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Japanese Yen Strengthens

Japanese Yen Strengthens as Traders Anticipate BoJ Rate Hike

Japanese Yen Strengthens as Traders Anticipate BoJ Rate Hike

The Japanese Yen (JPY) continues to gain momentum for the second consecutive day as Bank of Japan (BoJ) Governor Kazuo Ueda’s hawkish comments stand in stark contrast to the dovish tone of Federal Reserve Chair Jerome Powell.

In a speech to Parliament on Friday, Governor Ueda suggested that the BoJ might consider further interest rate hikes if economic conditions align with their projections. July’s National Consumer Price Index (CPI) data remained at its highest level since February, further supporting the BoJ’s hawkish outlook.

Meanwhile, the US Dollar (USD) is weakening due to increasing expectations of a rate cut in September. During the Jackson Hole Symposium, Fed Chair Powell remarked, “The time has come for policy to adjust,” though he did not specify the timing or scale of the potential cuts.

Market participants are now widely anticipating a 25 basis point (bps) rate cut from the Federal Reserve in September. The CME FedWatch Tool shows that markets are fully pricing in at least this amount.

Daily Market Movers: Japanese Yen Rises on BoJ Ueda’s Hawkish Comments

Bloomberg reported that Philadelphia Fed President Patrick Harker emphasized the need for a gradual reduction in US interest rates. Reuters added that Chicago Fed President Austan Goolsbee noted that monetary policy is currently at its most restrictive level, with the Fed now focusing on achieving its employment mandate.

Governor Ueda, speaking before the Japanese parliament on Friday, clarified that the BoJ is “not considering selling long-term Japanese government bonds (JGBs) as a tool for adjusting interest rates.” He added that any reduction in JGB purchases would only account for about 7-8% of the balance sheet, which is a relatively small decrease. Ueda further mentioned that if the economy meets their projections, there could be a phase where interest rates might be adjusted slightly higher.

Japan’s National CPI rose by 2.8% year-on-year in July, maintaining this rate for the third consecutive month and remaining at its highest level since February. Additionally, the National CPI excluding Fresh Food increased by 2.7%, the highest reading since February, in line with expectations.

In the US, the Composite PMI edged down slightly to 54.1 in August from 54.3 in July, a four-month low but still above market expectations of 53.5. This indicates continued growth in US business activity, marking 19 consecutive months of expansion.

The FOMC minutes from July’s policy meeting revealed that most Fed officials were in agreement that a rate cut is likely at the September meeting, provided that inflation continues to cool.

Technical Analysis: USD/JPY Drops Near 144.00

USD/JPY traded around 143.90 on Friday, with the daily chart indicating the pair is positioned below a downtrend line, suggesting a bearish outlook. However, the 14-day Relative Strength Index (RSI) remains slightly above 30, indicating that the bearish trend might persist.

On the downside, the USD/JPY pair may approach the seven-month low of 141.69, recorded on August 5. A break below this level could drive the pair toward the throwback support level at 140.25.

In terms of resistance, the USD/JPY pair may test the immediate barrier at the downtrend line around the psychological level of 145.00, followed by the nine-day Exponential Moving Average (EMA) at the 145.74 level. A breakthrough above the nine-day EMA could lead the pair to explore the region around the throwback-turned-resistance at the 154.50 level.

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Gold Price Holds Below $2,500 as Traders

Gold Price Holds Below $2,500 as Traders Await Powell’s Speech

Gold Price Holds Below $2,500 as Traders Await Powell’s Speech

Gold (XAU/USD) is seeing some dip-buying on the last trading day of the week, partially recovering from Thursday’s over 1% drop to a weekly low. The US Dollar (USD) is struggling to build on its overnight rebound from the year-to-date low, due to expectations of lower interest rates in the US. This dovish outlook has triggered a decline in US Treasury bond yields, putting pressure on the Greenback. Additionally, ongoing geopolitical risks are providing support to the safe-haven appeal of gold.

However, traders remain cautious and are avoiding significant bullish positions ahead of Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Symposium later today. This hesitation is keeping gold prices below the key psychological level of $2,500 as the European session approaches. Powell’s remarks will be closely analyzed for indications regarding the Fed’s potential rate-cut path, which will significantly impact near-term USD price movements and offer new directional momentum for gold.

Daily Market Movers: Gold Traders on Standby for Powell’s Speech

On Thursday, the US Dollar staged a solid recovery from its 2024 low, buoyed by rebounding US Treasury bond yields, which drew investors away from gold. However, the USD’s recovery lacked sustained momentum due to market speculation that the Federal Reserve might begin a rate-cutting cycle in September, limiting losses for XAU/USD.

On the economic data front, the US Department of Labor reported that initial jobless claims rose to a seasonally adjusted 232,000 for the week ending August 17, up from the previous 228,000. This followed an annual benchmark review revealing that US employers added 818,000 fewer jobs than initially reported for the year through March.

Minutes from the Federal Open Market Committee (FOMC) meeting on July 30-31 showed an increasing number of policymakers supporting a rate cut next month due to progress in reducing inflation. The S&P Global flash PMI indicated that US manufacturing activity contracted at its fastest pace this year, although the services sector saw a surprise increase. The composite PMI showed continued healthy expansion in US private sector business activity, with selling price inflation nearing pre-pandemic levels.

Comments from regional Fed officials reflect a cautious stance on rate cuts. Kansas City Fed President Jeffrey Schmid emphasized the need for more data to support a rate reduction, while Philadelphia Fed President Patrick Harker indicated openness to a September cut, contingent on economic data. Boston Fed President Susan Collins also suggested that a rate cut would soon be appropriate as inflation data stabilizes.

Market attention is now focused on Fed Chair Jerome Powell’s upcoming speech, which will be pivotal in signaling the future trajectory of interest rates and influencing gold’s direction.

Technical Analysis: Gold’s Setup Suggests Potential for Further Gains

From a technical perspective, gold’s recent decline found support near the $2,370 horizontal resistance-turned-support level, which now serves as a crucial pivot point. A decisive break below this level could trigger technical selling, pushing gold prices towards the next support area around $2,345-$2,343. Further downside could extend towards the 50-day Simple Moving Average (SMA), currently positioned just above the $2,400 mark.

Conversely, if gold can regain momentum above the $2,500 level, it will face initial resistance around the $2,513-$2,514 region. Clearing this hurdle could open the door to testing the all-time high near $2,531-$2,532, potentially reigniting bullish momentum and extending gold’s recent uptrend.

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US Dollar Faces Continued Pressure as Market Focus

US Dollar Faces Continued Pressure as Market Focus Shifts to PMI Data

US Dollar Faces Continued Pressure as Market Focus Shifts to PMI Data

After a brief recovery earlier in the day on Wednesday, the US Dollar Index reversed course during the American session, marking its fourth consecutive day of losses. As of Thursday’s European trading hours, all eyes are on the preliminary August PMI data from Germany and the Eurozone, provided by HCOB, alongside the S&P Global/CIPS PMI figures. Later in the day, the US economic calendar will feature weekly Initial Jobless Claims, Existing Home Sales, and S&P Global PMI data.

On Wednesday, the US Bureau of Labor Statistics reported a preliminary estimate indicating a benchmark revision for March 2024’s total Nonfarm employment, with a downward adjustment of -818,000 (-0.5%). Additionally, minutes from the Federal Reserve’s July 30-31 policy meeting revealed that a significant majority of policymakers felt that, should the incoming data align with expectations, easing policy at the next meeting would likely be appropriate. The USD Index is currently trading just above 101.20, down over 1% since the start of the week. Meanwhile, US stock futures are slightly lower, and the 10-year US Treasury bond yield remains near the lower end of its weekly range, around 3.8%.

In Asian trading, data from Australia showed the Judo Bank Composite PMI rose to 51.4 in August’s preliminary reading, up from 49.9 in July. However, this improvement failed to significantly impact AUD/USD, which continues to trade sideways around 0.6750.

EUR/USD surpassed 1.1170 on Wednesday, reaching its highest level since July 2023 before entering a consolidation phase early Thursday. The pair is currently steady at around 1.1150.

GBP/USD maintained its bullish momentum on Wednesday, climbing above 1.3100 for the first time in over a year. The pair remains just below this level as of Thursday morning in Europe.

USD/JPY was unable to capitalize on the USD’s broader weakness, closing flat on Thursday. The pair continues to trade sideways around 145.50 at the start of the European session.

Gold, which had corrected from its record high of $2,531 set on Tuesday, stabilized above $2,500 late Wednesday. XAU/USD remains relatively quiet, trading near $2,510 early Thursday.

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How Responsible is the Polish Central Bank

How Responsible is the Polish Central Bank? – Commerzbank Analysis

How Responsible is the Polish Central Bank? – Commerzbank Analysis

The Polish zloty weakened against the euro and other CE3 currencies yesterday after Poland’s Constitutional Court issued a controversial ruling. The court declared that NBP governor Adam Glapinski could not be held accountable by a parliamentary committee, the State Tribunal, or through any report by such bodies, citing constitutional guarantees of central bank independence. This argument has been used by the previous ruling party (PiS) from the outset of this dispute, notes Commerzbank’s FX Analyst Tatha Ghose.

Zloty Weakens Against the Euro

“We believe this argument lacks merit and doubt that parliament will consider the Constitutional Court’s ruling as binding. Poland’s Constitutional Court has been compromised since the rule of law disputes with the EU and lacks legitimacy. Other key courts are also dominated by right-wing PiS affiliates. The accusations from both sides are driven by ideology rather than good faith.”

“On balance, it seems clear that Glapinski’s ’emergency’ rate cuts just before the elections, coupled with his refusal to cut rates further after an opposing political party took over, were politically motivated. The NBP cannot now claim ‘central bank independence’ after failing to uphold its constitutional duty to remain apolitical.”

“The new KO government will likely proceed with the planned Sejm procedures despite the court’s ruling, pushing for Glapinski’s suspension. Glapinski, in turn, will likely use the ruling to resist interrogation. This standoff is expected to continue in parliament for the next year without a clear resolution. As a result, monetary policy is likely to remain highly politicized and stagnant during this period.”

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EUR/USD Approaches YTD Highs Near

EUR/USD Approaches YTD Highs Near 1.1050 on Expectations of Fed Rate Cuts

EUR/USD Approaches YTD Highs Near 1.1050 on Expectations of Fed Rate Cuts

The EUR/USD pair climbed to year-to-date (YTD) highs, nearing 1.1040, during early European trading on Monday. This rise is supported by a broad weakening of the US Dollar (USD) amid increasing speculation that the Federal Reserve (Fed) might cut interest rates in September. Market participants are now keenly awaiting Fed Chair Jerome Powell’s speech on Friday for further insights into potential rate cuts.

On Sunday, San Francisco Fed President Mary Daly expressed greater confidence that inflation is under control, suggesting that it might be time to consider lowering borrowing costs from the current range of 5.25% to 5.5%. Chicago Fed President Austan Goolsbee also cautioned that the US central bank should avoid maintaining restrictive policies longer than necessary. These dovish remarks from Fed officials have added selling pressure on the Greenback and provided a boost to EUR/USD.

Currently, investors are pricing in a roughly 70% chance of a quarter-point Fed rate cut in September, with some expecting a more substantial half-point cut. Morningstar’s chief US economist, Preston Caldwell, noted that the latest CPI report further supports the case for aggressive Fed rate cuts starting in September, with an initial 25 basis point cut projected to bring the Fed Funds rate down to 5.00-5.25%.

Meanwhile, the Euro (EUR) remains resilient as markets anticipate a gradual reduction in interest rates by the European Central Bank (ECB). At the latest press conference, ECB President Christine Lagarde emphasized a cautious, data-dependent approach, stating that policymakers are “not pre-committing to a particular rate path” and will make decisions on a meeting-by-meeting basis.

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Japanese Yen Strengthens

Japanese Yen Strengthens Amid Hawkish BoJ Sentiment; US Data in Focus

Japanese Yen Strengthens Amid Hawkish BoJ Sentiment; US Data in Focus

The Japanese Yen (JPY) rebounded against the US Dollar (USD) on Friday, likely bolstered by Japan’s strong second-quarter GDP growth, which fuels speculation about a potential interest rate hike from the Bank of Japan (BoJ).

However, the Yen may face headwinds due to political uncertainty in Japan, triggered by reports suggesting that Prime Minister Fumio Kishida will not seek re-election as party leader in September, potentially ending his term as prime minister.

The USD/JPY pair is trending lower as the US Dollar weakens, pressured by declining Treasury yields. Moreover, traders are fully pricing in a 25 basis point rate cut by the US Federal Reserve for September, according to the CME FedWatch tool.

Despite this, the Greenback found some support from recent positive US economic data, which has eased recession fears. Upcoming data, including the preliminary US Michigan Consumer Sentiment Index for August and July’s Building Permits, will be closely watched during the North American session.

Market Highlights: Japanese Yen Rises on Hawkish BoJ Outlook

On Thursday, the US Census Bureau reported a 1.0% month-over-month increase in US Retail Sales for July, reversing June’s 0.2% decline and exceeding the expected 0.3% rise. Additionally, Initial Jobless Claims for the week ending August 9 came in at 227,000, lower than the forecast of 235,000 and down from 234,000 the previous week.

Japanese Economy Minister Yoshitaka Shindo expressed optimism on Thursday, stating that Japan’s economy is expected to recover gradually as wages and incomes improve. He also mentioned that the government will work closely with the BoJ to implement flexible macroeconomic policies.

Japan’s GDP grew by 0.8% quarter-on-quarter in Q2, beating market expectations of 0.5% and rebounding from a 0.6% contraction in Q1. This marks the strongest quarterly growth since Q1 2023. On an annualized basis, GDP grew by 3.1%, surpassing the 2.1% market consensus and reversing a 2.3% contraction in Q1. This is the highest yearly growth since Q2 2023.

Federal Reserve Bank of Chicago President Austan Goolsbee expressed concern on Wednesday about the labor market rather than inflation, noting recent improvements in price pressures alongside weak employment data. He added that the extent of rate cuts will depend on prevailing economic conditions, according to Bloomberg.

US Consumer Price Index (CPI) data showed a 2.9% year-over-year increase in July, slightly down from the 3% rise in June and below market expectations. The Core CPI, excluding food and energy, rose by 3.2% year-over-year, a slight decrease from June’s 3.3% increase, in line with market forecasts.

Prime Minister Fumio Kishida announced on Wednesday that he will not seek re-election as the leader of the Liberal Democratic Party (LDP) in September. Kishida highlighted the need to address Japan’s deflationary pressures by promoting wage and investment growth, with the goal of expanding Japan’s GDP to ¥600 trillion.

Rabobank’s senior FX strategist, Jane Foley, noted that this week’s series of US data releases, along with the upcoming Jackson Hole event, should offer more clarity on potential US policy actions. The primary expectation is for the Fed to cut rates by 25 basis points in September, with another potential cut by year-end.

Technical Analysis: USD/JPY Slips Toward 148.50; Immediate Support at Nine-Day EMA

The USD/JPY pair is trading around 148.80 on Friday. The daily chart indicates that the pair is above the nine-day Exponential Moving Average (EMA), suggesting a short-term bullish trend. However, the 14-day Relative Strength Index (RSI) remains below 50, and further gains would confirm a bullish momentum.

In terms of support levels, the USD/JPY pair may find immediate support at the nine-day EMA, around 148.09. A drop below this level could enhance the bearish outlook, potentially pushing the pair toward the seven-month low of 141.69, recorded on August 5. A continued decline could bring the pair closer to the next support level at 140.25.

On the upside, the USD/JPY pair could target the 50-day EMA at 153.08, with a possibility of testing the resistance level at 154.50, which has shifted from previous throwback support to current pullback resistance.

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Australian Dollar Declines as US Dollar Gains Strength

Australian Dollar Declines as US Dollar Gains Strength Ahead of CPI Inflation Data

Australian Dollar Declines as US Dollar Gains Strength Ahead of CPI Inflation Data

The Australian Dollar (AUD) has weakened against the US Dollar (USD) following an unexpected rate cut by the Reserve Bank of New Zealand (RBNZ) on Wednesday. The RBNZ reduced its Official Cash Rate (OCR) by 25 basis points to 5.25% from 5.50%. Given the close economic ties between Australia and New Zealand, developments in one country can influence the other, impacting their respective currencies.

Despite this, the AUD found some support from recent data showing that Australian wage growth remained strong in the second quarter, leading the Reserve Bank of Australia (RBA) to maintain a hawkish stance on its policy outlook. The RBA kept the cash rate steady at its meeting last week, aiming to return inflation to its 2-3% target range.

RBA Governor Michele Bullock ruled out the possibility of rate cuts within the next six months, emphasizing the bank’s cautious approach to inflation risks and its readiness to raise rates if necessary. Traders are now focused on the upcoming release of Consumer Inflation Expectations and Employment data from Australia on Thursday.

The AUD/USD pair saw support as the US Dollar retreated following weaker-than-expected Producer Price Index (PPI) data from the United States (US) released on Tuesday. Investors are now looking ahead to the US CPI inflation report on Wednesday, which could provide insights into the Federal Reserve’s (Fed) interest rate strategy.

Market Movers: Potential for Australian Dollar Appreciation Amid RBA’s Hawkish Stance

On Tuesday, Atlanta Fed President Raphael Bostic expressed increased confidence in the Fed’s ability to achieve its 2% inflation target, though he noted that more evidence is needed before supporting a rate reduction, according to Reuters.

The US Core Producer Price Index (PPI) rose by 2.4% year-on-year in July, down from the previous 3.0%, and below the expected 2.7%. The overall PPI increased by 2.2% YoY in July, compared to 2.7% in June, missing the market forecast of 2.3%. Month-over-month, PPI rose by 0.1% after a 0.2% increase in June.

In Australia, Westpac Consumer Confidence rose by 2.8% in August, reversing a 1.1% decline in July. Meanwhile, the Wage Price Index saw a 0.8% rise in the second quarter, slightly below the expected 0.9% increase.

RBA Deputy Governor Andrew Hauser attributed persistent inflation to weaker supply and a tight labor market, noting the significant uncertainty surrounding economic forecasts.

However, the AUD’s upside could be limited by safe-haven flows due to rising geopolitical tensions in the Middle East. On Sunday, Defense Minister Yoav Gallant informed US Defense Secretary Lloyd Austin of Iran’s military activities, which suggest preparations for a significant strike on Israel, according to Axios writer Barak Ravid.

Federal Reserve Governor Michelle Bowman also stated on Sunday that she sees ongoing inflation risks and labor market strength, indicating that the Fed may not be ready to cut rates at their next meeting in September, according to Bloomberg.

Westpac recently revised its RBA forecast, now predicting the first rate cut in February 2025, delayed from the previously expected November 2024. They also adjusted their terminal rate forecast to 3.35% from 3.10%, reflecting the RBA’s cautious approach, requiring stronger evidence before considering rate cuts.

Technical Analysis: Australian Dollar Trades Near 0.6650

The Australian Dollar is trading around 0.6640 on Wednesday. Technical analysis of the daily chart shows that the AUD/USD pair is moving within an ascending channel, indicating a strengthening bullish trend. The 14-day Relative Strength Index (RSI) has also moved above the 50 level, confirming the bullish momentum.

On the upside, the AUD/USD pair may test the upper boundary of the ascending channel at the 0.6675 level. A breakout above this level could propel the pair toward its six-month high of 0.6798, achieved on July 11.

In terms of support, the AUD/USD pair could test the nine-day Exponential Moving Average (EMA) at 0.6587, followed by the lower boundary of the ascending channel and the throwback level at 0.6575. A drop below this level could lead to a bearish outlook, potentially pushing the pair toward the throwback level at 0.6470.

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Hopes of Interest Rate Peak Propel European Stocks Higher

Hopes of Interest Rate Peak Propel European Stocks Higher

Optimism over a possible peak in interest rates has given European stocks a slight boost. On Tuesday, minor gains were noted across the European stock market due to traders’ anticipation that central banks would avoid triggering a recession by excessively hiking interest rates in their effort to combat inflation. In particular, Europe’s Stoxx 600 saw an increase of 0.2%, while France’s Cac 40 and Germany’s Dax each rose by 0.1%. It’s worth noting that these gains occurred amidst relatively low trading volumes, given that US markets were closed for the Independence Day holiday.

The Asian markets followed a similar trend. Stocks in this region rose after the Reserve Bank of Australia decided to maintain its interest rates at 4.1%. The bank is currently monitoring the effects of its previous rate increases on the economy. This decision was driven by a quicker-than-anticipated drop in the country’s annual inflation rate, which fell from 6.8 per cent to a 13-month low of 5.6% in May. This news provided some relief to investors who feared central banks might tighten their monetary policy too much in an attempt to curb ongoing price pressures.

Reacting to this news, Australia’s S&P/ASX 200 stock index rose by 0.5%, China’s CSI 300 grew by 0.2%, and Hong Kong’s Hang Seng increased by 0.6%. Japan’s Topix, however, bucked the regional trend and declined by 0.6%.

In other developments, oil prices experienced a surge on Tuesday after Saudi Arabia and Russia, two of the world’s largest producers, announced plans to cut supply in August. Consequently, Brent crude, the international benchmark, rose by 0.8% to trade at $75.27 per barrel, while the US marker West Texas Intermediate climbed by 0.9% to $70.42.

The German economy has also been in the spotlight recently. Germany’s Dax suffered significant losses in the energy and basic materials sectors, resulting in a 0.5% dip in the Stoxx 600 Basic Resources index. Additionally, new data released on Tuesday showed a 0.1% reduction in German exports in May, as high-interest rates continue to impact the country’s main trading partners. This decrease fell significantly short of the expected 0.3% rise projected by analysts.

As we move forward, investors will be keeping a close eye on upcoming economic data. The US employment report due on Friday is particularly anticipated, as it may offer insight into the Federal Reserve’s next policy move.

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Gold Prices Under Pressure as Stronger USD Weighs Ahead of Fed Decision

Nikkei Paces Asia in Market Gains, China Trails

Nikkei Paces Asia in Market Gains, China Trails

Asian stock markets kicked off the week on a positive note, with Japan’s Nikkei Index spearheading the gains while China trailed. The surge in demand for tech stocks fuelled Japan’s market, as investors prepared for a week filled with data that will offer vital insights into the health of the Chinese economy and the direction of U.S. interest rates.

China experienced a dip in factory activity in June, as reflected by the Caixin manufacturing survey, which fell to 50.5 from 50.9 in May. Although this was slightly better than the anticipated market figure of 50.2, it underscored the ongoing weakening trend reflected in other surveys.

In light of this, China’s central bank, the People’s Bank of China, has promised more “forceful” actions to strengthen the economy. This decision comes at a crucial juncture when the country is expected to introduce a new central bank leader and its blue-chip index (.CSI300) lost 5% in the last quarter, even as most of the developed world witnessed a rally.

ANZ analysts caution that efforts to stimulate an economy amidst a significant property downturn, high sector debt, and a dwindling population could be challenging, citing Japan’s struggles in the 1990s as an example.

On the other hand, Japan’s Nikkei (.N225) index recorded nearly 20% growth in the previous quarter, buoyed by expectations that Japanese firms could step in to fill gaps created by the Sino-US decoupling, and a weakened yen. The index registered another 1.7% rise on Monday, inching towards 30-year highs.

According to a Bank of Japan survey, business sentiment improved in Q2, driven by easing supply restrictions and the lifting of pandemic-related measures, leading to enhanced factory output and demand.

However, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose by just 1.2%, still lagging behind Japan’s performance. EUROSTOXX 50 futures and FTSE futures each rose by 0.4%. S&P 500 futures and Nasdaq futures remained steady, ahead of the July 4 holiday, after recording over 6% growth in June.

The tech sector, already riding high, could receive an additional boost from Tesla’s (TSLA.O) record delivery of 466,000 vehicles in Q2, exceeding market estimates of around 445,000. This follows Apple’s (AAPL.O) achievement of crossing a $3 trillion valuation for the first time, contributing to Nasdaq’s best quarter in four decades.

BofA analysts noted that the market value of the seven largest tech companies has soared by $4.1 trillion this year, with Apple, Microsoft (MSFT.O), and Alphabet (GOOGL.O) now worth more than all emerging markets combined.

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WTI Slips to $71.00 Amid Trade Tariff Concerns and Weak China Data

Dow futures are indicating a downward trend

Dow futures are indicating a downward trend

During the evening trading session on Thursday, U.S. stock futures exhibited a varied performance, following a predominantly positive session for major benchmark averages. This optimistic sentiment was spurred by GDP data that outstripped expectations, thereby bolstering investor confidence. Furthermore, banks saw an upswing after the Federal Reserve announced that all 23 institutions featured in its annual stress test were sufficiently capitalized to endure a severe recession.

By 18:45 ET (22:45 GMT), Dow Jones futures were showing signs of a downward shift, marking a slight dip of 0.1%. In contrast, S&P 500 futures and Nasdaq 100 futures remained stable, indicating no significant changes in these indices’ projected opening levels.

In the wake of extended trading hours, shares of Nike (NYSE:NKE) experienced a 4.3% drop. This decline was triggered by the company’s Q4 earnings per share (EPS) of $0.66, which fell $0.02 short of the analyst estimate of $0.68. Despite this, the company’s revenue reached $12.8 billion, surpassing the anticipated figure of $12.58 billion.

Conversely, Accolade (NASDAQ:ACCD) witnessed a notable surge of 15.4% during after-hours trading. This increase followed their Q1 report, which revealed losses of $0.52 per share, outperforming the expected losses of $0.62 per share. The company also reported revenue of $93.2 million, exceeding the forecasted figure of $90.27 million.

As we look forward to Friday’s trading session, market participants will be keenly observing new data on the PCE price index, personal income and spending, as well as the Michigan consumer sentiment and expectation surveys. These indicators will offer crucial insights into the health of the U.S. economy and could steer the direction of the stock market.

During regular trading on Thursday, the Dow Jones Industrial Average rose by 269.8 points or 0.8%, closing at 34,122.4. Similarly, the S&P 500 climbed by 19.6 points or 0.5% to 4,396.4. However, the Nasdaq Composite wrapped up the day virtually unchanged at 13,591.3.

From a fixed income standpoint, the yield on the United States 10-Year Treasury note was pegged at 3.848%. Given that bond yields move inversely to prices, this level of yield suggests that investors are bracing for a rise in interest rates, which could exert further pressure on the stock market.

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Dow Jones Versus the Nasdaq 100 Amid Rising Government Bond Yields

Dow Jones Versus the Nasdaq 100 Amid Rising Government Bond Yields

The blue-chip-oriented Dow Jones gained cautiously on Wednesday while the tech-heavy Nasdaq 100 sank 1.75% in the worst single-day drop since April 25th. In fact, the Nasdaq/Dow ratio plunged 2.02%, marking the worst 24-hour period since October 27th, which was over 7 months ago. What explains this divergent dynamic and is it a concern for sentiment going forward?

Tech’s underperformance coincided with a strong day for developed countries’ 10-year government bond yields. An average of key nations (such as the United States, Canada, and Australia) soared 3.78% on Wednesday. That was the best single-day gain since December 20th. As we were reminded last year, growth-oriented companies face increasingly difficult challenges in a rising rate climate.

The surge in government bond yields follows two key events that are related: unexpected interest rate hikes from the Reserve Bank of Australia and Bank of Canada. The former was earlier this week while the latter occurred over the past 24 hours. These events served as not just a reminder that the fight against inflation is not done, but that other major central banks, such as the Fed, could yet follow.

With that in mind, the mostly pessimistic sentiment tone set by Wall Street leaves the door open to follow-through during Thursday’s Asia-Pacific trading session. That could place regional indices, such as Australia’s ASX 200 and Hong Kong’s Hang Seng Index vulnerable. Sentiment may thus remain in the driver’s seat given a light economic docket over the remaining 24 hours.

Nasdaq 100 Technical Analysis

On the daily chart, the Nasdaq 100 has fallen back to the 100% Fibonacci extension level at 14271. The index remains in a clear uptrend, with the 20-day Simple Moving Average and January trendline guiding prices higher. Reversing the uptrend would thus require meaningful follow-through lower from here. Key resistance is the 123.6% level at 14852 before 15768 comes into focus.

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FOMO Regime Change for US Stock Market

FOMO Regime Change for US Stock Market

The laggards, Dow Jones Industrial Average & Russell 2000 have recorded stellar single-day outperformances on Friday, 2 June against the Nasdaq 100; at least a three-month high.

Market breadth has improved but fundamental structure remains weak due to stagflation risk.

Positive FOMO (“fear of missing out”) flows may persist at least in the short to medium term due to relatively low levels of positioning, exposure, and sentiment.

On Friday, 2 June, we witnessed a significant flow of rotation among the benchmark US stock indices ahead of the key 16 June “Triple Witching” US options expiration; prior laggards, the Dow Jones Industrial Average and Russell 2000 have recorded one of the best single day outperformance in at least three months against the leading mega-cap tech & AI concentrated Nasdaq 100.

The ongoing medium-term uptrend of the Nasdaq 100 started on 13 October 2022, outperforming the Dow Jones Industrial Average and Russell 2000 in the past seven months. Interestingly, the Dow Jones Industrial Average / Nasdaq 1000 ratio recorded its strongest single-day performance on Friday since 3 Feb 2023 (1.38) while the Russell 2000 / Nasdaq 1000 ratio notched its strongest single-day performance since 26 October 2022 (2.81) supported by strong rallies seen in cyclical, industrial and banking stocks such as 3M (+8.7%), Caterpillar (+8.4%) and US regional banks (KRE ETF +6.2%) on Friday.

On the surface, these positive observations can be considered as an improvement in market breadth as rotation is being spread from the high-flying eight mega-cap tech stocks (FAANG plus MNT; Facebook/Meta, Apple, Amazon, Netflix, Google/Alphabet, Microsoft, Nvidia, and Tesla) that are leading the rally since late October 2022 towards the cyclical laggards.

A higher cost of funding environment cannot be ruled out

However, a higher cost of funding environment amid a lingering risk of stagflation may put a damper on earnings growth. The 10-year US Treasury yield has recovered above its 200-day moving ex-post US debt ceiling deal and is looking for a test on a key resistance at 3.90% with positive momentum.

The leading inverted US Treasury yield curve is pointing to a potential imminent global recession

In addition, we cannot rule out an impending global recession as the leading US Treasury yield curve, the difference between the 10-year and 2-year is now at -0.81%; it’s the most inverted state in almost 42 years.

However, in a nutshell, the trend is always your friend until its ends so do not be surprised by such positive FOMO irrational behavior that can persist in the short to medium-term time horizons which in turn may take the US stock market higher due to a relatively low level of positioning, exposure, and sentiment since the start of the year.

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Dollar Index Looks Unstoppable now

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Dollar Index Looks Unstoppable now

On Friday afternoon the new highs rose to 107.6, on the start of European trading session it went 107.45. Since Oct 2002 this was the highest rate and the index added around 20% to its 2021 low.

This is a positive secondary effect for the US(strengthening of dollar), reducing inflationary pressures through imports to ending the talk of dollar weakness that has been prevalent since late 2020.

Central bankers are not welcome too sharp fluctuations in any direction, however they are ignoring the exchange rate against any other currency.

Dollar got a little attention of appreciation by Fed, but it good to be prepared for the change in coming days and weeks to avoid the cause of any uncontrolled rise in dollar, which be devastating.

Fed has begun selling assets off its balance sheet, reducing it by $42.5B. The ECB stopped net buying in July, but active Fed like selling in the matter of uncertainty.

The strengthening of dollar looks controlled so far. But still, after the substantial rise to multi-year highs, markets could start a wave of movement from Europe and Asia, underpinned by the news and current exchange movements. The current market reached a point where it can move in one way. In such a case it is hard to talk about any levels could be the real turning point.[/vc_column_text][/vc_column][/vc_row]

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In the first half, US stocks fell by the most since more than 50 years

In the first half, US stocks fell by the most since more than 50 years

The first half of the year for US stocks was the worst in more than 50 years as a result of a collapse that was started by the Federal Reserve’s attempt to stop persistent inflation and accelerated by growing fears about global growth. The S&P 500 dropped 0.9% on Thursday, bringing the blue-chip index’s decline in the first half of 2022 to 20.6%. Since 1970, when stocks fell as a result of a recession that put a stop to the longest stretch of economic development in American history, Wall Street stocks have not had a year’s start as severe.

According to Bloomberg data on the S&P 1500 index, a larger measure that encompasses small, mid, and large-cap groups, the decline in US stocks has wiped out more than $9 trillion in market value since the end of 2021. The likelihood of recessions in the US and Europe is the dominant market concern, according to Bastien Drut, strategist at Paris-based asset manager CPR. The days of being able to rely on central banks loosening monetary policy to assist economic development are “gone,” he continued, describing the situation as “extremely gloomy.”

The NASDAQ Composite, which is heavily weighted toward technology, has also fallen this year; on Thursday, it lost 1.3%, bringing its losses for the year to roughly 30%.Except for energy stocks, which are up 29% over the past six months, every sector of the S&P 500 has declined. The equities in consumer discretionary companies have dropped the greatest, by 33%. Utility equities, which are viewed as inflation hedge since businesses are better able to pass on increasing costs to customers, have suffered the least this year, down just 2%.

Paul Leech, co-head of global equities at Barclays, claimed that “everything has been highly inflation-driven.” It has been the recurring theme of the year and has truly just gotten worse. Large stock indices have dropped significantly all throughout the world. The Stoxx 600 index for Europe fell 1.5% on Thursday, bringing its yearly loss to almost 17%. In terms of dollars, the MSCI index of the Asia-Pacific markets has fallen 18% in 2022.

Leading policymakers cautioned that the period of low interest rates and moderate inflation had ended following the inflation shock brought on by Russia’s invasion of Ukraine and the coronavirus epidemic on Wednesday at the European Central Bank’s annual conference. Fed Chair Jay Powell has cautioned that the US may experience substantial and frequent price increases that policymakers may find difficult to control if the central bank does not swiftly boost interest rates high enough to combat inflation. The most pain would come from neglecting to confront this high inflation and allowing it to become entrenched, he continued.

Interest rate increases from the Fed and Bank of England have alarmed the markets this month. The Fed increased the federal funds rate by 0.75 percentage points to a new target range of 1.5 to 1.75 percent, and officials have hinted at another significant rate increase for next month. For the first time since 2011, the ECB is also planning a July quarter-point increase.

According to Scott Chronert, US equities analyst at Citigroup, “stubborn inflation readings have provoked an increasingly hawkish Fed response, pushing the policy focus to battle inflation despite potential economic consequences.” Investors are understandably reluctant to purchase due to the Fed’s continuous rate hikes and their concern over resetting earnings expectations. On Wednesday, Citi decreased its S&P 500 year-end projection from 4,700 to 4,200 points. Although the new aim would represent an increase of about 11% above the benchmark’s current level, bank experts also put the likelihood of a worldwide recession at 50%.

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Gold Struggles Below $3,300 as Fed Rate Cut Hopes Dim Ahead of FOMC Minutes

Gold Struggles Below $3,300 as Fed Rate Cut Hopes Dim Ahead of FOMC Minutes

Gold (XAU/USD) dipped to a one-and-a-half-week low near $3,284 during the Asian trading session on Wednesday, weighed down by a stronger US Dollar and rising Treasury yields. Investors are increasingly convinced that recent US tariff hikes may fuel inflation, prompting the Federal Reserve to keep interest rates elevated for longer. 

The firmer Greenback, bolstered by expectations of prolonged Fed tightening and a robust June jobs report, has dulled the appeal of non-yielding assets like gold. Benchmark 10-year US bond yields also climbed, adding further pressure on the precious metal. 

Market participants remain cautious amid ongoing concerns about the economic fallout from Donald Trump’s aggressive tariff proposals. On Tuesday, the former US President threatened to impose duties of up to 50% on copper and 200% on foreign pharmaceuticals, unsettling global markets. However, gold’s traditional safe-haven demand has yet to see significant support in response. 

Traders are now eyeing the release of the FOMC meeting minutes later today, hoping for clues on the Fed’s rate path. Although a July rate cut appears off the table, markets are still pricing in up to 50 basis points of easing by year-end, likely beginning in October. 

Technically, a break below the $3,300 level, coupled with resistance at the 100-period SMA on the 4-hour chart, signals further downside. Momentum indicators suggest gold could slide towards the next support at $3,270, with a deeper drop towards $3,248–$3,247 not ruled out. 

On the upside, recovery attempts may face initial resistance near $3,310 and stronger barriers around $3,326 and $3,340. A decisive move above $3,360 could open the door to a short-term rebound toward the $3,400 mark. 

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Gold Price Climbs Steadily

Gold Price Climbs Steadily, Eyes Record High Amid Trade War Concerns

Gold (XAU/USD) extends its intraday rally, reaching the $2,880 region during the Asian session on Monday. The gains come in response to US President Donald Trump’s plan to impose new 25% tariffs on all steel and aluminum imports, reigniting fears of a global trade war and driving demand for the safe-haven precious metal. Additionally, concerns that Trump’s protectionist policies could fuel inflation further bolster gold’s appeal as a hedge against rising prices.

Gold Supported by Trade War Fears, But Fed Policy Remains a Concern

Despite strong upside momentum, gold’s gains may face limitations due to the resilient US Dollar (USD) and expectations that the Federal Reserve (Fed) might delay further rate cuts. The strong US employment data released on Friday, coupled with inflationary concerns, has reinforced speculation that the Fed will maintain a cautious stance.

Overbought conditions on the daily chart could also deter traders from initiating fresh bullish positions, especially in the absence of key US economic data early in the week.

Trump’s Tariff Announcement Sparks Market Uncertainty

On Sunday, Trump reaffirmed plans to impose 25% tariffs on all steel and aluminum imports into the US, adding that his administration would match tariff rates imposed by other countries. These announcements have further fueled uncertainty and strengthened gold’s safe-haven appeal.

Meanwhile, geopolitical tensions remain elevated. Russian Deputy Foreign Minister Galuzin stated there are no satisfactory proposals for Ukraine peace talks, dismissing Western statements as mere rhetoric. US Vice President JD Vance is reportedly heading to Germany this week to outline US policy proposals.

Fed Policymakers Express Caution Amid Economic Uncertainty

The latest US Nonfarm Payrolls (NFP) report showed 143K jobs were added in January, falling short of the 170K estimate but offset by an unexpected dip in the Unemployment Rate to 4.0%. While the report provides mixed signals, it has reinforced the belief that the Fed will remain cautious regarding further monetary easing.

Several Fed officials have weighed in on economic policy:

  • Minneapolis Fed President Neel Kashkari stated he would consider supporting further rate cuts if inflation data remains favorable and the labor market stays strong.
  • Chicago Fed President Austan Goolsbee noted that inconsistent US government policies create economic uncertainty, making it difficult to assess inflation trends.
  • Fed Governor Adriana Kugler acknowledged steady US economic growth but warned that progress toward the 2% inflation target remains uneven and slow.

What’s Next for Gold?

A stronger US Dollar could act as a headwind for gold prices, limiting aggressive bullish momentum. Traders will closely monitor Fed Chair Jerome Powell’s semi-annual congressional testimony and the upcoming US consumer inflation figures for further market direction.

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Gold Price Rally Holds Strong, But Overbought Conditions Raise Caution

Gold Price Bulls Hold Firm, But Overbought Conditions Suggest Caution

Gold (XAU/USD) continues its upward trajectory through the Asian session on Wednesday, reaching a fresh all-time high near $2,858. Concerns about the economic impact of US President Donald Trump’s trade tariffs continue to drive demand for the safe-haven metal. Furthermore, predictions that the Federal Reserve (Fed) would continue its easing cycle, backed by signs of deteriorating momentum in the US labor market, are fuelling demand for the non-yielding yellow metal.

 

Meanwhile, the US dollar (USD) remains under pressure near its weekly low, with rising expectations of further Fed policy easing, offering an extra lift to gold prices. However, Trump’s decision to suspend tariffs on Canada and Mexico has contributed to a risk-on mentality, which may restrict future gains for XAU/USD. Furthermore, gold is entering overbought territory on the daily chart, implying a short-term consolidation or minor retreat before the advance begins. Traders are now waiting for significant U.S. data releases, such as the ADP private-sector employment report and the ISM Services PMI, for new market signals.

Gold Bulls Retain Control Amid US-China Trade Tensions

Despite the positive risk tone, a further escalation in U.S.-China trade tensions continues to lend support to the upward momentum in gold. In response to President Trump’s latest tariffs, China has imposed targeted duties on US imports, and the threat of a trade war between the world’s two biggest economies has seen gold reach an all-time high on Wednesday.

On the macroeconomic front, the Job Openings and Labor Turnover Survey (JOLTS) released Tuesday revealed a decline in U.S. job openings, dropping to 7.6 million in December from a previous 8.09 million. The data signals a cooling labor market, increasing the likelihood of additional Fed rate cuts. This has kept USD bulls on the defensive and further strengthened XAU/USD.

Trump’s decision to postpone the application of a 25% tax on Canadian and Mexican imports by 30 days has revived hopes that a global trade war can be avoided. However, this has done little to undermine the positive enthusiasm toward gold.

Market players will be keenly monitoring Wednesday’s U.S. economic data, such as the ISM Services PMI and the ADP employment report, which may cause short-term changes in gold prices. However, Friday’s highly anticipated Nonfarm Payrolls (NFP) report continues to be the main focus. Furthermore, any fresh information about trade tariffs is probably going to cause financial markets to become more volatile.

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WTI Crude Oil Struggles Near $72.00, 100-Day SMA Holds as Key Support

WTI Crude Oil Struggles Near $72.00, 100-Day SMA Holds as Key Support

West Texas Intermediate (WTI) crude oil prices fell from a one-week high on Tuesday, attracting sellers for the second straight session. The commodity trades at $72.00, barely above last week’s one-month low and close to the important 100-day Simple Moving Average (SMA) support. 

US Tariff Delay Weighs on Oil Prices

US President Donald Trump has announced a one-month suspension on newly imposed tariffs on imports from Canada and Mexico, easing worries about potential supply disruptions from two of the country’s main oil suppliers. This development put downward pressure on crude oil prices. Furthermore, fears of lower gasoline demand—driven by the larger economic impact of Trump’s trade policies—are contributing to gloomy sentiment in the oil market.

OPEC+ Stands Firm on Production Policy

Despite Trump’s calls for higher output to combat rising oil prices, the Organization of Petroleum Exporting Countries and its allies (OPEC+) have chosen to keep current production levels. This decision may give some support for crude oil prices, avoiding further losses in the near term.

Key Technical Levels to Watch

Traders will closely monitor the 100-day SMA, currently positioned near the $71.00 mark, which serves as a crucial support level. A decisive break below this threshold could trigger an extended pullback from the recent multi-month highs. Conversely, a bounce from this level may reinforce buying interest and help WTI recover from its recent slump.

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Gold Holds Below $2,800 Despite Intraday Recovery

Gold Price Trims Intraday Losses but Remains Below $2,800 Amid Stronger USD

The gold price (XAU/USD) recovers some of its losses following the strong Asian session sell-off but remains in negative territory, hovering around $2,785, down about 0.60% for the day. The recent rise in the US Dollar (USD), fueled by President Donald Trump’s decision to impose tariffs on Canada, Mexico, and China, has pushed the greenback closer to a two-year high, weighing on gold and dragging it away from its all-time high of $2,817, hit on Friday.

However, projections that the Federal Reserve (Fed) would lower interest rates twice by the end of 2025, combined with indications about probable economic disruptions from Trump’s trade policies, contribute to gold’s safe-haven appeal. The current risk-off mentality further shields the downside, so bearish traders should exercise caution ahead of this week’s key US macroeconomic data, which begins with today’s ISM Manufacturing PMI release.

Technical Outlook: Gold’s Uptrend Intact Despite Intraday Pullback

From a technical perspective, the intraday decline found support near the $2,772 resistance-turned-support level, which now serves as a pivotal point. A decisive break below this zone could trigger further selling pressure, exposing gold to the next key support levels:

 

  • $2,755 – Initial downside target
  • $2,740 – Intermediate support
  • $2,725-$2,720 – Strong demand zone
  • $2,700 – Psychological level, a break below which could accelerate losses

Conversely, immediate resistance is seen in the $2,790-$2,800 region, followed by the record high of $2,817. Notably, momentum indicators on the daily chart remain comfortably positive, indicating that gold has not yet reached overbought levels. This provides room for additional upward momentum, confirming the broader bullish trend that began with the December swing bottom.

If gold manages to sustain a move above $2,817, it could pave the way for fresh record highs, with bulls eyeing further gains amid ongoing market uncertainty.

Market Drivers to Watch

US Dollar Strength: The impact of Trump’s tariffs on global trade could continue supporting the USD, potentially weighing on gold.

Federal Reserve Policy: Expectations of rate cuts in 2025 remain a crucial factor for gold’s long-term trajectory.

US Economic Data: The upcoming ISM Manufacturing PMI and Nonfarm Payrolls (NFP) report later this week could trigger volatility in gold prices.

Risk Sentiment: Any escalation in geopolitical or economic tensions could further boost gold’s safe-haven demand.

Overall, while gold has retreated from its highs, the larger bullish trend remains intact, with technical signals suggesting further upward movement as long as critical support levels hold.

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WTI Slips to $71.00 Amid Trade Tariff Concerns and Weak China Data

WTI Slips to $71.00 Amid Trade Tariff Concerns and Weak China Data

West Texas Intermediate (WTI) crude oil prices edge lower during Wednesday’s Asian session, erasing part of the previous day’s modest recovery from a nearly three-week low. The commodity trades near $71.00, down over 0.25% for the day, and remains vulnerable to further losses amid prevailing bearish sentiment.

Investor concerns persist over US President Donald Trump’s threat to impose trade tariffs on Canada, China, and Mexico by February 1, which could weigh on global fuel demand. Additionally, weak Chinese economic data adds to downward pressure. Official PMIs released on Monday highlighted continued weakness in the world’s second-largest economy and top crude importer, raising concerns over lower consumption.

Further pressure on oil prices comes from Trump’s energy policies, which include plans to ramp up US energy production and calls for the Organization of Petroleum Exporting Countries (OPEC) to increase output to drive prices lower.

With bearish fundamentals dominating, WTI remains susceptible to further downside risks in the near term.

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WTI Drops Toward

WTI Drops Toward $74.00 as Trump Pressures OPEC to Lower Oil Prices

West Texas Intermediate (WTI), the US crude oil benchmark, trades near $74.10 on Friday, continuing its downward trend after US President Donald Trump urged Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC) to reduce oil prices.

Uncertainty surrounding Trump’s proposed tariffs and energy policies adds to the pressure on WTI. Speaking at the World Economic Forum in Davos on Thursday, Trump announced plans to request Saudi Arabia and OPEC to lower oil prices, saying, “I’m also going to ask Saudi Arabia and OPEC to bring down the cost of oil.”

Expectations of increased US production under Trump’s administration further weigh on oil prices. Earlier this week, Trump declared a national energy emergency, leveraging his authority to expedite the approval of oil, gas, and electricity projects that would typically require years of permitting.

Meanwhile, US crude inventories declined for the ninth consecutive week. The US Energy Information Administration (EIA) reported a drop of 1.017 million barrels in crude oil stockpiles for the week ending January 17, following a 1.962 million-barrel decline in the prior week. Market expectations had forecast a larger decrease of 2.1 million barrels.

Oil traders will closely monitor developments surrounding Trump’s energy policies and tariff announcements. Additionally, attention will shift to the preliminary US S&P Global Purchasing Managers Index (PMI) for January, set for release later on Friday. A weaker-than-expected reading could pressure the US Dollar (USD), potentially offering some support to the USD-denominated WTI price.

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ANZ Economists Predict Earlier OCR

ANZ Economists Predict Earlier OCR Cut Amid ‘Meaningful Progress’ in Inflation Battle

ANZ Economists Predict Earlier OCR Cut Amid ‘Meaningful Progress’ in Inflation Battle

Economists at ANZ New Zealand, the country’s largest bank, have revised their forecast for the first Reserve Bank Official Cash Rate (OCR) cut, moving it up to February 2025 from the previously anticipated May 2025.

Currently, the OCR stands at 5.50%, unchanged since May 2023. This adjustment in ANZ’s forecast comes as they observe potential progress in controlling inflation, despite ongoing domestic economic weakness. ANZ’s Chief Economist Sharon Zollner highlighted that recent data and leading indicators support a more confident outlook for a weak economy, prompting the bank to adjust its forecast.

Earlier this year, ANZ had forecasted a steady sequence of OCR cuts starting in August, eventually reducing the rate to 3.5% over 12 months. However, by February, they revised their stance, predicting two 25 basis point increases instead, one in February and another in April. Post the February monetary policy review, ANZ acknowledged their forecast error but still saw a strong chance of the OCR moving up before eventually forecasting a cut in mid-2025, later specified as May.

Zollner explained that before cutting the OCR, the Reserve Bank needs to be confident that Consumer Price Index (CPI) inflation is moving toward 2% and is expected to remain within the 1% to 3% target range. By February 2025, ANZ anticipates seeing fourth-quarter CPI inflation at 2.6% year-on-year and non-tradable inflation dropping below 4% in the following quarter, with unemployment rising above 5%. These conditions, according to Zollner, would justify an OCR cut.

The March CPI was 4%, with unemployment at 4.3%. Non-tradable inflation, which includes domestic goods and services, was at 5.8%, while tradeable inflation, including imported goods, was at 1.6%.

ANZ economists note the housing market remains stagnant, with ANZ holding $107.5 billion in housing loans as of March 31. Looking beyond February, they have penciled in a 25 basis point cut at each Reserve Bank monetary policy meeting, aiming for the OCR to stabilize around 3.5%, considered a neutral rate that neither stimulates nor constrains the economy.

The Reserve Bank itself isn’t forecasting an OCR cut until August next year, while financial markets have priced in a cut for November this year. The next OCR review is scheduled for July 10. Meanwhile, Infometrics’ chief forecaster Gareth Kiernan has also adjusted his forecast, now expecting the first OCR cut in February next year instead of November this year.

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Taiwan Central Bank Chief Links Rate Cut to Inflation Control

Taiwan Central Bank Chief Links Rate Cut to Inflation Control

Taiwan Central Bank Chief Links Rate Cut to Inflation Control

On Thursday, Taiwan’s central bank governor highlighted that inflation remains the crucial determinant in the potential decision to adjust interest rates at the upcoming meeting next week. During a session with legislators in parliament, Governor Yang Chin-long noted that Taiwan’s current interest rates are at their peak in over 15 years.

Governor Yang acknowledged the growing expectations for the U.S. Federal Reserve to reduce its rates by September. However, he emphasized that Taiwan’s economic circumstances differ from the U.S., indicating that any decision by Taiwan’s central bank to alter interest rates would not necessarily mirror the Fed’s actions. He stated that the decision to adjust rates in Taiwan hinges entirely on the domestic inflation scenario, which currently does not align directly with U.S. rates.

Despite not committing to a rate cut, Governor Yang suggested that another rate hike might be off the table for now. He reflected on the market’s reaction to the unexpected rate increase in March, pointing out that frequent surprises regarding rate adjustments are not desirable.

In economic data, Taiwan’s consumer price index (CPI) for April recorded a year-on-year increase of 1.95 percent, which was below the expectations of analysts. This has led the government to report a mild easing in inflation levels. This comes after the central bank, in a move that caught markets off guard in March, increased its policy rate to 2 percent from 1.875 percent. This decision was influenced by ongoing inflationary pressures and an impending rise in electricity prices.

The next rate-setting meeting of the central bank is scheduled for June 13. The economic context for this meeting is shaped by recent statistics indicating that Taiwan’s economy is poised for faster growth in 2024. This optimistic forecast is supported by robust international demand for artificial intelligence (AI) applications and strong domestic consumption. These factors will play a significant role in the central bank’s deliberations on whether to adjust interest rates, balancing the need to manage inflation while supporting economic growth.

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RBA Governor Bullock Predicts 'Quite Low' March GDP Numbers

RBA Governor Bullock Predicts ‘Quite Low’ March GDP Numbers

RBA Governor Bullock Predicts ‘Quite Low’ March GDP Numbers

Reserve Bank of Australia (RBA) Governor Michele Bullock has indicated that a rebound in inflation or persistently high price pressures could necessitate further interest rate hikes. Speaking at a senate estimates hearing, Bullock emphasized the RBA’s readiness to act if inflation remains uncomfortably high, stating that the central bank would not hesitate to increase rates again to control rising prices.

Conversely, Bullock noted that if economic growth were significantly lower than expected, the RBA would consider cutting interest rates to stimulate the economy. She highlighted the importance of monitoring economic indicators closely to determine the appropriate monetary policy response.

Bullock also projected that economic growth would be “quite low” in early 2024. The March quarter national accounts are expected to show minimal growth, with economists predicting a mere 0.2% expansion in the first quarter of 2024. This figure would result in an annual growth rate of just 1.2%, the weakest performance outside the pandemic since the 2000 dot-com bust. When questioned about the concept of a per capita recession, Bullock dismissed the term, stating that it does not accurately reflect job losses and economic difficulties.

In addressing budgetary questions, Bullock avoided labeling Treasurer Jim Chalmers’ May budget as either expansionary or contractionary, citing the complexity of the issue. She argued that various domestic and international factors influence Australia’s economic conditions, not just fiscal policy. Treasury Secretary Steven Kennedy also declined to provide a definitive answer on the budget’s impact during a similar inquiry.

Bullock reassured that federal and state energy rebates would not significantly impact underlying inflation. Despite concerns from some economists that the savings from the rebates might boost spending and inflation, Bullock believes the effect will be minimal. The May budget included a $300 energy rebate for households, which Treasury estimates will reduce headline inflation by 0.5 percentage points.

Under questioning from Liberal Senator Dean Smith, Bullock affirmed that the RBA would not rule out raising interest rates during an election campaign if necessary. The central bank’s decisions will continue to be driven by economic data.

RBA Assistant Governor Christopher Kent highlighted that the effects of the 13 rate hikes since May 2022 are still unfolding. A small group of borrowers with fixed-rate loans are yet to transition to higher variable rates, which could add another 20 basis points to the average mortgage rate. Kent also noted that increased competition among banks for high-quality borrowers has mitigated the impact of rate hikes on households. Only about 80% of the increase in the cash rate has been passed on to borrowers, thanks to competitive banking practices.

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China's Yuan Falls Despite

China’s Yuan Falls Despite Gains Across Asian Markets

China’s Yuan Falls Despite Gains Across Asian Markets

On Tuesday, the Chinese yuan experienced a decline against the dollar, diverging from the general upward trend seen in other Asian currencies. This occurred despite a broader weakening of the greenback, influenced by factors such as foreign dividend payments and ongoing economic concerns.

Before the markets opened, the People’s Bank of China set the daily midpoint rate for the yuan at 7.1083 per US dollar, marking its strongest position since May 22. This rate is central to the managed floating exchange rate system that allows the yuan to fluctuate within a 2% range above or below the midpoint.

In the spot market, the onshore yuan started the day at 7.2400 per dollar. By midday, it had weakened to 7.2456, showing a slight decrease of 43 pips compared to the previous session’s close and standing 1.93% weaker than the midpoint.

Despite recent policy efforts to stimulate the property market, these measures have not managed to sustain capital inflows, according to analysts. HSBC noted that while there have been short-lived increases in equity inflows due to policy changes favoring property, these have not been maintained. On the other hand, there has been a more consistent outflow of funds due to onshore demand for foreign exchange and investments in offshore equities through the southbound trading link.

Additionally, the Chinese blue-chip CSI 300 index has shown signs of weakening after initially rebounding from five-year lows in February. This suggests investor fatigue and uncertainty regarding the effectiveness of the government’s support measures for the market.

Another factor contributing to the yuan’s decline is the seasonal demand for foreign currency by overseas-listed Chinese companies needing to cover dividend payouts. This demand typically leads to selling of the yuan in exchange for foreign currencies.

Market watchers are now looking forward to upcoming U.S. economic indicators, including the ISM services PMI and nonfarm payrolls data, which will provide further insights into the potential adjustments in U.S. interest rates.

For the year, the yuan has fallen by 2.1%, affected by its relatively low yields compared to other currencies and the divergent monetary policies between China and other major economies. Meanwhile, the global dollar index has seen a slight decrease, dropping to 104.08 from 104.14. The offshore yuan is also showing a modest disparity from its onshore counterpart, trading at 7.2573 per dollar, which is 0.16% weaker.

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Japan's Q1 Capex Increase Hints at Positive GDP Revision

Japan’s Q1 Capex Increase Hints at Positive GDP Revision

Japan’s Q1 Capex Increase Hints at Positive GDP Revision

In the January-March period, Japanese companies increased their investment in plant and equipment, driven by a rise in demand for automobiles and efforts to streamline operations. This uptick in capital expenditure suggests that the economic downturn observed in the first quarter might be less severe than previously estimated.

The latest figures indicate a resurgence in private sector-led growth, a key factor for the Bank of Japan as it considers further normalization of its monetary policy. This follows a rate hike in March, the first since 2007. According to the Ministry of Finance, corporate capital spending in Japan grew by 6.8% year-over-year in the first quarter. Despite being the 12th consecutive quarter of gains, the growth rate has decelerated from the previous quarter’s robust 16.4%. Additionally, on a seasonally adjusted quarterly basis, there was a decline of 4.2%, pointing to inconsistent momentum.

These investment figures will play a crucial role in the recalibration of the gross domestic product (GDP) statistics scheduled for release on June 10. Initial estimates had shown a contraction of 2.0% on an annualized basis in the first quarter. Analysts now suggest that these capex figures, combined with public works investment and an increase in inventories, may lead to an adjusted contraction of around 1.8% annualized.

This improved capex data is anticipated to strengthen arguments in favor of the central bank continuing with its policy normalization efforts gradually. Additionally, the Ministry of Finance reported that corporate sales in the first quarter rose by 2.3% from the previous year, while recurring profits surged by 15.1%. Total corporate profits reached 27.4 trillion yen, marking the third highest recorded figure, bolstered by heightened demand in sectors like automotive, chemicals, real estate, and other services. These developments suggest a potential stabilization and gradual recovery of the Japanese economy in the upcoming months.

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Japanese Yen Nears Multi-Month

Tokyo Inflation Rises, Aligning BOJ with Potential Rate Hike

Tokyo Inflation Rises, Aligning BOJ with Potential Rate Hike

Inflation in Tokyo saw a notable uptick in May, with consumer prices excluding fresh food climbing by 1.9%, according to data from the Ministry of Internal Affairs. This increase, which aligns with economists’ predictions, was primarily fueled by higher utility costs due to renewable energy surcharges.

These inflation figures from Tokyo often predict national trends, suggesting that a similar rise could be expected in the upcoming nationwide inflation data. Despite this increase, Tokyo’s inflation rate remains below the national average, largely due to educational subsidies provided by the local government.

Economists are closely monitoring the potential impacts of the upcoming tax cuts in June and the cessation of government utility subsidies on consumer prices and spending habits. Although some analysts foresee a possible early rate hike by the Bank of Japan (BOJ) due to the depreciating yen, others, like Mari Iwashita from Daiwa Securities, anticipate such a move might not occur until October.

Additional data released indicated a mixed economic scenario. Industrial output in April was below expectations, and while the jobless rate stabilized at 2.6%, the job vacancy-to-seeker ratio slightly declined. Nonetheless, the labor market remains tight, potentially leading to higher wages and, subsequently, higher prices.

The BOJ’s approach to interest rates is garnering attention following the end of its negative interest rate policy in March. Solid growth in prices might encourage the BOJ to initiate another rate hike this year if a healthy cycle of rising wages and prices appears to be taking shape. BOJ Governor Kazuo Ueda has hinted at the possibility of gradual rate increases, moving away from the long-standing zero inflation mindset.

On the inflation details, a deeper look at the data reveals a slight slowdown in core inflation, which excludes fresh food and energy, to 1.7%. Service prices also saw a modest rise, impacted by ongoing educational subsidies.

Retail sales data showed a positive trend with a 1.2% increase in April, outperforming expectations. However, factory output dipped slightly by 0.1%, missing the projected 1.5% growth. These figures suggest an uneven recovery pace in Japan’s economy, which continues to face challenges despite some positive signs.

Inflationary pressures are expected to intensify with the phasing out of energy subsidies and a significant increase in renewable energy surcharges, potentially driving the inflation rate towards 3% over the summer. Additionally, the weakening yen, which recently hit a 34-year low against the dollar, poses further risks by increasing import costs. This scenario is compounded by the likelihood of businesses passing on rising labor costs to consumers, reflecting significant pay gains achieved in recent wage negotiations, marking the most substantial increases in nearly three decades.

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Yen Surpasses Threshold Suspected to Trigger Intervention

Yen Surpasses Threshold Suspected to Trigger Intervention

The yen recently fell to a four-week low, touching 157.71 before slightly recovering to 157.39 per dollar, demonstrating the ongoing challenges Japan faces in its attempts to stabilize its currency through market interventions. This decline brings the yen close to the 157.52 mark, a critical level that previously triggered suspected intervention by Japan at the beginning of May to strengthen the currency.

Despite these efforts, the yen continues to weaken due to the substantial difference in interest rates between Japan and other major economies. This discrepancy has made the yen less attractive as investors seek assets with higher returns. Even as Japanese bond yields hit their highest in a decade, the currency’s pressure remains unrelieved.

Japan’s 10-year government bond yield has risen to 1.1%, the highest since July 2011, fueled by speculation that the Bank of Japan (BOJ) might increase interest rates further this year after moving away from negative interest rates in March. However, even slight increases in Japan’s yields seem insufficient to shift market focus away from higher-yielding currencies.

The yen’s depreciation is evident not only against the dollar but also against European currencies, nearing its lowest point since 2008 against the pound and approaching a record low against the euro. The yields on ten-year bonds in the US and UK are more than 300 basis points higher than those in Japan, further highlighting the yen’s unattractiveness.

Japanese authorities have not confirmed their intervention in the currency market, though estimates based on financial deposits at the Bank of Japan suggest they might have purchased around ¥3.5 trillion ($22 billion) worth of yen to support it. Finance Minister Shunichi Suzuki has maintained vigilance over the currency market, promising necessary actions as required.

However, the intervention faces potential complications. US Treasury Secretary Janet Yellen emphasized that currency intervention should rarely be used and should be pre-announced, aligning with the Group of Seven’s agreement to avoid manipulating exchange rates except in cases of extreme volatility. This stance could make it more challenging for Japan to intervene under current conditions.

Moreover, BOJ Board Member Seiji Adachi indicated that ongoing yen weakness could lead to higher prices, potentially hastening the need for another rate hike. Swap markets are now fully pricing in a rate increase by the BOJ in their July meeting, reflecting heightened expectations for monetary tightening in Japan.

In summary, while Japan is keen on supporting the yen, global yield disparities and international diplomatic considerations complicate its intervention efforts. As higher yields continue to dominate global markets, the yen remains under significant downward pressure.

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USD/JPY Holds Steady Near 147.00 as Yen Weakens on Trade Tensions and BoJ Rate Outlook

USD/JPY Holds Steady Near 147.00 as Yen Weakens on Trade Tensions and BoJ Rate Outlook

The Japanese Yen (JPY) continues to trade with a bearish bias on Wednesday, keeping the USD/JPY pair firm around the 147.00 mark during the Asian session. A stronger US Dollar and persistent concerns over rising trade tensions are weighing heavily on the Yen, as markets brace for the impact of US tariffs on Japanese goods starting August 1. 

Former US President Donald Trump’s announcement of a 25% tariff on Japanese imports, coupled with the threat of retaliatory action, has sparked renewed fears over Japan’s economic resilience. The country’s Q1 GDP contracted, real wages in May dropped at their steepest pace in nearly two years, and political uncertainty is rising ahead of the July 20 House of Councillors election. Recent polls suggest the ruling LDP-Komeito coalition may struggle to retain its majority, further dampening investor confidence. 

These developments have led traders to scale back expectations of a rate hike by the Bank of Japan this year. The combination of domestic headwinds and external pressure is weakening the JPY, while the US Dollar continues to gain on expectations that rising tariffs will stoke inflation and prompt the Federal Reserve to maintain a hawkish stance. 

The Fed’s June decision to hold interest rates steady, along with a strong US jobs report, has reinforced the belief that rate cuts may be delayed until at least October. The FOMC meeting minutes, due later today, will be closely watched for insights into the Fed’s policy trajectory. Markets currently anticipate up to 50 basis points in rate cuts by year-end. 

Technical Outlook: Bullish Momentum Builds 

Technically, USD/JPY’s break and close above the 100-day Simple Moving Average (SMA) — for the first time since February — signals potential for further gains. Positive momentum on the daily chart supports a move toward the 147.60–147.65 resistance area, with the 148.00 handle, a key June high, in sight. 

On the downside, immediate support lies near 146.50, with the 100-day SMA just below 146.00 acting as a critical pivot. A decisive break below this level could shift momentum in favor of bears, opening room for deeper losses. 

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NZD/USD gains ground to near 0.5700 on weaker US PMI data

During the early Asian session on Thursday, the NZD/USD pair was trading slightly higher at 0.5690. The Greenback falls against the New Zealand Dollar (NZD) as US economic data disappoints. Investors will keenly monitor developments in the rekindled trade battle between the United States and China, the world’s two largest economies. 

The weaker US Services Purchasing Manager Index (PMI) could weigh on the Greenback and generate a tailwind for the pair. The US ISM Services PMI fell to 52.8 in January from 54.0 (revised from 54.1) in December. This reading came in below the market consensus of 54.3.

On the other hand, New Zealand’s fourth-quarter employment report will put the RBNZ on pace to decrease the Official Cash Rate (OCR) by 50 basis points (bps) to 3.75% this month. Statistics New Zealand said on Wednesday that the country’s unemployment rate increased to 5.1% in Q4, up from 4.8% the previous quarter. This result was a four-year high and exceeded the 25-year average of 4.8%. Rising expectations that the Reserve Bank of New Zealand (RBNZ) may decrease interest rates may further impact on the New Zealand Dollar (NZD).

“In line with RBNZ guidance, markets continue to imply another 50bps rate cut to 3.75% at the February 19 meeting and the policy rate to through around 3.00% over the next 12 months. Bottom line: NZ-US 2-year bond yield spreads can further weigh on NZD/USD,” noted Société Générale’s FX analysts. 

On Tuesday, the finance ministry in China unveiled a package of tariffs on various US products such as crude oil, farm equipment, and some autos in a sharp response to an announcement made by US President Donald Trump imposing a 10% tariff on Chinese imports. Further, China served notice to several companies including Google for potential sanctions in response to Trump’s tariffs. Any sign of uncertainty or a rising trade war tension may see the China-proxy Kiwi being dragged lower, as China remains one of the major trading partners to New Zealand.

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JPY Recovers Losses vs. USD, Bullish Outlook Intact

Japanese Yen Recovers Some Losses Against USD; Bullish Outlook Remains Intact

The Japanese yen (JPY) cut some of its intraday losses against the US dollar (USD) on Monday, bringing the USD/JPY pair back below the mid-155.00s during the early European session. The Bank of Japan’s (BoJ) Summary of Opinions showed conversations about the possibility of further hikes in interest rates. Furthermore, Tokyo’s core inflation increased at the quickest annual rate in nearly a year, raising expectations of further policy tightening by the BoJ, which supports the JPY.

Beyond monetary policy, narrowing interest rate differentials between Japan and other major economies, including the US, alongside a broader risk-off sentiment, provide additional support to the safe-haven JPY. However, concerns over the economic impact of US President Donald Trump’s newly announced trade tariffs limit the yen’s upside. Meanwhile, the USD remains broadly strong, allowing the USD/JPY pair to maintain its positive momentum for a second consecutive day, ahead of the upcoming US ISM Manufacturing PMI report.

Yen Gains Traction Amid BoJ Rate Hike Bets and Trade War Fears

US President Donald Trump signed an executive order on Saturday to impose 25% tariffs on imports from Canada and Mexico and 10% tariffs on Chinese goods, effective Tuesday.

Canada’s Prime Minister Justin Trudeau, Mexico’s President Claudia Sheinbaum, and China’s foreign ministry all replied quickly, indicating probable retaliation. The US Dollar continues to climb, approaching a two-year high last hit in January, supporting the USD/JPY pair’s upward trend.

The Bank of Japan’s latest Summary of Opinions, released on Monday, showed that policymakers are thinking about additional rate hikes, though this has failed to appreciably lift the JPY.

Board members of the Bank of Japan stressed the need of continuing to raise interest rates if economic conditions and inflation remain stable.

Japan’s Finance Minister Katsunobu Kato stated that the government is closely monitoring the impact of Trump’s tariffs on the yen amid concerns over potential economic fallout.

Economy Minister Ryosei Akazawa reiterated Japan’s commitment to achieving the BoJ’s 2% inflation target while implementing measures to offset rising living costs.

The US-Japan yield spread remains near a multi-week low, which, coupled with risk aversion, could help stabilize the yen in the near term.

Investors now turn their focus to key US economic data, starting with today’s ISM Manufacturing PMI, followed by the highly anticipated Nonfarm Payrolls (NFP) report on Friday.

USD/JPY Faces Resistance Near 156.25; Bears in Control Below This Level

From a technical standpoint, last week’s strong rebound from the 50% Fibonacci retracement level of the December-January rally and the subsequent upside move favor bullish traders. However, additional gains beyond 156.00 may encounter resistance near last week’s swing high at 156.25. A sustained break above this level could spark a short-covering rally, pushing the pair towards:

  • 156.70-156.75 resistance
  • 157.00 psychological mark
  • 157.60 horizontal barrier
  • Potential extension towards 158.00, with an ultimate target at the 158.85-158.90 multi-month high from January 10

Conversely, on the downside:-

  • 155.00 serves as immediate support
  • Below this, watch for key levels at 154.55-154.50 and 154.00
  • A break below the 153.70 January low could accelerate the decline towards 153.30 and eventually 153.00

While the JPY is exhibiting some resilience, the overall trend remains unpredictable, with market participants intently watching economic indicators and geopolitical developments.

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Australian Dollar Drops as RBA Rate Cut Bets Rise, Fed Decision Looms

Australian Dollar Slides Amid Rising Odds of RBA Rate Cuts, Fed Decision in Focus

The Australian Dollar (AUD) extends its losing streak for a third consecutive session against the US Dollar (USD), weighed down by softer-than-expected inflation data from Australia.

Australia’s Consumer Price Index (CPI) rose by 0.2% quarter-on-quarter in Q4 2024, matching the previous quarter but missing the expected 0.3%. On an annual basis, CPI eased to 2.4% from 2.8% in Q3, below the market forecast of 2.5%. Despite December’s monthly CPI ticking up to 2.5% YoY, inflation remains within the Reserve Bank of Australia’s (RBA) 2%-3% target range. Meanwhile, the RBA’s Trimmed Mean CPI slowed to 3.2% YoY, its weakest pace in three years, slightly under the anticipated 3.3%.

Australian Treasurer Jim Chalmers expressed confidence that “the worst of the inflation challenge is behind us” and that a “soft landing” is increasingly likely. The cooling inflation strengthens the case for an RBA rate cut in February. The central bank has held the Official Cash Rate (OCR) steady at 4.35% since November 2023, emphasizing the need for inflation to “sustainably” return to target before considering a rate reduction.

AUD Pressured by Risk Aversion, Trump’s Tariff Threats

The AUD faces additional headwinds from risk-off sentiment following tariff threats by former US President Donald Trump. On Monday, Trump announced plans to impose tariffs on imports of key commodities, including computer chips, pharmaceuticals, steel, aluminum, and copper, aiming to boost US manufacturing.

Meanwhile, the US Dollar Index (DXY) holds firm around 108.00 as traders turn their attention to the upcoming Federal Reserve (Fed) interest rate decision. Market expectations, per the CME FedWatch tool, indicate near-certainty that the Fed will maintain its policy rate at 4.25%-4.50%. Investors will closely watch Fed Chair Jerome Powell’s press conference for guidance on future policy shifts.

Concerns over the potential inflationary impact of Trump’s trade policies add another layer of uncertainty. US Bank chief economist Beth Ann Bovino noted, “A number of White House proposals appear inflationary, which could keep the Fed in check.” Additionally, Treasury Secretary Scott Bessent has proposed universal tariffs on US imports starting at 2.5%, with Trump reportedly favoring even higher rates.

China’s Economic Slowdown Adds Pressure on AUD

The Australian Dollar remains vulnerable to China’s economic struggles. China’s NBS Manufacturing PMI dropped to 49.1 in January from 50.1, missing expectations, while the Non-Manufacturing PMI slipped to 50.2 from 52.2. As Australia’s largest trading partner, China’s weak data weighs heavily on the AUD.

Despite China’s recent stimulus measures, including a $7.25 billion investment in index products and long-term stock investments, concerns persist. Industrial profits fell 3.3% YoY in 2024, marking a third consecutive year of contraction, driven by weak demand, deflationary pressures, and a prolonged property sector slump.

Technical Outlook: AUD/USD Turns Bearish Below 0.6250

The AUD/USD pair trades near 0.6230 on Wednesday after breaking below the ascending channel on the daily chart, signaling a shift toward a bearish bias. The 14-day Relative Strength Index (RSI) has dropped below 50, reinforcing downside momentum.

A decisive break below key support at the lower boundary of the ascending channel strengthens the bearish outlook, potentially pushing AUD/USD toward 0.6131—its lowest level since April 2020. On the upside, immediate resistance lies at the nine-day Exponential Moving Average (EMA) at 0.6256. A rebound above this level could reintroduce a bullish bias, with the next upside target near 0.6360.

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US Dollar Surges as Trump Revives Tariff Threats

US Dollar Surges as Trump Revives Tariff Threats

The US dollar strengthened significantly against all major currencies after President Donald Trump and his Treasury Secretary reignited concerns about potential tariffs, raising fears that trade policies may return to the forefront. Risk-sensitive currencies, particularly those tied to China, saw sharp declines, while the euro weakened amid speculation that the European Union could soon face tariff pressures. Simultaneously, the Japanese yen took a hit as traders hedged against potential US inflation spikes and rising Treasury yields.

This market turbulence followed a Financial Times report indicating that Scott Bessent, the newly appointed Treasury Department official, supports a phased approach to implementing universal tariffs on US imports. The initial proposal suggests starting with a 2.5% tariff rate. However, President Trump hinted at a much broader scope, potentially targeting a range of imports from steel to semiconductor chips and suggesting higher tariff rates over time.

The administration’s “moderate” proposal involves a gradual increase in tariffs, reaching 20% over eight months in increments of 2.5% per month. This timeline has triggered speculation about more extreme scenarios and raised questions about the global trade concessions needed to halt these measures. Bessent’s approach, which allows businesses time to adjust, could also spark a rush of imports and exports to avoid higher future costs.

Amid these developments, financial markets are grappling with the potential outcomes. Traders are assessing whether the proposed tariff measures are fully priced in and evaluating the likelihood of de-escalation through negotiation.

On the positive side, any concessions or agreements that delay or reduce tariffs could stabilize markets. However, the risks of escalating tariffs, particularly if negotiations fail, remain a significant concern. Higher tariffs could disrupt global trade and have far-reaching implications for currency valuations.

While we initially favored long positions on the dollar, the unfolding tariff narrative has introduced significant uncertainty. Staying prepared for sudden shifts in policy and market dynamics is now crucial as the situation continues to evolve.

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Australian Dollar Weakens Amid Concerns Over Trump’s Trade Policies and Mixed Chinese Data

Australian Dollar Weakens Amid Concerns Over Trump’s Trade Policies and Mixed Chinese Data

The Australian Dollar (AUD) ended its three-day winning streak against the US Dollar (USD) on Monday, with the AUD/USD pair trading flat following the release of mixed Chinese Purchasing Managers’ Index (PMI) data. As a close trade partner, Australia’s economy is heavily influenced by China’s economic performance.

China’s National Bureau of Statistics (NBS) reported that the Manufacturing PMI fell to 49.1 in January, down from 50.1 in December, missing market expectations. Similarly, the Non-Manufacturing PMI dropped to 50.2 from the previous month’s 52.2. These weaker-than-expected figures suggest a slowdown in China’s economic recovery, weighing on the risk-sensitive Australian Dollar.

Despite fresh stimulus measures from China aimed at revitalizing its equity markets, the AUD struggled to gain momentum. The China Securities Regulatory Commission (CSRC) announced a second round of long-term stock investment pilot programs valued at 52 billion Yuan ($7.25 billion). However, these measures have done little to alleviate investor concerns about China’s economic challenges.

Risk Aversion Rises Amid Trump’s Trade Tariff Push

Broader market sentiment took a hit as reports emerged that US President Donald Trump’s advisers are pushing to impose 25% tariffs on Mexico and Canada as early as February 1, bypassing negotiations. According to the Wall Street Journal, Trump’s willingness to move swiftly on tariffs follows similar actions taken against Colombia, raising fears of escalating trade tensions and dampening demand for riskier assets like the Australian Dollar.

Adding to the negative outlook, China’s Industrial Profits declined by 3.3% year-over-year in 2024 to CNY 7,431.05 billion, marking the third consecutive year of contraction. This downturn highlights ongoing economic headwinds, including weak demand, rising deflationary pressures, and a prolonged slump in the property sector.

Technical Analysis: AUD/USD Eyes Key Resistance Amid Bullish Setup

The AUD/USD pair is trading near 0.6290 on Monday, showing signs of upward momentum within an ascending channel on the daily chart, indicating a potential bullish bias. The 14-day Relative Strength Index (RSI) remains slightly above 50, reflecting mild optimism in the market.

On the upside, the pair could retest the psychological resistance level at 0.6300, with the next target near the channel’s upper boundary around 0.6350.

Support levels are found at the nine-day Exponential Moving Average (EMA) of 0.6265, followed by the 14-day EMA at 0.6254. A stronger support lies near the channel’s lower boundary around 0.6240, which could act as a safety net in case of a downside correction.

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NZD/USD Struggles

NZD/USD Struggles Below 0.5700 Amid Trump’s Tariff Plans and Dovish RBNZ Expectations

The NZD/USD pair remains under pressure, trading near 0.5675 during the early Asian session on Friday. The New Zealand Dollar (NZD) faces headwinds due to uncertainty surrounding US President Donald Trump’s proposed tariffs on China and the dovish outlook of the Reserve Bank of New Zealand (RBNZ).

New Zealand’s Consumer Price Index (CPI) for the fourth quarter of 2024 indicated a continued decline in underlying inflation, strengthening expectations of additional rate cuts by the RBNZ. Swap markets now estimate a nearly 90% chance of a 50-basis-point (bps) rate cut on February 19, building on the two cuts already implemented in this cycle. The RBNZ is projected to deliver a total of 100 bps in rate cuts through the remainder of 2025.

Meanwhile, the downside for the pair could be capped by recent comments from Trump. Speaking at the World Economic Forum in Davos on Thursday, Trump called for immediate interest rate cuts by the US Federal Reserve (Fed). “With oil prices going down, I’ll demand that interest rates drop immediately, and likewise, they should be dropping all over the world,” Trump said.

Investors are now closely watching for further details on Trump’s tariff policies, alongside key US economic data releases. The flash US S&P Global Manufacturing and Services PMI for January will be a key focus later on Friday, along with the release of US Existing Home Sales and the Michigan Consumer Sentiment Index.

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US Yields Boost Dollar, Weaken Yen

US Yields Boost Dollar, Weaken Yen

US Yields Boost Dollar, Weaken Yen

The dollar strengthened on Tuesday, driven by rising U.S. yields, putting pressure on low-yielding currencies like China’s yuan and Japan’s yen, which fell to its lowest level since 1986.

Benchmark 10-year Treasury yields increased nearly 14 basis points to 4.479% overnight. Analysts attributed this rise to expectations of Donald Trump winning the U.S. presidency, which could lead to higher tariffs and increased government borrowing.

As the dollar gained, the euro reversed part of a small rally following the first round of France’s election, which aligned with polling predictions. The euro last traded at $1.0735.

The yen dropped to 161.72 per dollar on Monday, its weakest in nearly 38 years, primarily due to the significant interest rate gap between the U.S. and Japan. On Tuesday, the yen traded at 161.55 per dollar in Asia and was under pressure from yen bears wary of potential intervention by Japanese authorities. The yen also hit a lifetime low of 173.67 against the euro on Monday and remained near that level on Tuesday.

In the bond market, the 10-year yield gap between U.S. and Japanese rates stood at 340 basis points, and nearly 440 basis points at the two-year tenor. China’s yuan, which reached a seven-month low against the dollar last week, faced similar pressure, with U.S. 10-year yields more than 220 basis points higher than Chinese government bond yields.

Robust manufacturing data in China and an announcement from the central bank about borrowing bonds, likely to sell them and stabilize falling yields, provided only a brief boost to the currency on Monday. The yuan last traded at 7.3043 in offshore markets on Tuesday, close to its June low.

The New Zealand dollar slipped 0.3% in early trade and was testing support at its 200-day moving average at $0.6075. The British pound remained steady at $1.2641. The Australian dollar hovered within its recent range at $0.6650, with traders focused on central bank minutes to gauge the likelihood of future interest rate hikes. Swaps market pricing suggests a one-in-three chance of a rate hike as soon as next month.

The question remains about the trigger for such a move. ING economist Rob Carnell noted that discussions have taken place, but the specific trigger for a hike is still uncertain. There is a leaning towards forecasting a hike at the August meeting.

Overall, the strengthening dollar and rising U.S. yields continue to exert pressure on low-yielding currencies, with markets closely watching upcoming central bank decisions and geopolitical developments.

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Cryptocurrency Move Back to Support the Pack to Level

If we have a look at the bearish start to the day in the majors and the Bitcoin move back to the level by $18,500 to the support pack. The Bitcoin to USD was seemed down at the level by 1.16% on this Thursday that reversing a 1.25% gain to the Wednesday to the ended the day at the level $18,260.0. At the start of the day, the Bitcoin rose to the early morning intraday to the high at the level before hitting the reverse level.

The major resistance level goes at the level by $18,878 and the Bitcoin fell to the intraday low to the level by $17,935.0.

The close term bullish pattern stayed flawless, disregarding the most recent pullback to sub-$18,000 levels. For the bears, Bitcoin would have to slide through the 62% FIB of $10,095 to shape a close term bearish pattern.

The Bitcoin was somewhere near at the level by 1.03% to $18,072.0. A blended beginning to the day saw Bitcoin ascend to an early morning high of $18,299.0 prior to tumbling to a low of $18,070.0.

Bitcoin left the significant help and obstruction levels untested from the get-go.

Somewhere else, it was a bearish beginning to the day for the majors. The Ripple’s XRP was somewhere around at the level 2.69% to lead the route down.

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Bitcoin Slips Down Below at Level $13,000 Since the Last Rally

Bitcoin Slips Down Below at Level $13,000 Since the Last Rally

The Bitcoin seems to the low at the level of $9,813 in September that managed the bitcoin to reach at the level high at $13,868. The bitcoin price is rejected to the sequential indicators on the 3-day chart.

If we have a look at the current candlestick of the 3-day chart it will seem significantly bearish and the TD sequential indicators are presented a sell signal. The 50- SMA seems down at the level of $10,600 and the 100 SMA at the level of $9,47.

The In/Out of the Money Around Price chart shows the closest and most grounded help region to be somewhere in the range of the level at $12,687 and $13,073 with near 624,000 BTC in volume. A break below this point can drive the cost of Bitcoin down to $11,914.

Despite the fact that bears appear to have assumed responsibility for the present moment, the powerful day by day upswing stays unblemished for Bitcoin. The 50-SMA and the 100-SMA harmonize around $11,200 which will go about as a critical help level. The MACD keeps bullish and the most basic obstruction level is still at $13,863. A breakout over this point can without much of a range drive the lead digital currency towards the untouched high at the level of $20,000.

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Bitcoin Price Clear the Path and Rose to the Level $13,000

Bitcoin Price Clear the Path and Rose to the Level $13,000

Bitcoin Price of the bulls has been the full control of the market to the price at the level of $11,340 to $12,835. The cryptocurrency had the largest to the single day that put the gain. The MACD shows the increasing the bullish momentum to price the growth anticipated.

The position detector is a convenient little apparatus that causes us to imagine solid opposition and backing levels. According to the everyday conjunction detector, there is an absence of solid obstruction levels on the potential gain. This should be empowering news for the buyers as they plan to bring BTC into the $13,000-zone.

Santiment’s holder’s distribution charts show you the number of addresses having a place with a specific symbolic section. According to the chart, the number of addresses holding 10,000-100,000 tokens tumbled from 111 on October 8 to 104 on October 20. This is an intensely bearish sign as it shows that the whales are selling off their property.

Bitcoin buyers have the opportunity to bring the cost into the level at $13,000 and even the $14,000 interference. The everyday intersection finder shows a total absence of solid opposition barriers straightforward.

For the bears, the drawback is covered off at the $12,000-$12,100 uphold divider. A break below that zone will bring the value down to $11,000, which has both the 50-day and 100-day SMA

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Cryptos Market: Bitcoin Shows Bullish Momentum Over Dollar Strength

Cryptos Market: Bitcoin Shows Bullish Momentum Over Dollar Strength

The BTC/USD traded at the level of $11,355 after the mild rejection of the top-level $11,720 that losing some of the bullish.

Ethereum USD had a similar fate at the higher risk that seeing the longer pullback than the Bitcoin. If we talk about the XRP/USD is the clear loser after breaking below the 50 SMA and the 100 SMA on the daily chart that currently trading at the level of $0.2482 after yet facing another rejection.

Bitcoin, BTC to USD, fell by 1.02% on Tuesday. Incompletely turning around a 1.55% increase from Monday, Bitcoin finished the day at the level of $11,442.0.

It was a quiet beginning to the day. Bitcoin rose to a late morning intraday high to the level of $11,574.9 before operating reverse.

Missing the mark concerning the primary significant obstruction level at $11,830, Bitcoin tumbled to an early evening intraday low of $11,333.0.

Avoiding the primary significant help level at $11,201 Bitcoin quickly returned to $11,470 levels before moving back.

The close term bullish pattern stayed perfect, upheld by the most recent move back through to $11,000 levels. For the bears, Bitcoin would need to slide through the 62% FIB of $6,400 to shape a close term bearish pattern.

Bitcoin was up by 0.22% to $11,467.0. A beginning to the day saw Bitcoin tumble to an early morning low of $11,427.0 before ascending to a high at the level of $11,467.0. Bitcoin left the support and Resistance levels untested at an early stage.

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Ethereum Rate Hits at Higher Level More Profitable Than Bitcoin Mining

Ethereum Rate Hits at Higher Level More Profitable Than Bitcoin Mining

Let’s have a look at the cryptocurrency that hovering near to the level at $10,600 mark. The Bitcoin price is consolidating to the 50-12 Hour SMA and the 200-12 Hours SMA. The strong resistance lies at the level 50-12 SMA that repeatedly rejected the price.

This repeated dismissal may drop the value down to the level at  $10,400 uphold level, which is by all accounts the main observable help level on the drawback. If case this level doesn’t hold firm, at that point you can anticipate that the cost should plunge below $10,000. For this situation, one can anticipate that BTC should tumble to the level of $9,700 before it experiences another solid help.

While this may not appear to be a huge number, remember that every one of these addresses holds a great many dollars worth of Bitcoin. The fishes using the stale value activity to merge their positions look good for the general market.

With respect to the top 50 digital forms of money, the greatest failures incorporate Compound, down 12% over the most recent 24 hours, UMA down 12%, OMG Network down at the level 13%, Yearn.finance down 16%, and Aave down 18%. The main bull among the sloths of bears is EOS, which broke out greatly as covered Tuesday.

Ethereum has since September 23, been holding inside a rising equal channel. Recuperation towards $400 flamed out marginally above $360 a week ago. On the drawback, the misfortunes that followed grasped uphold at the level of $335 throughout the end of the week, permitting the shrewd agreement sign to revitalize, making strides above $350.

The Ethereum selling pressure in the market halted the increase at the 50 SMA and 100 SMA. Ether fell below the climbing channel, confirming a bear banner.

The downside of a significant help zone shows that Ethereum is at grave risk of spiraling to the level at $300. Other than the various simple help zones, the most significant one lies somewhere in the range of $298 and $309. Previously, around 879,000 locations purchased almost 2 million ETH.

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Cryptocurrency Bitcoin Shows the Bullish Divergence on User Count

Cryptocurrency Bitcoin Shows the Bullish Divergence on User Count

The Bitcoin moves back and shows the bearish to the start of the day with the support level at $10,900 to the broader market.

The Bitcoin BTC to USD is rose by the level at 1.33% this Tuesday and reversing the loss at the level of 0.83% on Monday.

It was a mixed start to the day. Bitcoin fell to an early morning low $10,674.2 before finding support.

Steering clear of the major support levels, Bitcoin struck a late morning high at the level of $10,815.4 before operating reverse.

Coming up short of the major resistance levels, Bitcoin slid to a late afternoon intraday low $10,654.0.

Steering clear of the first major support level at $10,585, Bitcoin rallied to a final hour intraday high at the level of $10,889.0.

Falling short of the first major resistance level at $10,915, Bitcoin eased back to end the day at sub-$10,860 levels.

The near-term bullish trend remained whole, in contempt of the latest pullback. For the bears, Bitcoin would need to slide through the 62% FIB of $6,400 to form a near-term bearish trend. At the hour of composing, Bitcoin was somewhere around 0.28% to the level of $10,826.0. It was a blended beginning to the day. Bitcoin rose to an early morning high $10,866.0 before tumbling to a low $10,826.0.

Bitcoin started the significant help and obstruction levels untested from the get-go. Somewhere else, it was a blended beginning to the day.

Bitcoin Cash ABC (+0.54%), Bitcoin Cash SV to the level (+0.62%), and Crypto.com Coin (+0.65%) evaded the pattern right off the bat.

It was a bearish beginning to the day for the remainder of the majors, in any case. Binance Coin was somewhere around 1.18% to lead the way down.

https://xtreamforex.com/nasdaq-futures-shows-the-short/

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