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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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As Fears Grow, Stocks Rally. Maintain the shakiness of Wall Street

As Fears Grow, Stocks Rally. Maintain the shakiness of Wall Street

Stocks in the United States rose on Tuesday as Treasury yields fell, but Wall Street remained shaky as investors awaited more clarity on interest rates, inflation, and the economy’s trajectory. After reversing a morning loss of 1%, the S&P 500 rose 39.25 points, or 1%, to 4,160.68. After bouncing back and forth between losses and gains throughout the day, the Dow Jones Industrial Average increased 264.36 points, or 0.8 percent, to 33,180.14. The NASDAQ composite rose 113.86 points to 12,175.23, up 0.9 percent.

Apple, Microsoft, and other technology stocks were among the greatest drivers of the market’s rise. They profited from a decline in Treasury yields, which saw the 10-year yield dip below 3%. In recent years, lower yields have encouraged investors to pay greater prices for stocks, particularly those that are rapidly developing.

Energy producer stocks also soared as oil prices increased to about $120 per barrel, a year-to-date gain of more than 55%. Exxon Mobil increased by 4.6 percent, while ConocoPhillips increased by 4.5 percent.

Kohl’s stock jumped 9.5 percent after the department store chain announced it is in advanced talks to sell itself to Vitamin Shoppe owner Franchise Group for $8 billion. J.M. Smucker’s stock surged 5.7 percent after the company reported better-than-expected results.

Stocks first plunged as Target warned of reduced profit margins as it reduces prices to clear out inventory, sending Wall Street into a tailspin. The retail behemoth dropped 2.3 percent after announcing changes it said were need to stay up with shifting customer behaviour. Shoppers across the country are spending more on restaurants and travel than they were earlier in the pandemic on sprucing up their homes.

Other shops were affected by the downturn, and Walmart’s stock dropped 1.2 percent. Worries were heightened by the World Bank’s dramatic downward revision of its economic growth prediction for this year. It cited Russia’s conflict on Ukraine and the threat of severe food shortages as reasons for the return of “stagflation,” a poisonous combo of high inflation and sluggish growth that hasn’t been witnessed in more than four decades.

The economy’s fragility has been on Wall Street’s mind this year, amid concerns about Federal Reserve interest-rate hikes. The central bank is acting aggressively to combat the highest inflation in decades, but if it goes too far or too fast, it risks suffocating the economy. At its meeting next week, the Federal Reserve is largely expected to raise its benchmark short-term interest rate by half a percentage point. That would be the second consecutive hike of more than double the regular amount, with a third expected in July.

The Fed isn’t the only one who has scaled back the huge aid given to the economy and financial markets during the pandemic. The Reserve Bank of Australia startled investors by hiking interest rates by half a percentage point on Tuesday. Markets confront further hurdles even if central banks master the delicate act of slowing the economy just enough to stop inflation without causing a recession.

“Rising rates and slowing GDP are not a helpful environment for investors, therefore it is unlikely that equities or fixed income returns will approach the stimulus-fueled returns of the past two years.” She believes the United States will avoid a recession. With expectations for a more aggressive Fed, Treasury rates have mainly risen this year. They did, however, moderate a little on Tuesday.

Late Monday, the yield on the 10-year Treasury dipped to 2.98 percent from 3.03 percent. The two-year yield, which is more closely linked to Fed action expectations, fell to 2.72 percent from 2.73 percent. Markets may continue volatile until additional information about inflation and the economy becomes available. The latest report on the consumer price index will be released by the US government on Friday, which will provide the next major update on inflation.

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Higher US bond yields and the USD halted Wall Street

Higher US bond yields and the USD halted Wall Street

Higher US bond yields and a stronger USD dragged down Wall Street futures on Monday. Higher bond yields, i.e. higher borrowing costs, are generally negative for corporate profitability, whereas a stronger dollar is unfavourable for export-oriented US MNCs, particularly tech companies. After a slight reversal from about +3.203 percent to +2.706 percent in May, the US 10Y bond yield broke +3.00 percent again on Monday. Higher inflation and faster/larger Fed tightening, combined with diminishing chances of a September pause following a better-than-expected May NFP job report and comments by Fed’s Mester on Friday, drove up US bond yields.

In addition, due to the rising policy divergence between the Fed and the BOJ, the USDJPY surged to about 131.68, its highest level since 2002. In April, Japan’s headline CPI (inflation) increased by 2.5 percent, the highest level since October 2014. In April, Japan’s core CPI, which excludes fresh food but includes gasoline expenses, jumped to +2.1 percent, the highest level in more than seven years. However, Japan’s core-core CPI, which excludes both fresh food and fuel expenses and is similar to the standard/US/European version of core CPI, was just +0.8 percent in April, nearly two years high.

Overall inflation in Japan has risen in recent months as a result of Yen depreciation (which is good for imported inflation), higher commodities, such as imported oil and gas, and higher raw material costs. In contrast to the standard core CPI, which excludes both food and fuel prices, BOJ officially follows core CPI, which excludes only fresh foods and not fuel costs. Although Japan’s core CPI rose above the BOJ’s target of +2.0 percent in April after rising for the eighth consecutive month (unusual in Japan) and accelerating from a 0.8 percent increase in March, on average, it’s still well below 2% in recent months after months of negative prints as the Japanese economy has been in decades of structural deflation/depression or even occasional recession for various reasons and past policy mistakes by the BOJ.

In any case, Japan’s core-core CPI, which is nearly identical to normal core CPI, remains far below the BOJ’s sustainable target of +2.0 percent. In any case, the BOJ wants a stable 2% core CPI (Japanese translation) underpinned by substantial wage growth, which is still lacking, according to the BOJ. Sluggish wage growth, on the other hand, makes it more difficult for businesses to pass on higher prices to consumers, resulting in a deflationary cycle that runs counter to the US economy.

As a result, the BOJ is unable to adjust its QQE policy, resulting in significant policy divergence not only with the Fed, but also with the ECB, which has been jawboning for an unusually uber-hawkish stance in recent months in order to contain inflation expectations.

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The recovery of the US stock market will be put to the test by inflation

The recovery of the US stock market will be put to the test by inflation

The rise that brought US stocks back from the brink of a bear market will be put to the test next week, when consumer price data will reveal how much more the Federal Reserve will need to do to combat the worst inflation in decades. Despite a rough week, the S&P 500 is still up more than 5% from last month’s lows, which saw the benchmark index drop over 20% from its all-time high. After dropping 1% in the previous week, the index was down around 14 percent from its January 3 high.

More upside may be contingent on investors’ belief that officials are making success in combating rising costs. Signs that inflation is still high might reinforce the case for even more aggressive monetary tightening, potentially spooking a market already shaken by fears that a hawkish Fed could wreak havoc on the US economy.

“Until we see a major shift lower in inflation, this market is likely to stay range-bound,” said Mona Mahajan, senior investment strategist at Edward Jones, which currently favours large-cap stocks over small-cap stocks due to larger companies’ ability to withstand greater input and salary expenses. “Clearly, the print next week will be crucial.” The consumer price index (CPI) climbed 8.3 percent in the 12 months ending in April, down from an 8.5 percent annual rate recorded the month before, which was the biggest year-on-year increase in 40 years. The May inflation report is one of the final major pieces of information before the Fed’s meeting on June 14-15, when the central bank is largely expected to hike rates by another 50 basis points.

“If inflation continues to be a problem,” Paul Nolte, portfolio manager at Kingsview Investment Management, said, “the Fed may not have the option of coasting later this year.” Nolte has reduced equity exposure in his portfolios, particularly in growth stocks, and increased cash balances, citing issues such as still-high market valuations.

The CPI report comes as investors assess the impact of the Fed’s 75 basis point monetary tightening already implemented this year on growth. US firms recruited more workers than expected in May and maintained a strong rate of wage rises, according to employment data released Friday, indicators of strength that might keep the Fed on an aggressive monetary policy tightening path.

Meanwhile, numerous senior corporate leaders, including Jamie Dimon of JPMorgan Chase and Elon Musk of Tesla, have expressed pessimism about the central bank’s ability to control inflation without harming the economy. Musk stated in an email to executives that he has a “very awful feeling” about the economy and that the electric carmaker needs to slash approximately 10% of its workforce.

Higher prices have historically prompted the Fed to raise interest rates, with higher bond yields decreasing the value of future corporate profits. Investors’ views on inflation are essential to how they value shares. Consumers and corporations both face higher costs as a result of rising pricing. According to Jeff Buchbinder, equities strategist at LPL Financial, the S&P 500 trades at about 18.7 times trailing 12-month earnings, a high valuation compared to prior inflationary periods that signals investors fear the present level of price increases may not endure.

LPL predicts that inflation will begin to reduce this year, and that corporations will continue to do well. The firm’s year-end target for the S&P 500 is between 4,800 and 4,900, which is approximately 16 percent higher than the index’s current level as of Friday afternoon.

Others, on the other hand, have been more pessimistic. Morgan Stanley strategists termed the latest rise a “bear market rally” earlier this week, predicting the S&P 500 would tumble to about 3,400 by mid-August, citing poor earnings and economic signs. “Everyone agrees that the high prints or peak inflation numbers are likely in the rearview mirror,” said Art Hogan, chief market strategist at National Securities. “If that turns out not to be the case, markets will be thrown into disarray.”

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Ahead of job news, global stock markets climb, but US rates fall

Ahead of job news, global stock markets climb, but US rates fall

On Thursday, global equity markets climbed, while US yields fell, as lower-than-expected private payrolls data raised optimism that the American economy was slowing and that the Federal Reserve may be convinced to change its hawkish attitude on interest rates and inflation. The ADP National Employment Report released on Thursday indicated that private payrolls increased by 128,000 jobs in May, far less than the consensus projection of 300,000 jobs, indicating that labour demand was slowing.

If the private payrolls data is confirmed by the Labor Department’s more complete jobs report on Friday, Sandy Villere, portfolio manager at Villere & Co in New Orleans, believes the Fed will be unlikely to maintain its rate rise pace. “In essence, good news is terrible news and bad news is good news. That suggests the economy may be cooling a little, and the Fed may be able to ease up on its rate hikes, as the Fed is virtually in charge of everything right now “Villere remarked.

The MSCI world equity index, which includes stocks from 50 nations, rose 1.42 percent. The STOXX 600 index rose 0.57 percent across Europe. Treasury yields in the United States have retreated from recent highs ahead of the much watched employment report and what it might reveal about the future path of interest rates. On Thursday, two Fed officials, Vice Chair Lael Brainard and Cleveland Fed President Loretta Mester, reaffirmed that the US central bank will likely keep hiking rates at a rapid pace unless inflation moderates.

The benchmark 10-year note was trading at 2.9149 percent, while two-year notes were selling at 2.6438 percent. On Wall Street, the S&P; The Dow Jones Industrial Average increased by 1.33 percent to 33,248.28, while the S&P 500 increased by 1.84 percent to 4,176.82 and the NASDAQ Composite increased by 2.69 percent to 12,316.90. Oil prices rose as U.S. crude inventories declined more than expected due to strong demand for gasoline, and OPEC+ agreed to increase crude output to compensate for a drop in Russian output.

Brent futures jumped 1.69 percent to $118.26 a barrel, while WTI crude in the United States rose 1.97 percent to $117.53 a barrel. The dollar weakened across the board, giving up some of the gains made in recent sessions as investors sought higher-yielding currencies in response to rising risk sentiment.

The dollar index dropped 0.78 percent, while the euro increased 0.94 percent to $1.0746. Gold prices increased by more than 1%, helped by a weaker dollar and reports on US private payrolls. Gold futures in the United States gained 1.38 percent to $1,868.70 an ounce, while spot gold rose 1.3 percent to $1,868.59 an ounce.

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To begin June trading, stocks are down

To begin June trading, stocks are down

After a volatile trading month, US stock indices fell on the first day of June. The three major US indexes all gave up their morning advances. To close at 4101.23, the S&P 500 dropped 30.92 points, or 0.7 percent. The Dow Jones Industrial Average dropped 176.89 points, or 0.5 percent, to 32813.23, while the NASDAQ Composite, which tracks technology, slid 86.93 points, or 0.7 percent, to 11994.46. After a month marked by big movements in both directions, major U.S. indexes fell on Tuesday, causing the S&P 500 to close May essentially flat.

The start of a new trading month begins on Wednesday, but few investors expect a break from the high volatility that has characterized markets this year. Many traders are concerned about the rate of interest rate hikes by the Federal Reserve and whether they will send the US economy into recession. According to Deutsche Bank analysts, eight of the last 11 protracted Fed rate-hike cycles ended in recession. Even so, many traders believe that a recession is unlikely, and that any serious economic slowdown in the United States could be months away. As a result, some investors have jumped into the market to buy shares with low valuations, causing markets to become more volatile.

Many investors and strategists are still debating whether last week’s surge, which saw all three main U.S. indices rise by at least 6%, represented the start of a longer-term recovery or simply a respite from this year’s selling pressure.

“Most of the gains we witnessed last week were a bear-market rally,” Vaughan Nelson Investment Management’s chief executive and chief investment officer Chris Wallis said. “I believe we will see continued volatility, but there is a high probability the market will bottom between June and September.”

Mr. Wallis does not rule out the potential of a recession this year, fueled by a slowing global economy and rising inflation. Morningstar’s chief U.S. equities strategist, Dave Sekera, was optimistic on value companies at the start of the year, but now believes growth stocks, which have taken a beating this year, are undervalued. This year, the Russell 1000 Value Index is down 6%, while the Russell 1000 Growth Index is down 23%. “The market frequently behaves like a pendulum.”We believe it swings too far in one extreme or the other at times,” he explained.

Traders have recently been reassured by the Fed’s clear messaging on the need for half-percentage-point interest-rate rises during its June and July policy meetings. What happens next, on the other hand, is less obvious. On Wednesday, the Bank of Canada raised its policy interest rate by a half-percentage point.

“For us, the question is whether [the recent surge] is a one-month or six-month phenomena,” said Viraj Patel, Vanda Research’s global macro strategist. In the absence of a major data shock, he expects U.S. equities will grind higher in the coming weeks, but he doesn’t believe stocks are on track for a longer-term gain.

During the summer, trading desks may be understaffed, which might lead to increased volatility in the weeks ahead. Summer trading has reduced trade volumes and liquidity, resulting in more dramatic stock price movements. Many investors are also anticipating increased volatility in other asset groups, which have experienced significant swings this year.

The Institute for Supply Management’s indicator of US manufacturing activity increased to 56.1 in May from 55.4 in April, according to economic statistics. The Wall Street Journal polled economists, who predicted a drop to 54.5 percent. A reading of more than 50 shows growth.

As Americans continue to leave occupations at an alarming rate, hiring demand in the United States remains high. Seasonally adjusted job vacancies declined to 11.4 million in April from an upwardly revised 11.9 million in March, according to data issued by the Labor Department on Wednesday. Wages have risen as a result of the tight labour market, contributing to historically high inflation.

According to some observers, the market should consolidate and break away from whipsawed trading sessions as more closely monitored economic data on inflation and gross domestic product is issued in the coming months. “I believe the second half of the year will be stronger than the first because we will have more information,” Liz Young, SoFi’s head of investment strategy, said.

The 10-year Treasury note yield rose to 2.930 percent on Wednesday, up from 2.842 percent the day before. Bond prices and yields move in opposite directions. The benchmark note’s yields are still significantly below this year’s closing high of 3.124 percent, but they have risen this week as speculators continue to rethink interest rate policy.

As investors digested European Union leaders’ intention to impose an oil embargo on Russia and a prohibition on insuring ships carrying Russian oil, crude prices increased. Some members of OPEC are also considering suspending Russia’s involvement in an oil-production agreement. “Oil prices have been on a roller coaster ride…and I believe they will remain elevated,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said. “I continue to believe that oil and rising energy prices will be an inflationary factor weighing on markets.”

Salesforce jumped $15.83, or 9.9%, to $176.07 after posting sales that beat analyst forecasts, assuaging fears about the company’s business software demand. According to Dow Jones Market Data, the stock was the top performer in both the Dow and the S&P 500 on Wednesday. Victoria’s Secret’s stock surged $3.68, or 8.9%, to $44.89 after the company reported a profit that beat analyst estimates.

In tumultuous intraday trading, shares of energy companies bounced between gains and losses. To $70.42, Occidental Petroleum gained $1.11, or 1.6 percent. The Stoxx Europe 600, a pan-European index, fell 1% overseas. Trading in Asia was a mixed bag. As Covid-19 lockdowns in China’s financial capital lessened, the Shanghai Composite fell 0.1 percent. The Hang Seng index in Hong Kong declined 0.6 percent. The Nikkei 225 index in Japan, on the other hand, increased by 0.7 percent.

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Stocks end a bumpy month with a drop as the rally fades

Stocks end a bumpy month with a drop as the rally fades

After a recovery late last week failed to maintain pace, US stocks ended a bumpy month of May down on Tuesday. In a turbulent session, the S&P 500 dropped 0.6 percent, while the Dow Jones Industrial Average dropped 220 points, or 0.7 percent. The NASDAQ Composite Index fell 0.4%.

These developments follow weekly gains of more than 6% for all three indices on Friday, reversing seven consecutive losing weeks for the S&P 500 and NASDAQ, and eight weeks of losses for the Dow. Concerns about inflation and interest rate hikes impacted on sentiment in May, making it another bumpy month for equity markets. The three major indexes all finished the month on a negative note.

Meanwhile, Bitcoin and Ethereum climbed on Tuesday as part of a broader crypto currency relief rally. Oil futures rose on reports that Chinese officials were about to terminate a two-month COVID-19 lockdown in Shanghai and that EU leader had agreed to halt buying Russian crude oil and petroleum products. Brent crude oil futures increased 3.7 percent to $123.83, while WTI crude oil futures rose 3.6 percent to $118.70.

Following the premiere of TOP GUN over Memorial Day weekend, shares of movie theatre operator AMC soared as much as 10% in early trading. According to AMC, U.S. cinemas enjoyed a 122 percent year-over-year rise over last year’s holiday weekend, indicating good indicators of post-COVID resurgence for the industry. AMC shares are on track for a fourth straight day of advances following a nearly 40% gain in the previous three sessions, according to pre-market action.

The latest bounce on Wall Street follows a string of positive quarterly earnings reports in recent trading sessions, which helped momentarily alleviate fears about the impact of inflation on corporate profits. Prices appeared to be peaking, according to recent economic statistics, which helped to boost sentiment. Stocks are still down substantially for the year, and some strategists are doubtful that a bottom has been created. In a statement to clients, Morgan Stanley CIO Michael Wilson wrote, “Last week’s performance will prove to be another bear market rally in the end.”

Stocks have had a tumultuous month, fueled by concerns over decades-high inflation and fears that the Federal Reserve’s efforts to reign in skyrocketing prices by raising interest rates may send the economy into recession. “The primary rationale ascribed to this particular rally beyond just an oversold bounce is that the Fed may be contemplating a pause in September,” Wilson wrote, adding that “inflation remains too high for the Fed’s liking, and so whatever pivot investors hope for will be too immaterial to change the downtrend in equity prices.”

Investors are anticipated to be influenced by a flurry of critical employment data this week, including the all-important May jobs report, which will be released on Friday. Even though earnings season is over, further reports from Salesforce.com, GameStop, Chewy, and HP are expected to be released through Friday.

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In May, Global stock markets swing positive due to Fed bets

In May, Global stock markets swing positive due to Fed bets

On forecasts of a likely pause in US monetary tightening and after an easing of COVID restrictions in China, world stock markets climbed on Monday and the dollar was held near five-week lows. Following signals of peaking American inflation on Friday, confidence in a less aggressive Federal Reserve strengthened, helping the MSCI’s benchmark index for global markets turn positive for the month.

The news that Shanghai officials would lift several restrictions on businesses restarting operations from Wednesday, easing a city-wide lockdown that began two months ago, also helped to lighten the mood. The MSCI index climbed to its highest level in more than four weeks at 656.4 points at 1332 GMT, boosted by a bullish session in Europe following robust gains in Asia. So far this month, the index has gained 0.5 percent.

“It appears that the worst is over. The dreadful news has been released. According to Carlo Franchini, head of institutional clients at Banca Ifigest in Milan, “the market is hopeful it has seen the bottom.” “There also appears to be some clarity on what the ECB (European Central Bank) will do.” There will be rate hikes, which should take the bloc away from negative rates, which have distorted banks and markets,” he added.

The STOXX 600 index of European stocks rose 0.3 percent, while Japan’s Nikkei climbed 2.2 percent and Chinese blue chips rose 0.7 percent. Despite the fact that Wall Street will be closed for the Memorial Day holiday, derivative markets in the United States were active. S&P 500 e-mini futures gained 0.3 percent after rallying 6.6 percent last week in their greatest week of the year, while NASDAQ e-minis gained 0.7 percent.

Investors have pounced on suggestions that the Federal Reserve may delay its tightening after a series of sharp hikes in June and July.”Talk of a Fed rate hike halt is working wonders for everything from equities to bonds, and – sadly – commodities as well,” said Arne Petimezas of AFS Group in Amsterdam. Over the last few weeks, the Fed’s terminal rate pricing has been slashed by around 50 basis points. Fed pricing, predictably, signals the Fed will decrease rates following the annual Jackson Hole retreat in August,” he noted in a note.

The safe-haven dollar has fallen as market sentiment has improved, while the euro has risen thanks to hawkish statements from European Central Bank officials who have hinted at a rate move as early as July.

“U.S. economic data look to be stalling, ECB officials are contemplating even faster first rate hikes, and front-end rate differentials have begun to shift in the euro’s favour,” according to Goldman Sachs analyst Zach Pandl. “A dramatic downturn in the US economy – if not accompanied by similar weakness in Europe – might result in a meaningful euro bounce, while the opposite could also be true if US data hold up better than expected,” Pandl noted. “We believe there are downside risks to US GDP and have advised USD/JPY put options to reflect this.”

This emphasises the significance of crucial U.S. data due this week, including the ISM manufacturing survey on Wednesday and the May payrolls report on Friday. With unemployment at 3.5 percent, payrolls are expected to climb by a robust 320,000, but this would be down from April. The euro surged to a five-week high of $1.0764, up 0.35 percent from the previous week’s high of 1.6 percent. After losing 1.3 percent last week, the dollar index sank to a new five-week low of 101.35 and was last down 0.2 percent at 101.46.

After reaching a one-week high of 6.654 per dollar, China’s offshore yuan climbed 0.3 percent. Treasuries rallied on Friday, with 10-year note rates ending just over a six-week low of 2.743 percent, down from a high of 3.203 percent on May 9. In Europe, rates surged on Monday after German inflation surpassed expectations in May, hitting 8.7%, its highest level in over half a century. Germany’s 10-year rates jumped 9 basis points to 1.064 percent, a one-week high.

The dollar’s decline aided gold’s recovery from recent lows, pushing the metal up 0.4 percent to $1,860.5 an ounce. Oil prices rose to their highest level in over two months as traders awaited the outcome of a planned European Union summit on a ban on Russian oil imports. Brent crude gained 0.4 percent to $119.91 per barrel, while US crude increased 0.5 percent to $115.64 per barrel.

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XAG/USD Vulnerable, Aiming for $22.20-$22.10 Retest

XAG/USD Vulnerable, Aiming for $22.20-$22.10 Retest

Silver witnessed a fleeting upward movement during the Asian trading session, attempting to breach the pivotal $23.00 level. However, this surge was short-lived, with silver unable to maintain the momentum required to sustain a position above this critical threshold. Delving into the intricacies of this price action, the breach below the $22.85-$22.80 support range signifies a significant shift in market sentiment that leans decidedly bearish. This sentiment is further corroborated by closely examining the oscillators on the daily chart, which appear to signal the potential for further downward movement.

The repercussions of this bearish sentiment set the stage for a testing period for silver as it gears up for a retest of the robust support zone in the $22.20-$22.10 range. In more pessimistic scenarios, the price could venture even lower, extending its downward trajectory to the $21.25 region.

In the event of a shift in momentum favoring the upside, silver would encounter various resistance levels. Initially, surpassing the psychological hurdle at $23.00 would be met with a resistance barrier of around $23.20. Further upward momentum would then contend with the presence of the 200-day Simple Moving Average, a key technical indicator, which is situated within the $23.45-$23.50 range. Beyond this, the 100-day SMA would pose another formidable obstacle at approximately $23.80, closely followed by the psychologically significant $24.00 level.

Should market dynamics and trader sentiment align so that these resistance levels are convincingly breached, it would represent a significant departure from the prevailing negative outlook that currently shrouds XAG/USD. This potential turning point could set the stage for a short-covering rally, propelling silver past the confines of the $24.30-$24.35 range. At this juncture, the coveted target for traders is the psychological and strategically significant level of $25.00, a threshold that corresponds notably with the August monthly swing high.

Attainment of the $25.00 level would constitute a pivotal moment for the market, potentially recalibrating prevailing sentiment from bearish to bullish. Such an achievement would signify renewed optimism among traders, acting as a catalyst for further gains in silver. Thus, market participants will keenly monitor price action around the $25.00 level, recognizing its capacity to redefine the trajectory of XAG/USD in the near term and offer crucial insights into the market’s direction.

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US PCE Data Approaches

WTI Crude Oil Rises Above $87 as Supply Cuts and China’s Recovery Boost Prices

WTI Crude Oil Rises Above $87 as Supply Cuts and China’s Recovery Boost Prices

WTI Crude Oil has surged above $87 per barrel, reaching its highest since November 2022. The rise in prices can be attributed to several factors, including extended production cuts by Saudi Arabia and Russia, as well as positive economic developments in China.

Saudi Arabia and Russia, both major players in the oil market, have recently announced that they will continue cutting oil production for the rest of the year. This decision has created a sense of supply tightness and supported the upward movement of WTI prices. Saudi Arabia, in particular, will reduce its crude output to approximately 1.3 million barrels per day until the end of 2023.

China’s improving economic conditions have also played a role in boosting WTI prices. As the world’s largest oil importer, any positive signs from China have a significant impact on the market. The country’s Consumer Price Index (CPI) for August showed a 0.1% year-on-year increase, signaling a decrease in deflation concerns compared to the previous month’s 0.3% drop. This improvement has further bolstered confidence in the oil market.

However, there are potential factors that may limit the upward trajectory of WTI prices. Recent positive economic data from the United States, especially concerning interest rates, could have an impact. Higher interest rates can result in increased borrowing costs, potentially slowing down economic growth and subsequently reducing oil demand.

Oil traders will closely monitor upcoming data releases, such as the API Weekly Crude Oil Stock and EIA Crude Oil Stocks Change reports, as well as the US Consumer Price Index (CPI). These events have the potential to significantly influence the value of WTI and present opportunities for oil traders to capitalize on market fluctuations.

In summary, WTI Crude Oil has experienced a notable surge, surpassing $87 per barrel, driven by production cuts by major oil exporters and positive economic indicators from China. However, the potential impact of interest rates and upcoming data releases should be closely monitored to determine the future trajectory of WTI prices.

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WTI Holds Steady Near $68.50 Amid US Dollar Strength

WTI surpasses $86.40, eyes on US ISM Services PMI

WTI surpasses $86.40, eyes on US ISM Services PMI

Presently, the price of a particular type of oil known as WTI stands at approximately $86.40 on this Wednesday. It was a bit higher at $88.00 previously, but it has dipped a little since then. The recent surge in the price of WTI can be attributed to the decisions made by two significant countries, namely Saudi Arabia and Russia, who have indicated their intention to reduce their oil production. This announcement has had the effect of driving up the price of WTI in recent weeks.

Both Saudi Arabia and Russia are major players in the global oil market. They produce a lot of oil and sell it to various countries around the world. These countries have now stated that they will continue to decrease the amount of oil they produce until the end of 2023. This news caused the price of WTI to increase significantly over the past few weeks. However, it’s important to note that Saudi Arabia will still be producing around 9 million barrels of oil each day in the coming months. They will review this decision every month to determine whether they should produce more or less oil.

However, there is a factor that has prevented the price of WTI from rising too steeply. The economic data coming from China has not been very favorable. In August, businesses in China that provide services like car maintenance or house cleaning did not experience significant growth. In fact, their growth was the slowest in eight months, according to a report by a company called Caixin. This is noteworthy because China happens to be the largest buyer of oil in the world.

Looking ahead, traders are eagerly anticipating the release of two important reports. One is called the US ISM Services PMI, and the other is the EIA Crude Oil Stocks Change for the week ending September 1. These reports will provide more insights into the current oil supply and the health of the services sector in the United States. Since the price of WTI is denominated in US dollars, this information holds significant importance for those who trade in the oil market. They will be paying close attention to these reports to gain insights and potentially make decisions about buying or selling oil based on the information they contain.

 

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WTI Nears $73.00 Amidst Rising Tensions

WTI Hovers Below $80 as China Growth Concerns and US Rate Hike Fears Persist

WTI Hovers Below $80 as China Growth Concerns and US Rate Hike Fears Persist

As the trading week unfolds, the Western Texas Intermediate (WTI) crude oil benchmark finds itself hovering around the $79.85 mark on Tuesday, revealing a minor upward shift following a pullback from the $80.68 level. The oil market remains ensnared in the grip of investor concerns revolving around the trajectory of China’s economic growth and the looming specter of potential interest rate hikes in the United States, both of which have the potential to impede oil demand and sway WTI prices.

A key driver in the unfolding narrative is the Federal Reserve’s resolute stance on prospective rate hikes, a factor exacerbating uncertainties that play into the undulating path of WTI prices. The recent remarks by Federal Reserve Chairman Jerome Powell have reverberated through the market, underscoring the central bank’s readiness to ratchet up interest rates if deemed expedient. Powell’s announcement underscores that any forthcoming rate determinations will be tethered to empirical data. Moreover, Powell accentuated the landscape of robust economic expansion and a labor market characterized by taut conditions, signaling the possibility of a prolonged cycle of tightening measures. However, this trajectory could potentially fetter the upward thrust of WTI prices, given the domino effect of heightened interest rates on escalating borrowing costs, sluggish economic growth, and a consequential dampening of oil demand.

The unfolding scenario is further compounded by mounting unease regarding China’s economic deceleration, a factor assuming particular significance due to China’s stature as a premier global oil importer. The focal point for many observers is the imminent release of China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) data for August. An underwhelming outcome in this report could likely exert downward pressure on WTI prices, given China’s pivotal role in global oil dynamics.

Concurrently, a counterbalancing influence on the oil market emerges through the prism of supply dynamics. Notably, voluntary production curtailments orchestrated by Saudi Arabia and Russia inject support into the equation. Saudi Arabia’s pronouncement to sustain September production at an approximate rate of 9 million barrels per day, representing a reduction of roughly 1 million barrels from August levels, has the potential to wield a stabilizing impact on prices.

Looking forward, the oil market landscape becomes punctuated by key impending events. One noteworthy juncture is the impending release of China’s Caixin Manufacturing PMI for August, scheduled to be unveiled on the ensuing Friday. Market projections anticipate a modest rise in the index from 49.2 to 49.3, indicating a potentially delicate economic balance. However, the zenith of this week’s developments hinges on the unveiling of the Nonfarm Payrolls (NFP) data, also slated for release on Friday. These events emerge as pivotal inflection points with the capability to markedly sway USD-denominated WTI prices. In light of this, astute oil traders are poised to intently parse through these data releases, harnessing insights to strategically navigate trading opportunities linked to the oscillations in WTI prices.

 

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WTI Holds Near $78.60 Amid US Inflation and China Economic Worries

WTI Holds Near $78.60 Amid US Inflation and China Economic Worries

Today, the price of Western Texas Intermediate (WTI), the key US crude oil benchmark, is holding steady around the $78.60 level. This marks the fourth consecutive day of negative trading as two main factors weighing on the market.

First, there are growing concerns about the potential tightening of monetary policy by the Federal Reserve. The US Energy Information Administration (EIA) reported a significant drop of nearly 6 million barrels in crude oil inventories for the week ending August 11, surpassing expectations of a 2.3 million barrel contraction. Despite this decline, crude oil production has been rising since the initial impact of the pandemic, indicating a steady recovery in demand.

However, the recently released minutes from the Federal Open Market Committee (FOMC) meeting highlighted persistent high inflation. Fed officials are acknowledging significant inflation risks that may require further monetary tightening to align inflation with long-term targets. This hawkish stance is capping the upward movement of WTI prices, as higher interest rates can dampen economic activity and oil demand due to increased borrowing costs.

Another cause for concern is the state of China’s economy. Data shows a decline in the Chinese House Price Index for July, raising alarm bells about a potential property crisis. This concern is amplified by the struggles of major developer Country Garden Holdings in meeting debt obligations. Additionally, Chinese Retail Sales and Industrial Production for July fell short of expectations, indicating further economic distress in China that could put downward pressure on oil prices.

On a positive note, the tightening supply dynamics could exert upward pressure on WTI prices. Saudi Arabia has announced an extension of its voluntary oil output cut of one million barrels per day through September. Similarly, Russia is planning to decrease its oil exports by 300,000 barrels per day in September. Recent reports suggest that Saudi Arabia’s oil exports have reached their lowest level since September 2021, dipping below 7 million barrels per day.

Looking ahead, oil traders will closely monitor US weekly Initial Jobless Claims and the Philadelphia Fed Manufacturing Survey for August, as well as ongoing developments in China’s economic landscape. These factors will significantly influence the price of WTI, guiding trading strategies in response to evolving market conditions.

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WTI Holds Firm Above $82: China’s Issues and US Retail Sales in Focus

WTI Holds Firm Above $82: China’s Issues and US Retail Sales in Focus

The Western Texas Intermediate (WTI) crude oil price has maintained its position above the $82 mark on the trading landscape, with two major factors shaping its trajectory: concerns over China’s economic challenges and anticipation of US retail sales data.

Amid the economic turmoil caused by the Chinese real estate sector, investors are closely monitoring how these developments might affect global markets. Specifically, Country Garden Holdings Co.’s bond and share price declines have raised alarms, triggering concerns of potential significant defaults within the sector. The broader implications of China’s real estate market instability are magnifying the impact on the WTI price.

Adding to these concerns, China’s recent inflation data has sparked further unease. The Consumer Price Index (CPI) for July exhibited deflationary signs, showing a year-on-year decrease of 0.3%. Given that China is one of the world’s largest oil consumers, any economic shifts in the country have direct consequences on global oil demand and prices.

In contrast to these concerns, supply-side factors are exerting their influence. Saudi Arabia’s decision to extend its voluntary oil output cut of one million barrels per day (bpd) through September suggests a tightening of supply. Additionally, Russia’s plans to reduce its oil exports by 300,000 bpd in September adds to the support for higher WTI prices.

Both the Organization of Petroleum Exporting Countries (OPEC) and the Energy Information Administration (EIA) have displayed optimism for the second half of the year. The IEA projects a demand increase of 2.2 million bpd in 2023, driven by factors like increased air travel, growing oil demand in power generation, and elevated petrochemical activity in China. OPEC, on the other hand, anticipates a production increase of 2.44 million bpd.

In the coming days, the focus will shift to key data releases. The attention of oil traders will be directed towards US Retail Sales figures for July, with expectations of a rise from 0.2% to 0.4%. Additionally, the upcoming releases of the American Petroleum Institute’s (API) Weekly Crude Oil Stock report and the Energy Information Administration’s (EIA) Crude Oil Stocks for the week ending August 11 will provide further insight into market dynamics. These data points will play a vital role in guiding oil traders as they analyze opportunities related to the USD-denominated WTI price.

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WTI Crude Oil Steadies Around $82.30 Ahead of EIA Report and US Inflation Figures

WTI Crude Oil Steadies Around $82.30 Ahead of EIA Report and US Inflation Figures

In the early European session on Wednesday, WTI, the benchmark for US crude oil, is exhibiting little movement as prices fluctuate within a narrow range of $82.20 to $82.45. The market is grappling with concerns over China’s dwindling demand for oil due to trade dynamics and inflation patterns, which are exerting downward pressure on WTI prices.

The release of Chinese inflation data for July reveals a year-on-year decrease of 0.3% in the Consumer Price Index (CPI), deviating from the previous reading of 0%. Surpassing market expectations of a decline of -0.4%, this slight improvement is encouraging news. Furthermore, the Producer Price Index (PPI) experienced a year-on-year decrease of 4.4%, surpassing the anticipated drop of 4.1%.

A significant decline of 18.8% in China’s crude oil imports during July is particularly noteworthy, marking the lowest level since January. This decline is worrisome considering that China stands as the world’s largest consumer of oil.

Conversely, the latest report from the US Energy Information Administration (EIA) provides some support for WTI prices. The EIA projects a 1.9% increase in Gross Domestic Product (GDP) for 2023, an improvement from the previous forecast of 1.5%. According to the report, the recent surge in crude prices can be attributed to Saudi Arabia’s voluntary output restrictions and the growing global demand for oil.

WTI prices have received an additional boost from Saudi Arabia’s decision to extend its one-million-barrel-per-day oil output cut until September, along with Russia’s plan to reduce oil exports by 300,000 bpd in September.

Traders are anxiously awaiting the release of the EIA Crude Oil Stocks Change report on Wednesday, covering the week ending August 4. Furthermore, they have their eyes set on key events such as the release of the Consumer Price Index (CPI) and the Producer Price Index (PPI) later this week. The analysis of this data will be crucial for traders as it has the potential to significantly impact the value of USD-denominated WTI, creating trading opportunities in the oil market.

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EUR/USD Price Forecast

EUR/USD Price Forecast: Consolidating Below 1.0500 Amid Multi-Week High

The EUR/USD currency pair is having a hard time continuing its recent winning streak, trading in a tight range just below the 1.0500 psychological mark during the Asian session on Monday. In spite of the consolidation, the pair is still close to its three-week high of Friday, buoyed by a weaker US Dollar (USD).

Technically, the pair‘s location above the 38.2% Fibonacci retracement level of the November-January bear run, combined with upbeat oscillators on the daily chart, indicates that the bullish momentum is still intact. This leaves room for a potential rally towards the 1.0545-1.0555 resistance area, which coincides with the 50% Fibonacci retracement level and the 100-day Exponential Moving Average (EMA).

A successful breach above this crucial barrier may set the stage for additional gains, with EUR/USD potentially challenging the 1.0600 level. A break above this level may propel the pair towards the December 2024 swing high of 1.0630, close to the 61.8% Fibonacci retracement level. Further bullish momentum may continue to drive the rebound from its more than two-year low in January.

To the contrary, however, the 38.2% Fibonacci level of 1.0465 acts as an instant support level. A resolute breach through this area can drive selling momentum faster, pulling the pair towards the 1.0400 round number and down further into the mid-1.0300s (23.6% Fibonacci level). Failure to hold these levels could shift the bias in favor of bearish traders, potentially exposing the 1.0200 handle.

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EUR/USD Eases Near

EUR/USD Eases Near 1.0300 Ahead of Lagarde’s Speech

The EUR/USD pair edges lower to approximately 1.0310 during the Asian session on Monday, weighed down by a stronger US Dollar (USD). Market participants are focused on the upcoming Eurozone Sentix Investor Confidence data for February and a speech by European Central Bank (ECB) President Christine Lagarde later in the day.

On Friday, former US President Donald Trump announced plans to introduce reciprocal tariffs on multiple countries by Tuesday or Wednesday, though he did not specify which ones. This move has heightened concerns about a global trade war, fueling demand for the safe-haven USD.

“The immediate concern might not be inflation, as counter-effects like a demand slowdown could come into play. However, the bigger issue is uncertainty and the shift toward a more protectionist world,” said Charu Chanana, Chief Investment Strategist at Saxo.

Meanwhile, the Euro faces pressure from growing expectations of further ECB rate cuts amid sluggish economic growth. ECB Governing Council member Boris Vujcic stated that the market’s anticipation of three rate cuts this year is reasonable. However, he emphasized that greater clarity on monetary policy direction may not emerge until early in the second quarter.

Traders will keep a close eye on US trade policies, especially Trump’s repeated threats against Europe. JPMorgan economist Nora Szentivanyi noted that the objectives, timing, and tariff rates remain unclear. Nonetheless, the European Commission has stated it would retaliate firmly against any tariffs imposed by the US.

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EUR/USD Holds Below 1.0400 Ahead of Eurozone Retail Sales Data

EUR/USD Struggles Below 1.0400 Ahead of Eurozone Retail Sales Data

EUR/USD is trading lower around 1.0390 in the Asian session on Thursday, extending losses following a two-day recovery. Investors remain wary ahead of the release of Eurozone Retail Sales data later today.

Market predictions suggest that Eurozone retail sales scaled by 1.9% year on year in December, up from the previous 1.2% increase. However, the monthly number is expected to fall by 0.1%, erasing the 0.1% increase reported in November.

The euro remains under pressure as market sentiment points to further monetary easing by the European Central Bank (ECB). Policymakers feel optimistic that inflation will steadily return to the ECB’s 2% objective, lessening the need for additional tightening.

Meanwhile, the US Dollar Index (DXY), which tracks the dollar against six major currencies, has stabilized at 107.70, restricting EUR/USD’s upside potential. The dollar’s resiliency comes after a three-day losing skid, which puts pressure on the pair.

On Thursday, Federal Reserve Vice Chair Philip Jefferson reiterated his desire for keeping existing interest rates, underlining that the Fed’s policy remained restrictive despite the 100-basis-point drop. Meanwhile, San Francisco Federal Reserve President Mary Daly emphasized the central bank’s cautious attitude in the face of prolonged economic uncertainties.

The dollar weakened on Wednesday following a disappointing US Services PMI reading. The ISM Services PMI dropped to 52.8 in January from a revised 54.0 in December, falling short of the market consensus of 54.3. Looking ahead, traders are watching Friday’s US Nonfarm Payrolls (NFP) report, which might influence the Federal Reserve’s next policy actions.

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EUR/USD Stuck in Range Near 1.0375-1.0380 as Bulls Struggle for Direction

EUR/USD Struggles for Clear Direction, Stays Range-Bound Near 1.0375-1.0380

The EUR/USD pair continues in consolidation mode, failing to build on its recent recovery from the 1.0200 region—the lowest level since January 13. After reaching a weekly high earlier on Wednesday, the pair is fluctuating within a narrow range around 1.0375-1.0380, showing little change for the day amid mixed market signals.

Tuesday’s Job Openings and Labor Turnover Survey (JOLTS) indicated a cooling U.S. labor market, reinforcing expectations of Federal Reserve (Fed) policy easing. Markets are now factoring in the likelihood of two rate cuts by the Fed this year. Risk-on sentiment also remains prevalent, but should continue to weigh on demand for the safe-haven USD, and thereby support EUR/USD.

Upside momentum, however remains constrained by issues on the introduction of U.S. tariffs over the goods to be imported in Europe under Trump’s administration, among others, and the ECB dovish direction which is being felt in restraining the Euro though HICP was reported higher to an annual rate of 2.5% in the last month, still, does not allow much upside in this pair.

Looking ahead, market participants will focus on the final Eurozone Services PMI release, while the U.S. economic calendar highlights the ADP private-sector employment report and the ISM Services PMI. Movements in the USD could also be influenced by key FOMC member speeches. Still, Friday’s NFP report will focus more attention on it as it will help deliver a better picture of the situation in the U.S. labor market and set the direction for future Fed policy.

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GBP/USD Holds Above 1.2400 as Markets Watch China Tariff Developments

GBP/USD Holds Above 1.2400 as Markets Watch China Tariff Developments

GBP/USD extends its gains for a second consecutive session, trading around 1.2430 during Asian market hours on Tuesday. With  the  decision   by   U.S. President Donald Trump   to pause tariffs on Mexico and Canada , the pair benefits from a risk-on sentiment .

Despite this, investors continue to pay close attention to ongoing trade negotiations, making market volatility a major concern. Trump declared that he would postpone imposing high tariffs on Canada and Mexico for at least 30 days following their agreements to send 10,000 troops to the U.S. border to fight drug trafficking.

This move follows Trump’s recent decision to impose 25% tariffs on Mexican and Canadian goods, along with a 10% tariff on Chinese imports. Additional tariffs on China are anticipated to go into effect Tuesday at 5:00 GMT. Trump managed to say that talks with Chinese officials might happen “probably over the next 24 hours,” and that tariffs on China would be “very, very substantial” if an agreement could not be made.

Meanwhile, the U.S. Dollar Index (DXY), which tracks the USD against six major currencies, hovers around 108.70 after erasing most of its gains from the previous session. Strong U.S. economic data could provide support for the greenback, as the ISM Manufacturing PMI climbed to 50.9 in January from 49.3 in December, surpassing the expected 49.8.

While GBP/USD may rise, the British Pound’s upside may be limited, given the expectation that the Bank of England (BoE) will cut interest rates once again. Despite rising wages in the UK, the BoE is expected to lower interest rates by 25 basis points to 4.5% on Thursday.

The BoE’s Monetary Policy Committee (MPC) is expected to vote 8-1 in favor of the rate cut, with one member likely advocating for maintaining rates at their current level for now.

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EUR/USD Drops to 1.0200 on Trump’s Trade Tariffs

EUR/USD Slumps to Multi-Week Low Near 1.0200 Amid Trump’s Trade Tariffs

The EUR/USD pair extends its decline on Monday, plunging to the 1.0200 region—a three-week low—during the early Asian session. This drop brings the pair closer to its lowest level in over two years, last seen in January, reinforcing the ongoing multi-month downtrend.

The US Dollar (USD) gains broad strength following President Donald Trump’s weekend announcement of new tariffs: 25% duties on imports from Canada and Mexico, along with an additional 10% tariff on Chinese goods. These measures escalate global trade tensions, dampening investor appetite for riskier assets and boosting demand for the safe-haven USD. As a result, the EUR/USD pair faces renewed selling pressure.

Adding to the bearish sentiment, Trump also declared on Friday evening that he would impose tariffs on goods from the European Union. This, coupled with the European Central Bank’s (ECB) dovish stance, further weighs on the euro. Last Thursday, the ECB cut borrowing costs by 25 basis points (bps) as expected and signaled the possibility of additional rate cuts before the year’s end, exacerbating the euro’s weakness.

The policy divergence between the ECB and the Federal Reserve (Fed) further tilts market sentiment in favor of the USD. While the Fed has opted for a hawkish pause, supporting the dollar’s strength, a recent pullback in US Treasury yields may limit further USD gains and offer some relief to the EUR/USD pair. However, the overall market outlook suggests that the pair’s downside momentum is likely to persist.

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EUR/USD Holds Above 1.0400 | Focus on Q4 GDP & ECB Policy Decision

EUR/USD Holds Above 1.0400 Ahead of Q4 GDP Data and ECB Policy Decision

The EUR/USD pair is edging higher after three consecutive losses, trading near 1.0420 during Thursday’s Asian session. The rebound is primarily driven by a technical pullback in the US Dollar (USD). Meanwhile, the US Dollar Index (DXY), which tracks the greenback against six major currencies, remains just below 108.00.

Despite the recent uptick, further gains for EUR/USD may be capped as the USD could regain strength following the Federal Reserve’s (Fed) cautious approach to monetary policy. The Fed reinforced its hawkish stance by removing language suggesting confidence in inflation reaching its 2% target.

During his press conference, Fed Chair Jerome Powell emphasized that any policy changes would require “real progress on inflation or some weakness in the labor market.” As expected, the Fed maintained its overnight borrowing rate at 4.25%-4.50% during its January meeting on Wednesday. This decision follows three consecutive rate cuts since September 2024, totaling a one-percentage-point reduction.

Meanwhile, the Euro faces downward pressure as the European Central Bank (ECB) is widely expected to cut interest rates by 25 basis points in its policy meeting on Thursday, lowering the Deposit Rate to 2.75%. Market sentiment suggests that further rate cuts from the ECB may follow in the coming months, potentially weighing on the Euro.

Investors will closely watch the release of fourth-quarter Gross Domestic Product (GDP) data from the Eurozone and Germany on Thursday. Later in the day, focus will shift to the US Annualized GDP report, which could influence market sentiment and currency movements.

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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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