially on whether exceptions will be granted and how key trade partners like the EU, China, and Canada will respond.

    Technically, US 10-year yield capped down through 4.174 support today. A close below the support level should confirmed that corrective recovery from 4.106 has completed at 4.387 after rejection by 55 D EMA. That would set up deeper fall back to 4.106 first. Firm break there will resume the whole decline from 4.809 to 61.8% projection of 4.809 to 4.106 from 4.387 at 3.952, which is below 4% psychological level.

    In Europe, at the time of writing, FTSE is up 0.76%. DAX is up 1.24%. CAC is up 0.86%. UK 10-year yield is down -0.055 at 4.634. Germany 10-year yield is down -0.072 at 2.677. Earlier in Asia, Nikkei rose 0.02%. Hong Kong HSI rose 0.38%. China Shanghai SSE rose 0.38%. Singapore Strait Times fell -0.09%. Japan 10-year JGB yield rose 0.016 to 1.504.

    Eurozone CPI falls to 2.2% in Mar, core down to 2.4%

    Eurozone headline CPI eased slightly from 2.3% yoy to 2.2% yoy in March, in line with expectations. CPI Core (excluding energy, food, alcohol & tobacco) dropped from 2.6% yoy to 2.4% yoy, undershooting forecasts of 2.5% yoy.

    Looking at the composition, services remained the main driver despite moderating to 3.4% from 3.7%. Food, alcohol, and tobacco edged up to 2.9% from 2.7%. Non-energy industrial goods stayed stable at 0.6%, while energy slipped further into deflationary territory at -0.7%.

    Eurozone PMI manufacturing finalized at 48.6, greenshoots clouded by tariff frontloading

    Eurozone manufacturing showed encouraging signs of recovery in March, with the final PMI Manufacturing reading rising to 48.6, its highest level in 26 months. Output index broke above the 50 mark to 50.5, the first time in growth territory since March 2023. Though still technically in contraction, the steady three-month climb in headline PMI suggests that the worst may be behind for the sector.

    Regional breakdowns reveal uneven performance, with Greece leading the bloc at 55.0, while Italy and Austria remain below 47. Germany and France—the two largest Eurozone economies—improved notably, to 48.3 (31-month high) and 48.5 (26-month high) respectively.

    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, believed some of the recent gains stem from US companies frontloading orders ahead of the looming tariff war, which could mean that part of the improvement may unwind in the coming months.

    Still, there are signs of structural tailwinds forming. Speculation is growing that Germany’s ramped-up fiscal spending—particularly on defense and infrastructure—may eventually trickle down into broader Eurozone growth. While those benefits are unlikely to be felt until 2026 or beyond, they offer a potential path to sustained recovery.

    BoE’s Greene: Trade War likely disinflationary for UK

    BoE Monetary Policy Committee member Megan Greene said today that a trade war involving retaliatory tariffs would likely be “disinflationary” for the UK overall. Though she cautioned against putting too much weight on early modelling at this stage.

    Greene pointed out that exchange rates would be a key transmission channel for the effects of global trade tensions. She also noted the possibility that the US dollar’s role as the world’s reserve currency could be “undermined a little bit” by the rising uncertainty, adding more unpredictability to how exchange rates, including GBP/USD, could respond.

    On domestic inflation expectations, Greene maintained that they “remain anchored” for now but acknowledged the upward drift over the past six months as a growing concern. While she clarified that this is not currently a crisis-level issue—“not flashing red lights”—the trend warrants attention.

    UK PMI manufacturing finalized at 44.9, sector hit on several fronts

    UK PMI Manufacturing index was finalized at 44.9 in March, down from 46.8 in February, its lowest level in 17 months. The data showed broad-based weakness, with steep declines in output, new orders, and export business. Business optimism also tumbled to its lowest point since November 2022.

    Rob Dobson of S&P Global Market Intelligence noted that new business inflows suffered one of the sharpest drops since the pandemic lockdowns of 2020.

    Manufacturers are being “hit on several fronts”: weakening domestic demand, rising costs linked to minimum wage and national insurance changes, and a deteriorating global trade backdrop due to mounting geopolitical risks and tariff uncertainties.

    RBA stands pat, inflation eases as expected, but outlook clouded

    RBA kept the cash rate target unchanged at 4.10% today, in line with broad market expectations. While the central bank welcomed the continued decline in underlying inflation, it emphasized a “cautious” stance due “risks on both sides”.

    Recent data suggests inflation is easing in line with forecasts, but RBA reiterated that it needs greater confidence that this trend will continue sustainably toward the midpoint of the 2–3% target band.

    RBA highlighted “notable uncertainties” around domestic consumption and labor market dynamics. Internationally, there are concerns over the escalating US tariff policy, noting that such developments are already affecting global confidence.

    The risk of further tariff expansion or retaliatory measures from other countries could amplify the drag on global activity. Inflation could move in “either direction” depending on how households and firms react to the shifting macroeconomic environment.

    Japan’s Tankan survey flags manufacturing caution, services hit 33-year high

    Japan’s Q1 Tankan survey revealed a mixed outlook for the economy, with sentiment among large manufacturers slipping for the first time in a year. The index fell from 14 to 12, in line with expectations, as steel and machinery producers grew more cautious amid weak global demand, rising input costs, and uncertainty surrounding US tariff policy.

    However, manufacturing outlook ticked down just slightly to 12, beating expectations of a sharper decline to 9, indicating that businesses remain cautiously optimistic.

    In contrast, Japan’s services sector showed remarkable resilience. The large non-manufacturing index rose from 33 to 35—marking the highest level since 1991. Still, the outlook component was flat at 28, slightly missing forecasts of 29.

    Capital expenditure plans were also encouraging, with large firms expecting a 3.1% increase for fiscal 2025, ahead of consensus of 2.9%.

    Japan PMI manufacturing finalized at 48.4, weaker domestic and international demand

    Japan’s manufacturing sector contracted further in March, with final PMI reading falling to 48.4 from February’s 49.0, marking the lowest level in a year.

    According to S&P Global, both output and new orders declined more sharply, reflecting “weaker demand from both domestic and international clients”. Employment offered a rare bright spot, as firms increased hiring at the fastest rate in three months.

    However, confidence remained muted and below the long-run average. Cost pressures also persisted, with strong increases in both input costs and selling prices, suggesting that “inflationary pressure across the sector remains acute”.

    China Caixin manufacturing rises to 51.2, jobs and prices Lag

    China’s Caixin PMI Manufacturing rose to 51.2 in March, up from 50.8 and marking a four-month high.

    According to Wang Zhe of Caixin Insight Group, the upbeat print points to a steady start to the year, suggesting broader signs of recovery in the industrial sector.

    Still, challenges remain beneath the surface. The labor market “remained relatively sluggish”. In addition, “deflationary pressures persisted”, driven by weak domestic demand and cautious sentiment among market participants.

    EUR/USD Mid-Day Outlook

    Daily Pivots: (S1) 1.0783; (P) 1.0816; (R1) 1.0848; More…

    EUR/USD dips slightly today but stays well above 1.0731 support. Intraday bias remains neutral first. On the upside, break of 1.0857 resistance will indicate that correction from 1.0963 has completed already. Retest of 1.0953 should be seen first. Firm break there will resume the rally from 1.0176 towards 1.1274 key resistance. However, firm break of 38.2% retracement of 1.0358 to 1.0953 at 1.0726 holds will bring deeper correction to 55 D EMA (now at 1.0645).

    In the bigger picture, prior strong break of 55 W EMA (now at 1.0692) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    23:30 JPY Unemployment Rate Feb 2.40% 2.50% 2.50%
    23:50 JPY Tankan Large Manufacturing Index Q1 12 12 14
    23:50 JPY Tankan Large Manufacturing Outlook Q1 12 9 13
    23:50 JPY Tankan Non-Manufacturing Index Q1 35 33 33
    23:50 JPY Tankan Non-Manufacturing Outlook Q1 28 29 28
    23:50 JPY Tankan Large All Industry Capex Q1 3.10% 11.30%
    00:30 AUD Retail Sales M/M Feb 0.20% 0.30% 0.30%
    00:30 JPY Manufacturing PMI Mar F 48.4 48.3 48.3
    01:45 CNY Caixin Manufacturing PMI Mar 51.2 50.5 50.8
    03:30 AUD RBA Interest Rate Decision 4.10% 4.10% 4.10%
    04:30 AUD RBA Press Conference
    06:30 CHF Real Retail Sales Y/Y Feb 1.60% 1.50% 1.30% 2.90%
    07:30 CHF Manufacturing PMI Mar 48.9 50.5 49.6
    07:50 EUR France Manufacturing PMI Mar F 48.5 48.9 48.9
    07:55 EUR Germany Manufacturing PMI Mar F 48.3 48.7 48.3
    08:00 EUR Eurozone Manufacturing PMI Mar F 48.6 48.7 48.7
    08:30 GBP Manufacturing PMI Mar 44.9 44.6 44.6
    09:00 EUR Eurozone Unemployment Rate Feb 6.10% 6.20% 6.20%
    09:00 EUR CPI Y/Y Mar P 2.20% 2.20% 2.30%
    09:00 EUR CPI Core Y/Y Mar P 2.40% 2.50% 2.60%
    13:30 CAD Manufacturing PMI Mar 47.8
    13:45 USD Manufacturing PMI Mar F 49.8 49.8
    14:00 USD ISM Manufacturing PMI Mar 49.9 50.3
    14:00 USD ISM Manufacturing Prices Paid Mar 65 62.4
    14:00 USD ISM Manufacturing Employment Mar 47.6
    14:00 USD ISM Manufacturing New Orders Index Mar 48.6
    14:00 USD Construction Spending M/M Feb 0.20% -0.20%

     



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  • Markets Rush to Safe Haven as Tariff Clock Ticks Down

    Markets Rush to Safe Haven as Tariff Clock Ticks Down


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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Yields Tumble on Safe Haven Flows, Dollar Index Relatively Resilient

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

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

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

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

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

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

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

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

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

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

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

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

    USD/JPY Weekly Outlook

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

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

    In the long term picture, it’s still early to conclude that up trend from 75.56 (2011 low) has completed. A medium term corrective phase should have commenced, with risk of deep correction towards 55 M EMA (now at 136.94).



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  • Dollar Stays Weak as Markets Await Fed Guidance, Yen Softens After BoJ Hold

    Dollar Stays Weak as Markets Await Fed Guidance, Yen Softens After BoJ Hold


    Dollar remains under pressure as markets await FOMC rate decision and, more crucially, the updated economic projections. While the central bank is widely expected to hold rates steady at 4.25-4.50%, traders are looking for any signs that Fed officials are adjusting their outlook in response to mounting trade tensions. Meanwhile, US stocks saw another selloff overnight, led by the tech sector, though major indexes have so far held above last week’s lows. Sentiment remains fragile, and any dovish elements in Fed’s projections could trigger another round of risk aversion and Dollar weakness. However, the biggest market move may be on hold until April 2, when the final decision on reciprocal tariffs is expected.

    Japanese Yen is also soft in a tight range after BoJ left monetary policy unchanged earlier today. While this decision was widely anticipated, some market participants noted that the earlier-than-usual timing of the announcement suggested that the BoJ was not yet ready to accelerate rate hikes. Yen has also weakened this week on broader risk-on sentiment in Asia, despite the selloff in US equities.

    On the other hand, Euro remains firm, though lacking decisive upside momentum. Germany’s parliament approved the massive fiscal expansion plan yesterday, marking a historic departure from the country’s long-standing fiscal conservatism. This move has given CDU/CSU leader Friedrich Merz a significant political boost as he continues talks with the Social Democrats to form a centrist coalition government. While some economists argue that Germany’s fiscal expansion is the most significant since reunification, they also warned that structural reforms will be necessary to turn this spending into sustainable growth.

    Looking at currency performance this week, Kiwi is leading gains, followed by Swiss Franc and Aussie. In contrast, Yen remains the weakest performer, followed by Dollar and Sterling. Euro and Loonie are positioned in the middle of the pack.

    Technically, CHF/JPY is among the top movers this week so far. The extended rebound and firm break of 55 D EMA (now at 162.27) suggests that fall from 177.29 has completed at 165.83 already. The whole corrective pattern from 180.05 might have finished too. Further rise is now expected to trend line resistance at 173.95 first. Firm break there will solidify this bullish case and target 177.29/180.05 resistance zone next.

    In Asia, at the time of writing, Nikkei is up 0.03%. Hong Kong HSI is down -0.09%. China Shanghai SSE is down -0.18%. Singapore Strait Times is up 0.34%. Japan 10-year JGB yield is up 0.011 at 1.517. Overnight, DOW fell -0.62%. S&P 500 fell -1.07%. NASDAQ fell -1.71%. 10-year yield fell -0.025 to 4.281.

    BoJ holds rates, flags exchange rate as key inflation factor

    BoJ kept its uncollateralized overnight call rate unchanged at around 0.50%, as widely expected.

    In its statement, BoJ noted that growth is expected to remain above potential, while inflation progress remains on track toward its 2% target. However, policymakers flagged high levels of uncertainty, particularly citing global trade tensions and policy shifts in major economies as key risks.

    A notable shift in BoJ’s tone was its heightened focus on exchange rate movements as a key factor influencing inflation. The central bank acknowledged that with firms increasingly raising wages and prices, exchange rate developments are, compared to the past, “more likely to affect prices”.

    This suggests that further depreciation in Yen could accelerate price increases, and influence future monetary policy decisions.

    Japan’s export rises 11.4% yoy in Feb, up for fifth straight month

    Japan’s exports surged 11.4% yoy to JPY 9,191B in February, marking the fifth consecutive month of growth, driven by strong demand from both the US and China. Exports to the US rose 10.5% yoy, while shipments to China saw an even stronger 14.1% yoy increase.

    Meanwhile, imports declined by -0.7% yoy, marking their first drop in three months, as demand for crude oil and coal weakened. This shift in trade dynamics helped Japan return to a trade surplus of JPY 584.5B, the first positive balance in two months.

    On a seasonally adjusted basis, exports rose 4.0% mom to JPY 9,688B, while imports fell -4.1% mom to JPY 9,505B, leading to a JPY 182B surplus.

    Fed to stand pat, watch for signs of trade war fallout in new projections

    Fed is set to keep interest rates unchanged at 4.25-4.50% today. The focus will be on the updated economic projections, which may drop hints that Fed is beginning to pre-empt a full-blown trade war into its outlook. Additionally, another key element to watch will be the closely followed “dot plot”, which will reveal whether Fed still expects two rate cuts this year.

    Chair Jerome Powell’s press conference is important as usual, as he will need to balance Fed’s current economic assessment with the risks posed by US President Donald Trump’s trade policy. However, with no details on the big event of reciprocal tariffs on April 2, Powell is unlikely to offer any concrete guidance. Instead, he may just reiterate the central bank’s stance that it is “in no hurry” to cut rates and emphasize a data-dependent approach.

    Currently, Fed fund futures indicate that June and September are the most likely timing for policy easing.

    One key market reaction to watch will be 10-year Treasury yield, which recovery has clearly lost momentum well ahead of 55 D EMA (now at 4.389). Any dovish tilt from Fed today could push yields back toward 4.106 support. That would in turn keep Dollar under pressure.

    Though, firm break of 61.8% retracement of 3.603 to 4.809 at 4.063 is not anticipated for now, at least until the tariff picture is cleared or there are more signs of recession in the US. On the upside, any rebound should be limited by 55 D EMA.

    EUR/USD Daily Outlook

    Daily Pivots: (S1) 1.0907; (P) 1.0931; (R1) 1.0969; More…

    Intraday bias in EUR/USD remains on the upside for the moment. Current rally from 1.0176 should target 1.1274 key resistance. On the downside, though, break of 1.0821 support will indicate short term topping, likely with bearish divergence condition in 4H MACD. That will turn bias back to the downside for deeper pullback.

    In the bigger picture, prior strong break of 55 W EMA (now at 1.0675) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0531 resistance turned support holds.

    Economic Indicators Update

    GMT CCY EVENTS ACT F/C PP REV
    20:00 NZD Westpac Consumer Survey Q1 89.2 97.5
    21:45 NZD Current Account (NZD) Q4 -7.04B -6.64B -10.58B -10.84B
    23:30 AUD Westpac Leading Index M/M Feb 0.10% 0.13%
    23:50 JPY Trade Balance (JPY) Feb 0.18T 0.51T -0.86T -0.60T
    02:25 JPY BoJ Interest Rate Decision 0.50% 0.50% 0.50%
    04:30 JPY Industrial Production M/M Jan F -1.10% -1.10% -1.10%
    10:00 EUR Eurozone CPI Core Y/Y Feb F 2.60% 2.60%
    10:00 EUR Eurozone CPI Y/Y Feb F 2.40% 2.40%
    14:30 USD Crude Oil Inventories 0.8M 1.4M
    18:00 USD Fed Interest Rate Decision 4.50% 4.50%
    18:30 USD FOMC Press Conference

     



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

    Recession Fears Weigh on Markets as Risk-Off Trade Intensifies


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

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

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

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

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

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

    US stock market correction deepens as recession fears take hold

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

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

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

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

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

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

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

    Australia Westpac consumer sentiment jumps to 95.9, soft landing achieved

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

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

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

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

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

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

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

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

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

    EUR/AUD Daily Outlook

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

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

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

    Economic Indicators Update

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

     



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  • Euro Holds Gains After ECB Cut, Yen Rallies on Higher JGB Yields

    Euro Holds Gains After ECB Cut, Yen Rallies on Higher JGB Yields


    Euro remained firm following ECB’s decision to cut interest rates, a widely anticipated move. During the subsequent press conference, President Christine Lagarde emphasized a shift to “more evolutionary approach” to policy, now that monetary conditions have become “meaningfully less restrictive.” She also acknowledged the high levels of uncertainty, noting that “risks are all over.”

    Lagarde welcomed Germany and the EU’s proposed defense and infrastructure investments, highlighting that they could offer broad support for European growth. However, she also cautioned that increased government spending might push inflation higher via rising aggregate demand. At the same time, ECB recognizes downside risks to the economy, particularly if trade tensions escalate, thereby dampening exports and threatening global growth.

    Meanwhile, Yen resumed its recent rally against Dollar and recovered against European majors. Support for Yen came from an upswing in Japan’s 10-year JGB yield, which briefly touched 1.515%, its highest level since June 2009. Expectations of another BoJ rate hike this year have fueled speculation, while Germany’s surging benchmark yield also exerts upward pressure on Japan’s yield.

    In contrast, U.S. yields are struggling under the weight of growing worries about a “Trumpcession.” Investors fear that the administration’s trade policies could tip the economy toward recession, softening expectations for robust growth and keeping Treasury yields in check. This dynamic contrasts sharply with Europe and Japan, where yields jumped notably this week.

    Against this backdrop, Yen stands as the strongest performer for the day so far, followed by Swiss franc and then Euro. Canadian Dollar has taken the opposite position, emerging as the worst performer, trailed by Sterling and Dollar. Australian and New Zealand Dollars are in the middle of the pack.

    In Europe, at the time of writing, FTSE is down 01.05%. DAX is up 0.63%. CAC is down -0.30%. UK 10-year yield is up 0.008 at 4.656. Germany 10-year yield up 0.101 at 2.892. Earlier in Asia, Nikkei rose 0.82%. Hong Kong HSI rise 2.47%. China Shanghai SSE rose 0.78%. Singapore Strait Times rose 0.66%. Japan 10-year JGB yield rose 0.053 to 1.499.

    US initial jobless claims fall to 221k, vs exp 236k

    US initial jobless claims fell -21k to 221k in the week ending March 1, below expectation of 236k. Four-week moving average of initial claims rose 250 to 224k.

    Continuing claims rose 42k to 1897k in the week ending February 22. Four-week moving average of continuing claims rose 3k to 1866k.

    ECB cuts 25bps as expected, not pre-committing to rate path

    ECB cut its deposit rate by 25bps to 2.50% as expected. It maintains a data-dependent stance and stressing it is “not pre-committing to a particular rate path” amid rising uncertainty.

    ECB noted that disinflation process remains on track, with inflation upgrade reflects stronger energy prices. Growth forecasts for 2025 and 2026 were downgraded due to weaker exports and investment, driven partly by trade and broader policy uncertainty.

    In the new economic projections:

    • Headline inflation to average 2.3% in 2025, 1.9% in 2026, and 2.0% in 2027.
    • Core inflation to average 2.2% in 2025, 2.0% in 2026, and 1.9% in 2027.
    • GDP to grow 0.9% in 2025, 1.2% In 2026, and 1.3% in 2027.

    Eurozone retail sales fall -0.3% mom in Jan, EU down -0.2% mom

    Eurozone retail sales volume dropped by -0.3% mom in January, missing expectations of a modest 0.1% mom increase. The decline was driven by weaker demand for non-food products, which fell -0.7% mom, while sales of automotive fuel also slipped by -0.3% mom. In contrast, spending on food, drinks, and tobacco rose by 0.6% mom, offering a slight offset to the overall decline.

    Meanwhile, retail sales across the broader EU fell -0.2% mom on the month. Among individual EU, Slovakia saw the sharpest contraction, with retail trade volume plunging -9.0%, followed by Lithuania (-4.8%) and Cyprus (-2.2%). On the other hand, Slovenia (+2.3%), Hungary (+2.2%), and the Netherlands (+1.6%) recorded the strongest increases.

    USD/JPY Mid-Day Outlook

    Daily Pivots: (S1) 148.12; (P) 149.15; (R1) 149.91; More…

    Intraday bias in USD/JPY is back on the downside with break of 148.08 temporary low. Fall from 158.86, as the third leg of the corrective pattern from 161.94 high, has resumed. Sustained break of 61.8% retracement of 139.57 to 158.86 at 146.32 will pave the way back to 139.57 low. On the upside, 149.32 minor resistance will turn intraday bias neutral and bring consolidations again, before staging another fall.

    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
    00:30 AUD Building Permits M/M Jan 6.30% -0.10% 0.70% 1.70%
    00:30 AUD Trade Balance (AUD) Jan 5.62B 5.68B 5.09B 4.92B
    06:45 CHF Unemployment Rate Feb 2.70% 2.70% 2.70%
    09:30 GBP Construction PMI Feb 44.6 49.8 48.1
    10:00 EUR Eurozone Retail Sales M/M Jan -0.30% 0.10% -0.20% 0.00%
    12:30 USD Challenger Job Cuts Y/Y Feb 103.20% -39.50%
    13:15 EUR ECB Deposit Rate 2.50% 2.50% 2.75%
    13:15 EUR ECB Main Refinancing Rate 2.65% 2.65% 2.90%
    13:30 CAD Trade Balance (CAD) Jan 4.0B 1.4B 0.7B 1.7B
    13:30 USD Initial Jobless Claims (Feb 28) 221K 236K 242K
    13:30 USD Trade Balance (USD) Jan -131.4B -93.1B -98.4B -98.1B
    13:30 USD Nonfarm Productivity Q4 1.50% 1.20% 1.20%
    13:30 USD Unit Labor Costs Q4 2.20% 3% 3%
    13:45 EUR ECB Press Conference
    15:00 USD Wholesale Inventories Jan F 0.70% 0.70%
    15:00 CAD Ivey PMI Feb 50.6 47.1
    15:30 USD Natural Gas Storage -96B -261B

     



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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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