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Gold Price Holds Gains Around $2,670, Supported by Softer Risk Sentiment

Gold Price Holds Gains Around $2,670, Supported by Softer Risk Sentiment

Gold Price Holds Gains Around $2,670, Supported by Softer Risk Sentiment

Gold (XAU/USD) continues to edge higher for the second consecutive day on Wednesday, extending its recent positive streak, reaching a one-and-a-half-week high around $2,670 during the Asian session. The ongoing geopolitical tensions in the Middle East are fueling a risk-off sentiment, which is providing support to the safe-haven appeal of gold.

Meanwhile, the US Dollar (USD) is consolidating near a two-month peak, offering limited movement in the gold market. However, growing expectations that the Federal Reserve (Fed) will ease its monetary policy less aggressively, with a likely 25 basis point rate cut in November, are keeping any major USD decline in check. This calls for caution before making aggressive bullish bets on the non-yielding precious metal.

Market Movers: Gold Underpinned by Multiple Factors, Lacks Strong Bullish Momentum

US Treasury bond yields fell for the second straight day on Tuesday, as weaker-than-expected manufacturing data and easing inflation concerns, aided by lower oil prices, boosted demand for gold. The New York Fed’s Empire State Manufacturing Index, which surged to a 29-month high in September, fell sharply to -11.9 in October, the weakest level since May, signaling worsening economic conditions.

Falling oil prices, due to lower supply disruption fears and weaker demand prospects, further ease inflationary pressures, creating room for the Fed to cut interest rates. However, markets are pricing in a higher chance of a smaller rate cut at the next FOMC meeting in November, which could strengthen the US Dollar and limit gold’s upside potential.

San Francisco Fed President Mary Daly remarked that significant progress has been made in controlling inflation, and she anticipates one or two more rate cuts this year if the economic outlook remains on track. Similarly, Atlanta Fed President Raphael Bostic commented that the US economy is performing well and recession risks remain low, with inflation expected to return to the Fed’s 2% target.

On the geopolitical front, Israeli Prime Minister Benjamin Netanyahu rejected calls for a ceasefire with Lebanon, while Hezbollah threatened to escalate its attacks, increasing the risk of a broader conflict. The Biden administration has urged Israel to allow more humanitarian aid into Gaza, warning of potential consequences, including halting US arms transfers.

This week, market attention will shift to key US economic data releases, including Monthly Retail Sales, Industrial Production, and Weekly Initial Jobless Claims, as well as China’s economic reports.

Technical Outlook: Gold Nears All-Time High, Bullish Potential Intact

Technically, gold’s next resistance is expected around the $2,685-$2,686 level, close to the all-time high reached in September. A decisive break above the $2,700 psychological level could pave the way for further gains, extending the multi-month uptrend supported by positive momentum indicators on the daily chart.

On the downside, immediate support lies near the $2,650 area, with the next key level around $2,630-$2,632. A further decline could attract buyers near the $2,600 level, which serves as a crucial pivot. A decisive break below this level might trigger technical selling and lead to deeper losses for gold.

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Japanese Yen Vulnerable Against USD, Hovers Near Lowest Levels Since Early August

Japanese Yen Vulnerable Against USD, Hovers Near Lowest Levels Since Early August

The Japanese Yen (JPY) continues to struggle, failing to hold onto modest gains from the Asian session against the US Dollar (USD), and remains near its lowest point since early August, touched on Monday. Investors are scaling back their expectations for further interest rate hikes by the Bank of Japan (BoJ) in 2024. This, combined with the prevailing risk-on sentiment in the markets, has diminished demand for the safe-haven JPY.

At the same time, expectations for a less aggressive monetary easing approach from the Federal Reserve (Fed) and predictions of a standard 25 basis point rate cut in November are keeping US Treasury yields elevated. This supports the USD, which hovers near a two-month high, limiting any gains for the lower-yielding JPY and pushing the USD/JPY pair back towards the 150.00 psychological level in the latest trading.

Market Highlights: Yen Struggles Amid Elevated US Bond Yields and Risk-On Sentiment

  • Japanese Prime Minister Shigeru Ishiba’s recent comments have dampened market expectations for further BoJ rate hikes in the near term.
  • US equity markets maintained their upward momentum on Monday, with the S&P 500 and Dow Jones Industrial Average reaching record highs amid optimism over strong corporate earnings.
  • The USD has strengthened significantly over the past two weeks, reaching its highest level since August 8 due to bets on smaller Fed rate cuts.
  • Minneapolis Fed President Neel Kashkari indicated that recent job data shows the labor market remains resilient, with future policy moves being data-dependent.
  • Fed Governor Christopher Waller suggested the central bank should proceed cautiously with rate cuts, especially in light of recent policy meetings.
  • According to the CME Group’s FedWatch Tool, markets are pricing in a strong likelihood of a 25 basis point rate cut in November, with over a 15% chance of no cut.
  • Rising US bond yields, particularly the 10-year Treasury yield, which recently exceeded the 4% mark, favor the USD and continue to pressure the low-yielding JPY.

Traders are now looking to the release of the Empire State Manufacturing Index and speeches from key Federal Open Market Committee (FOMC) members for further direction.

Technical Outlook: USD/JPY Approaching Key Levels

From a technical standpoint, any further decline in USD/JPY is expected to attract buying interest around the 149.00 level. This should help limit downside moves near the 148.55-148.50 support zone. A break below this area could lead to increased selling pressure, pushing the pair below the 148.00 mark and potentially toward last week’s low around 147.35-147.30.

On the upside, sustained strength above the key psychological level of 150.00 could trigger fresh buying interest. With daily chart oscillators holding in positive territory and not yet overbought, the USD/JPY pair could aim for the August swing high around 150.85-150.90. A move beyond 151.00 would suggest the pair has bottomed out, paving the way for further appreciation in the near term.

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Japanese Yen Consolidates Against USD | Near Lowest Level Since Early August

Japanese Yen Consolidates Against USD, Hovers Near Lowest Level Since Early August

Japanese Yen Consolidates Against USD, Hovers Near Lowest Level Since Early August

The Japanese Yen (JPY) continues its sideways consolidation against the US Dollar (USD), remaining near its lowest level since early August during Monday’s early European session. Comments from Japanese Prime Minister Shigeru Ishiba last week, which were critical of further monetary tightening, have dampened expectations for additional rate hikes by the Bank of Japan (BoJ). This, combined with a generally positive risk sentiment in global markets, has weakened demand for the safe-haven JPY.

Meanwhile, the USD holds steady near a two-month high reached last week, supported by expectations of less aggressive policy easing from the Federal Reserve (Fed). However, despite the strong USD, the Fed is still anticipated to lower interest rates by 25 basis points in November, contrasting with the BoJ’s likely continuation of its rate-hiking cycle. This divergence in policy is preventing traders from making fresh bullish bets on the USD/JPY pair.

Market Sentiment: Yen Traders Hesitate Amid Mixed Signals

The futures market indicates less than a 50% chance that the BoJ will raise rates by 10 basis points before year-end, following Prime Minister Ishiba’s dovish tone in early October. Additionally, Japan’s economic data, including a drop in real wages for the first time in three months and declining household spending, along with easing price pressures from raw material costs, raises doubts about how aggressively the BoJ will pursue further rate hikes.

Meanwhile, China’s finance ministry signaled potential increased debt issuance to support its domestic economy, but provided few details about stimulus plans. Despite this, investors remain optimistic that comprehensive measures will be introduced to stabilize key sectors, buoyed by the recent rally in US equity markets, which hit record highs last Friday.

In the US, September’s Producer Price Index (PPI) data revealed a 1.8% rise in the headline figure and a 2.8% increase in the core measure on a yearly basis, both slightly exceeding expectations. Combined with last week’s hotter-than-expected US consumer inflation data, this has reduced the likelihood of another large rate cut by the Fed in November, strengthening the USD. That said, the Fed is still expected to continue lowering rates due to signs of labor market weakness, while the BoJ remains on course to hike rates again by year-end, which limits the upside for the USD/JPY pair.

Technical Outlook: USD/JPY Positive Bias Holds Above 148.00

From a technical perspective, the USD/JPY pair recently broke through its 50-day Simple Moving Average (SMA) for the first time since mid-July and climbed above the 38.2% Fibonacci retracement level of its July-September decline. This breakout, along with positive signals from daily chart oscillators, suggests that the pair’s path of least resistance is to the upside. A move above last week’s high around the 149.55-149.60 region would confirm the bullish bias, potentially pushing prices towards the 150.00 psychological level, and possibly extending towards the 50% Fibonacci level near 150.75-150.80.

On the downside, any significant dip below the 149.00 mark is likely to attract buying interest around the 148.55 region, which should limit losses near 148.00. A decisive break below this level could trigger technical selling, dragging the pair toward intermediate support at 147.35 and potentially down to 147.00 or 146.50.

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Gold Price Holds Gains as USD Strength Limits Upside Ahead of US PPI Data

Gold Price Holds Intraday Gains, But USD Strength Limits Upside Ahead of US PPI Data

Gold Price Holds Intraday Gains, But USD Strength Limits Upside Ahead of US PPI Data

Gold (XAU/USD) has retreated slightly from a three-day high, trading around the $2,640 level during early European hours on Friday. Despite the dip, the precious metal remains up over 0.40% for the day. A rise in U.S. weekly jobless claims signals some weakness in the labor market, which could allow the Federal Reserve (Fed) to continue cutting interest rates. This has led to a modest drop in U.S. Treasury yields and a softer risk sentiment, supporting gold prices for the second consecutive day.

However, stronger-than-expected U.S. consumer inflation data on Thursday reduced expectations of a significant rate cut by the Fed in November. This has supported the U.S. dollar, halting its recent pullback and creating headwinds for gold’s upward momentum. Traders are now focusing on the upcoming U.S. Producer Price Index (PPI), along with the Preliminary Michigan Consumer Sentiment Index and inflation expectations, for short-term direction.

Key Market Drivers: Gold Holds Steady Ahead of US PPI

  • US Inflation Data: The Labor Department reported on Thursday that the headline Consumer Price Index rose 2.4% year-over-year through September, while core inflation, excluding food and energy, climbed 3.3%. This stronger inflation data fueled speculation that the Fed will slow the pace of future rate cuts, boosting the U.S. dollar to near two-month highs, though the initial reaction faded.
  • Labor Market Weakness: U.S. weekly jobless claims rose by 33,000 to a seasonally adjusted 258,000, higher than the 230,000 expected, indicating some softening in the labor market. As the Fed shifts focus toward maximum sustainable employment, this mixed data suggests continued rate cuts, potentially supporting gold prices.
  • Treasury Yields and USD Strength: Despite the jobless claims data, the 10-year U.S. Treasury yield remains above 4%, bolstering the U.S. dollar and capping further gains for gold.
  • China’s Stimulus Measures: China’s finance ministry is expected to release details of fiscal stimulus measures, which could support risk sentiment and limit any significant upside for gold in the short term.

Looking ahead, traders will be closely watching the release of the U.S. PPI data, which is expected to impact USD demand and create trading opportunities for gold heading into the weekend.

Technical Outlook: Gold Poised for Further Gains

From a technical perspective, the recent rebound from near the $2,600 level and the move above the $2,630 support-turned-resistance zone favor bullish traders. The daily chart oscillators remain in positive territory, suggesting that gold may continue to rise toward the $2,657-$2,658 resistance area, with the $2,670-$2,672 supply zone as the next target. If momentum continues, gold could test its all-time high around $2,685-$2,686, with the $2,700 level serving as a key psychological resistance.

On the downside, the $2,630-$2,628 region now acts as immediate support, with a break below this level potentially opening the door for a test of the pivotal $2,600 mark. A sustained drop below $2,600 could trigger deeper losses, with the next key support at $2,560, followed by $2,535-$2,530, and eventually $2,500.

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Gold Price Recovers from Multi-Week Low, but Upside Potential Remains Limited Ahead of US CPI

Gold Price Recovers from Multi-Week Low, but Upside Potential Remains Limited Ahead of US CPI

Gold Price Recovers from Multi-Week Low, but Upside Potential Remains Limited Ahead of US CPI

Gold (XAU/USD) is experiencing a modest rebound on Thursday, recovering from a six-day losing streak that pushed prices to a near three-week low, around the $2,605-$2,604 range. This intraday uptick is likely due to repositioning ahead of the crucial US Consumer Price Index (CPI) report, which could shape expectations about the Federal Reserve’s (Fed) rate cut decisions and impact demand for the non-yielding metal.

At the same time, widespread market belief that the Fed will lower rates by 25 basis points in November has kept the 10-year U.S. Treasury yield above the 4% mark, boosting the U.S. Dollar (USD) to an eight-week high. This is a headwind for gold, which may limit any substantial upside. Traders are cautious, waiting for a stronger follow-through in the market before assuming that the recent corrective decline from gold’s all-time peak has concluded.

Market Factors Limiting Gold’s Upside: Strong USD and Moderate Fed Easing

The minutes from the September Federal Open Market Committee (FOMC) meeting showed a majority favored a 50 bps rate cut, confident in achieving a 2% inflation target. Some committee members, however, pushed for only a 25 bps reduction, citing still-elevated inflation and strong economic growth. There was a consensus that this large cut would not determine the pace of future reductions, which helped push the USD to a two-month high.

Additionally, key Fed officials expressed a more cautious stance on aggressive easing. Dallas Fed President Lorie Logan mentioned uncertainties in the economic outlook, while Boston Fed President Susan Collins emphasized that policy will remain data-driven. San Francisco Fed President Mary Daly hinted at more rate cuts but noted that the September decision does not indicate the size of future cuts.

Current market pricing shows a greater likelihood of a 25 bps rate cut in November and a more than 20% chance that rates will be left unchanged.

Safe-Haven Demand Supports Gold Amid Geopolitical Risks

Geopolitical tensions, particularly between Israel and Iran, are contributing to safe-haven demand for gold. Israeli Defense Minister Yoav Gallant recently warned of a potential strike against Iran, which could increase market volatility and lend further support to gold. However, traders are likely holding off on aggressive positioning until after the release of the US inflation data.

Technical Outlook: Bearish Bias with Limited Upside

From a technical perspective, the recent breakdown below the $2,630 support level signals a bearish outlook for gold. The daily chart oscillators remain in positive territory, but the metal has yet to sustain a break below the critical $2,600 level, making traders cautious about deeper losses.

If the price decisively breaks below $2,600, the next support levels to watch are $2,560, followed by the $2,535-$2,530 zone, with the $2,500 psychological level acting as a major downside target.

On the flip side, the $2,630-$2,635 range now serves as an immediate resistance level. Any upward movement is expected to face selling pressure around the $2,657-$2,658 barrier, with a sustained rally above this level possibly pushing gold toward the $2,670-$2,672 zone. A move beyond this point could challenge the all-time high near $2,685-$2,686, with a break above $2,700 setting the stage for further gains in the long-term uptrend.

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New Zealand Dollar Hits Seven-Week Low After RBNZ Cuts Interest Rate by 50 bps

New Zealand Dollar Hits Seven-Week Low After RBNZ Cuts Interest Rate by 50 bps

New Zealand Dollar Hits Seven-Week Low After RBNZ Cuts Interest Rate by 50 bps

The New Zealand Dollar (NZD) has dropped to its lowest level since mid-August, following the Reserve Bank of New Zealand’s (RBNZ) decision to cut the Official Cash Rate (OCR) by 50 basis points, lowering it from 5.25% to 4.75% at the October meeting. As anticipated, the move led to immediate selling pressure on the Kiwi. Additionally, the lack of new stimulus measures from Chinese officials has added to the NZD’s decline, as China remains a major trading partner for New Zealand.

Looking ahead, market participants will focus on the Federal Open Market Committee (FOMC) Minutes release later on Wednesday, followed by Thursday’s US Consumer Price Index (CPI) data for September. If inflation comes in softer than expected, it could weigh on the USD and provide some relief for the NZD/USD pair.

Market Movers: New Zealand Dollar Remains Weak Post-RBNZ Decision

The RBNZ’s Monetary Policy Statement (MPS) indicated that the annual consumer price inflation is within the target range of 1-3%. The decision to cut the OCR by 50 basis points aims to maintain low and stable inflation while avoiding instability in output, employment, interest rates, and exchange rates.

In the US, Federal Reserve Vice Chair Philip Jefferson noted that the Fed’s September 50 bps rate cut aimed to support the labor market while inflation eases. However, despite progress, inflation has not yet met target levels, according to Atlanta Fed President Raphael Bostic. New York Fed President John Williams also backed the recent rate cuts, signaling the possibility of additional cuts later this year.

Technical Analysis: NZD/USD Faces Downward Pressure

The New Zealand Dollar remains under pressure, continuing its downtrend against the US Dollar. The pair has fallen below the key 100-day Exponential Moving Average (EMA) and is nearing a break below the ascending trend channel on the daily chart. This bearish momentum is supported by the 14-day Relative Strength Index (RSI), which is sitting below the midline at 41.10, favoring sellers in the short term.

A decisive break below the lower boundary of the trend channel at 0.6135 could open the door to the 0.6000 psychological level. If the pair sustains trading below this level, it could test 0.5974, the low from August 15.

On the upside, immediate resistance is seen at the 100-day EMA, around 0.6142. If the NZD/USD pair can push higher, it may target 0.6254, the high from September 6. Further gains could aim for the round figure of 0.6300, with the upper limit of the trend channel at 0.6365.

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Australian Dollar Slips as China Holds Back on Major Stimulus Measures

Australian Dollar Slips as China Holds Back on Major Stimulus Measures

Australian Dollar Slips as China Holds Back on Major Stimulus Measures

The Australian Dollar (AUD) extended its decline on Tuesday, pressured by comments from the National Development and Reform Commission (NDRC) of China. During a press conference, China’s state planner acknowledged that the country’s economy is facing increasingly complex internal and external challenges. The lack of additional major stimulus from Chinese officials disappointed traders. Furthermore, the broader risk-off sentiment, fueled by escalating geopolitical tensions in the Middle East, contributed to selling pressure on risk-sensitive assets like the AUD.

Despite the downward movement, the Australian Dollar’s losses could be limited due to the Reserve Bank of Australia’s (RBA) hawkish stance, as reflected in the September Meeting Minutes. Investors now await remarks from Federal Reserve officials later on Tuesday, looking for guidance ahead of the Federal Open Market Committee (FOMC) Minutes. The focus will shift to the release of the US Consumer Price Index (CPI) for September, due on Thursday, for further clues on the US economic outlook.

Daily Market Movers: Australian Dollar Loses Ground After China’s NDRC Conference

The RBA’s September Meeting Minutes, released on Tuesday, revealed discussions among board members on possible future rate adjustments. The minutes emphasized that policy would need to remain restrictive until inflation is consistently moving toward the target range. RBA Deputy Governor Andrew Hauser stated that lowering inflation remains a priority, and the task is not yet complete.

Meanwhile, in the US, St. Louis Fed President Alberto Musalem expressed support for additional interest rate cuts, noting that economic performance will shape monetary policy. Similarly, Minneapolis Fed President Neel Kashkari backed a 50-basis-point rate cut, highlighting that the risks have shifted from high inflation toward higher unemployment. According to the CME FedWatch Tool, the probability of a 25-basis-point Fed rate cut in November has surged to 85%, up from 31.1% last week.

Technical Analysis: AUD/USD Remains Bullish in the Long Term

Despite recent setbacks, the AUD/USD pair is attempting a rebound. On the daily chart, the pair remains within the lower boundary of its ascending trend channel, maintaining a bullish bias as it stays supported above the 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) is below the midline at 47.0, suggesting potential for further consolidation or downside movement.

Initial support for the AUD/USD pair lies at 0.6735, the lower limit of the trend channel. A break below this level could trigger bearish momentum, pushing the pair toward the psychological level of 0.6700, with further downside potential at 0.6622, the low of September 11.

On the upside, resistance is first seen at 0.6823, the high from August 29. If the pair extends its gains, it could target 0.6942, the high from September 30. A decisive break above this level could attract more buyers, lifting AUD/USD toward the upper boundary of the trend channel at 0.6980.

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US stock market halted its losing trend & inflation to moderate

US stock market halted its losing trend & inflation to moderate

The NASDAQ, which gained 3.3 percent, led all three US benchmarks to a positive finish on Friday, bringing the stock market’s seven-week losing streak to an end. The S&P 500 gained 2.5 percent, while the Dow Jones gained 1.8 percent, with 29 of the 30 members posting increases. The Dow gained 6.2 percent this week, the S&P 500 climbed 6.6 percent, and the NASDAQ surged 6.8% higher.

The rise on Friday was fueled by a long-awaited, but predictable (in my opinion) reduction in inflation. After fuel costs declined during the month, core inflation in the United States climbed by only 0.2 percent in April, the smallest pace since November 2020. In addition, the 12-month rate fell from 6.6 percent to 6.3 percent.

While the inflation rate is favorable, consumer morale is at a 10-year low as a result of rising mortgage rates, rising fuel prices, and a slowing economy.

Two companies that stand out: Costco and Dell

Even if same-store sales declined, Costco was a rare retail winner, rising 1% after disclosing revenue that exceeded its own projections by $1 billion.

Dell increased its revenue by 13% in the first quarter, owing to a return to the office and lower-than-expected cost hikes.

Improving China

However, all eyes were on China, with Baidu and Alibaba both surging more than 12% after reporting stronger advertising revenue and sales than expected.

When the market starts this morning, the strong bullish lead is expected to send the S&P/ASX 200 higher. Check out my ASX 200 morning report for a round-up of the latest headlines. If you’re anything like me, you may believe that now is a wonderful moment to have money “waiting on the sidelines.”

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Stocks in the US are up for the second day in a row

Stocks in the US are up for the second day in a row

Strong retailer numbers mixed with investor bargain-hunting to generate a second straight bullish session on Wall Street on Thursday. Following Wednesday’s positive day, major indices continued to rise, achieving a rare back-to-back gain in 2022. Aside from the positive retailer results, initiatives by Southwest Airlines and JetBlue Airways to raise their revenue predictions, another evidence of robust consumer behavior, added to the momentum.

Analyst after the S&P 500 plummeted for seven weeks in a row, Patrick O’Hare believes the rally is unavoidable. He explained, “The market had been substantially sold… and was due for a bounce.” The Dow Jones Industrial Average rose more than 500 points, or 1.6 percent, to 32,637.19 at the end of the session.

The broad-based S&P 500 rose 2% to 4,057.84, while the tech-heavy NASDAQ Composite Index rose 2.7 percent to 11,740.65. Dollar General and Dollar Tree both saw their stock rise 14% and 21.9 percent, respectively, after posting better-than-expected earnings. Macy’s, up 19.3%, and Williams-Sonoma, up 12.8%, were two other notable stores to announce gains.

Broadcom gained 3.6 percent after announcing a $61 billion deal to buy cloud computing company VMware, which gained 3%. Despite decreasing its revenue forecast, another semiconductor manufacturer, Nvidia, rose 5.2 percent throughout the day.

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US stock market closes higher as US Fed minutes were positive

US stock market closes higher as US Fed minutes were positive

Wall Street ended the day higher on Wednesday, boosted by minutes from the Federal Reserve’s most recent monetary policy meeting, which revealed that officials agreed that the US economy was quite robust as they struggled to control inflation without sparking a recession.

The minutes from the Federal Open Market Committee’s May meeting, which resulted in a 50-basis-point hike in the Fed funds target rate – the largest increase in 22 years – revealed that the majority of the committee’s members believed that more rate hikes would “likely be appropriate” at the committee’s upcoming June and July meetings.

“Consensus is a positive thing,” said Ross Mayfield, an investment strategy analyst at Baird in Louisville, Kentucky. “There isn’t much doubt about what needs to be done in the short term.” “By the time (the Fed) comes to September, they’ll have plenty of economic data to make their decision from there,” Mayfield added.

Early in the day, Wall street the three major U.S. market indexes gyrated amid rising concerns arising from business and consumer surveys, economic statistics, and corporate earnings reports, all of which pointed to a cooling American economy – even as the Fed prepares to slam the brakes on decades-high inflation.

Fears that the Fed’s excessively aggressive interest rate hikes may send the economy into recession, despite evidence that inflation peaked in March, have fanned such fears. Mayfield added, “There’s some validity to the argument that inflation is doing (the Fed’s) job for them.” “A cooling is already taking place, and financial conditions have tightened in the previous month as a result of dollar strength and equity market downturn.”

The Commerce Department is expected to announce its second estimate of first-quarter GDP on Thursday, with economists anticipating a slightly shallower fall than the 1.4 percent quarterly annualized drop previously reported. On Friday, the Personal Consumption Expenditures (PCE) report will be released, which will provide more information about consumer spending and whether inflation peaked in March, as other signs imply.

The Dow Jones Industrial Average increased by 191.66 points, or 0.6 percent, to 32,120.28, the S&P 500 increased by 37.25 points, or 0.95 percent, to 3,978.73, and the NASDAQ Composite increased by 170.29 points, or 1.51 percent, to 11,434.74. Nine of the S&P 500’s 11 major sectors increased, with consumer discretionary stocks leading the way with a 2.8 percent rise.

Amazon.com Inc and Tesla Inc gave the S&P 500 and NASDAQ the biggest boosts, climbing 2.6 percent and 4.9 percent, respectively. Nordstrom Inc, a department store operator, rose 14.0 percent following its bullish annual profit and growth forecasts. Wendy’s stock rose 9.8% after a regulatory filing revealed that shareholder Nelson Peltz was mulling a takeover bid.

Nvidia Corp’s stock dropped more than 8% in after-hours trading after the company’s second-quarter sales projection fell short of forecasts. On the NYSE, advancers exceeded decliners by a 3.56-to-1 ratio; on the NASDAQ, advancers outpaced decliners by a 2.22-to-1 ratio. The S&P 500 added three new 52-week highs and 32 new lows, while the NASDAQ Composite added 23 highs and 255 lows. On U.S. exchanges, volume was 11.19 billion shares, compared to a total session average of 13.27 billion shares over the previous 20 trading days.

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Fears of slower growth in U.S.A have caused stock markets to tumble

Fears of slower growth in U.S.A have caused stock markets to tumble

After statements from social media company Snap and poor economic data raised concern that the US economy was about to decline dramatically, investors sold stocks on Tuesday and bet on a less aggressive Federal Reserve policy. On Tuesday, the NASDAQ Composite, which is dominated by large US technology companies, sank 2.3 percent.

The S&P 500 index, which monitors the fortunes of the largest publicly traded firms, fell 0.8 percent. However, by the time the bell rang, both indices had retreated off early-session lows. The average stock in the broad-based Russell 3000 is down more than 40% from previous highs this year, as the Federal Reserve raises interest rates in an attempt to contain inflation. Investors are concerned that the US economic recovery from the coronavirus pandemic may be diminishing, based on recent statistics showing weaker growth.

Instead of riskier assets, money managers have snatched up US government debt as a safe haven. The 10-year Treasury yield, which swings in lockstep with economic growth and interest rate forecasts, plummeted 0.09 percentage points to 2.76 percent on Tuesday, marking its greatest one-day gain since late April. Snap said late Monday that the “macroeconomic environment has deteriorated farther and faster than anticipated” since it released guidance in April, making investors nervous. The company predicted that sales and profitability for the current quarter would fall short of forecasts. Snap’s stock dropped 43% on Tuesday.

Snap mentioned, among other things, the problems created by increasing inflation, higher borrowing rates, supply chain snafus, and the situation in Ukraine. Because the announcement was unexpected, it had a particularly large impact on Snap’s stock price and the market as a whole. “Certainly, a social media company’s stern warning of ‘macro deterioration’ just a month after giving quarterly guidance presses all the key ‘leading indication’ buttons,” Citi strategist Edward Acton wrote. On Tuesday, Google parent Alphabet fell 5%, while Facebook owner Meta fell 8%, thanks to a sell-off in Snap. This year, the NASDAQ has lost 28% of its value.

Last week, US consumer bellwethers Target and Walmart offered similarly pessimistic forecasts. The grim outlook was worsened by Tuesday’s weak GDP figures. New house sales plummeted nearly 17% in April, according to the US Census Bureau, despite an increase in the number of new homes for sale. According to Doug Duncan, chief economist at Fannie Mae, the data “certainly indicates to a housing market that has shifted.” In May, the S&P purchasing managers’ index showed that business activity in the United States and the United Kingdom slowed. Traders also speculated that the Fed will be less active in raising interest rates than projected earlier this year due to these economic obstacles.

The two-year yield, which is influenced by interest rate forecasts, fell 0.14 percentage point to 2.49 percent. “The Fed wants the economy to slow down.”The economy is slowing down,” said Andrew Brenner, NatAlliance Securities’ head of international fixed income. “The Fed might be able to achieve something without raising rates as much as they might have anticipated.” Data from Europe and Asia only added to investors’ concerns. According to a study accompanying S&P Global’s May flash purchasing managers’ index for the major eurozone economy, German businesses were “increasing their charges for goods and services to cover the greater cost of energy, fuel, raw materials, and employees.”

According to a comparable PMI survey for Japan, manufacturing activity is rising at its weakest pace in three months, which its compilers blame on “supply chain interruptions” caused by “economic sanctions imposed on Russia” and Chinese lockdown measures. The Stoxx 600 index in Europe, which has lost more than a tenth of its value this year, dropped 1.1 percent. The Hang Seng index in Hong Kong fell 1.8 percent, while the Nikkei in Tokyo fell 0.9 percent.

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Big tech and banks are driving Wall Street higher; the Dow is up 2%

Big tech and banks are driving Wall Street higher; the Dow is up 2%

On Monday, US equities finished higher as bank gains and a resurgence in market-leading tech companies fueled a broad-based rally following Wall Street’s largest weekly fall since the dotcom bust more than two decades ago. All three major US market indexes rose between 1.6 and 2.0 percent, with resurgent megacap tech titans Apple Inc and Microsoft Corp providing the biggest boost.

Interest rate-sensitive banks rose 5.1 percent after JPMorgan Chase & Co, the largest U.S. lender, boosted its current year interest income outlook. The stock of JPMorgan Chase increased by 6.2 percent. “It appears to be more of a relief rally than a fundamental shift in market attitude,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York. “Investors as a group believe another shoe is about to drop, and they are probably correct in the short run.” On Friday, the S&P 500 fell 18.7% from its record closing high set on Jan. 3. If the benchmark index closes 20% or more below that high, it will confirm that the market has been in a downtrend since then.

Concerns over consistently rising inflation and strong moves by the Federal Reserve to contain it have roiled markets in recent weeks, as the global economy deals with the consequences from Russia’s invasion of Ukraine. “Today, it appears the market is less concerned about inflation and the Fed’s ability to orchestrate a smooth landing,” said Chuck Carlson, president and CEO of Horizon Investment Services in Hammond, Indiana. Carlson said that “the bias is still to the downside.”

The Dow Jones Industrial Average increased by 618.34 points, or 1.98 percent, to 31,880.24, the S&P 500 increased by 72.39 points, or 1.86 percent, to 3,973.75, and the NASDAQ Composite increased by 180.66 points, or 1.59 percent, to 11,535.28. On Wednesday, the Fed will disclose minutes from its most recent policy meeting, giving investors a glimpse into its thinking. This week’s economic statistics may provide more evidence that inflation peaked in March, as well as if high prices have harmed consumer purchasing power.

The S&P 500’s 11 major sectors all closed the session in the green, with financials leading the way with a 3.2 percent gain. The first-quarter reporting season is virtually over, with 474 of the S&P 500 businesses having released results. According to Refinitiv, 78 percent of them exceeded expectations. According to Refinitiv, current quarter pre-announcements are typically pessimistic, with 59 negative estimates and 32 positive, compared to 37 negative and 52 positive in the year-ago quarter.

VMWare Inc’s stock jumped 24.8 percent on news that chipmaker Broadcom Inc was in talks to buy the cloud service provider over the weekend. Broadcom’s stock fell 3.1 percent. Didi Global’s U.S.-listed shares fell 4.0 percent after shareholders voted to de-list the Chinese ride-hailing app from the New York Stock Exchange.

On the NYSE, advancers outnumbered decliners by a 2.43-to-1 ratio; on the NASDAQ, advancers outnumbered decliners by a 1.44-to-1 ratio. The S&P 500 added one new 52-week high and 31 new lows, while the NASDAQ Composite added 27 highs and 142 lows. The volume on US exchanges was 10.93 billion shares, down from the average of 13.36 billion during the previous 20 trading days.

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Stocks in the United States finish with a mixed performance

Stocks in the United States finish with a mixed performance

 

On Friday, May 20, 2022, the US stock market ended the day on a mixed note, with a lack of important US economic data putting some investors on the sidelines and concerns about the potential economic consequences from the Federal Reserve’s efforts to suppress inflation rising to the surface. The Dow Jones Industrial Average index increased 8.77 points, or 0.03 percent, to 31,261.90 at the close of trading. The S&P 500 index rose 0.57 points, or 0.01 percent, to 3,901.36.

The NASDAQ Composite Index, which is heavily weighted in technology, fell 33.88 points, or 0.3 percent, to 11,354.62. The S&P 500 lost 2.9 percent this week, the Dow lost 3%, and the NASDAQ lost 3.8 percent. The stock market in the United States has been battered this year by fears of increasing inflation and interest rates, with warnings from Walmart Inc. and other retailers this week adding to concerns about the economy.

Tesla’s stock dropped 6.4 percent after CEO Elon Musk called charges in a news story that he sexually assaulted a flight attendant on a private jet in 2016 “utterly untrue.” Ross Stores’ stock dropped 22.5 percent after the bargain clothes retailer lowered its sales and earnings estimates for 2022. Deere & Company’s stock plunged 14% after the heavy equipment manufacturer reported lower-than-expected quarterly revenue.

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Stocks end the day higher as indexes recover from their recent sell-off

Stocks end the day higher as indexes recover from their recent sell-off

Stocks in the United States rose on Tuesday, helped by a rise in technology companies, as all three indexes recovered after heavy selling last week sparked by concerns about persistently rising prices and the possibility of an economic downturn. Investors mostly ignored Federal Reserve Chair Jerome Powell’s hawkish statements at a Wall Street Journal conference on Tuesday, which suggested the central bank was willing to boost rates above neutral if necessary to cool rising prices.

The S&P 500 increased by 2%, while the Dow Jones Industrial Average increased by 400 points. As technology companies recovered from a negative day on Monday, the NASDAQ Composite rose 2.8 percent. The developments follow six weeks of losses for the S&P 500, the index’s longest losing streak in over a decade, and seven weeks of losses for the Dow Jones Industrial Average, the index’s longest losing streak since 2001.

Walmart (WMT) shares fell 11.38 percent to $131.39 in other markets after the megastore missed earnings expectations. During intraday trade, the store dropped as much as 11.75 percent, marking its worst day since 1980. During the 1987 stock market meltdown, Walmart’s shares dropped 11.68 percent. Retail sales rose 0.9 percent in April, indicating that consumer spending is still holding up despite stubbornly rising inflation.

In a report, Harris Financial Group managing partner Jamie Cox said, “The urge to spend remains high among US consumers.” “Americans have broken free from COVID’s bonds and are not going back. Numbers like this put into question any predictions of a US recession in 2022.”

Uncertainty about the timing and extent of the Federal Reserve’s rate hike cycle has fueled market pressure that has lasted all year. So far in 2022, the S&P 500 is nearly 15% below its all-time high on Jan. 3, the Dow is down around 11%, and the NASDAQ has entered a bear market – well over 20% below its record closing price in November.

Citi Private Bank Chief Investment Officer David Bailin told Yahoo Finance, “Markets lead the economy.” “The fact that markets are currently lower suggests that the consumer and the global economy are both slowing. “According to Comerica Wealth Management Chief Investment Officer John Lynch, equity markets have suffered “serious technical damage” in recent months, with the S&P 500 dipping below the crucial 4,000 level last Monday before touching bear market levels of 3,850 last Thursday.

“Curiously, statements from Fed Chair Jerome Powell indicating the potential of economic hardship in order to accomplish the central bank’s goals of lower inflation may have been the spark for the S&P 500’s rise that began Thursday afternoon and lasted until Friday’s closing,” Lynch said. “However, investors should be aware that the serious technical damage sustained in recent months will take more than a few good days to restore.” Investors will have more Fed speak to think over in the coming days, as additional central bank officials are scheduled to speak through Friday.

In an emailed message, Independent Advisor Alliance Chief Investment Officer Chris Zaccarelli wrote, “The unfortunate truth is that the Fed will need to raise rates more rapidly and to a greater level than many were hoped.” “This year, there will be at least four 50 basis point rate hikes, not three or less, and we will remain careful with risk assets.”

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

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

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

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

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

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

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

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

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Gold Price Climbs Steadily

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

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

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

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

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

Trump’s Tariff Announcement Sparks Market Uncertainty

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

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

Fed Policymakers Express Caution Amid Economic Uncertainty

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

Several Fed officials have weighed in on economic policy:

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

What’s Next for Gold?

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

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Gold Price Rally Holds Strong, But Overbought Conditions Raise Caution

Gold Price Bulls Hold Firm, But Overbought Conditions Suggest Caution

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

 

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

Gold Bulls Retain Control Amid US-China Trade Tensions

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

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

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

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

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

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

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

US Tariff Delay Weighs on Oil Prices

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

OPEC+ Stands Firm on Production Policy

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

Key Technical Levels to Watch

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

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Gold Holds Below $2,800 Despite Intraday Recovery

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

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

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

Technical Outlook: Gold’s Uptrend Intact Despite Intraday Pullback

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

 

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

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

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

Market Drivers to Watch

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

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

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

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

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

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

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

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

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

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

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

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WTI Drops Toward

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

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

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

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

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

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

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Ex-Chief Economist Predicts BOJ Rate Hike as Early as June

Ex-Chief Economist Predicts BOJ Rate Hike as Early as June

Ex-Chief Economist Predicts BOJ Rate Hike as Early as June

The Bank of Japan (BOJ) might implement up to three additional benchmark interest rate hikes this year, with the first potential increase occurring as early as June. This move would be a response to what a former BOJ chief economist describes as the excessive ease of the current monetary settings.

The economist, Toshitaka Sekine, expressed his view in a Bloomberg interview, suggesting that the central bank could adopt a more aggressive approach to monetary tightening. According to Sekine, there are no rigid constraints like a 0.25% limit that should prevent further rate increases if the economic conditions are favorable. He emphasized that gradual rate adjustments are feasible as long as the economic environment supports such actions.

Sekine, who now serves as an economics professor at Hitotsubashi University in Tokyo, believes that the BOJ has the opportunity to roll back its easy monetary policies gradually, particularly since real interest rates remain significantly negative.

In anticipation of the BOJ’s April policy meeting, a Bloomberg survey of economists indicated a median year-end benchmark rate prediction of 0.25%, suggesting expectations of only one more hike this year following the BOJ’s initial increase since 2007 in March.

However, Sekine’s stance is notably more hawkish compared to the general market consensus. Investment firms like Vanguard Group Inc. and Pacific Investment Management Co. also forecast a steeper increase in the key rate, with predictions of it reaching up to 0.75% by the end of the year.

The April summary from the BOJ’s policy meeting hinted at a possible hawkish shift within the nine-member board, with suggestions that the future rate path could surpass current market expectations. This was further supported by the BOJ’s recent decision to reduce its bond purchasing, which has fueled speculation about an impending rate hike.

Sekine also touched on the potential necessity of a higher rate if the yen’s value begins to adversely affect pricing trends, a situation made more likely as Japanese businesses adjust their pricing strategies in response to inflation.

Despite Japan’s fragile economic recovery, evidenced by a contraction in the first quarter of the year and stagnant growth at the end of 2023, Sekine argues that these economic conditions are unlikely to significantly impact the BOJ’s plans for rate hikes. He pointed out that the output gap is roughly zero, suggesting that even a contraction wouldn’t substantially alter the scope of monetary easing required.

The BOJ’s recent forecast projected that consumer prices, excluding fresh food and energy, would increase by 2.1% in the fiscal year starting April 2026, signaling that higher rates might be necessary. Sekine concluded by emphasizing that while the rate increases are not predetermined, they are likely to proceed incrementally as long as they align with common sense and favorable conditions.

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Japan's Economy Falters, Impacting BOJ Rate Hike Plans

Japan’s Economy Falters, Impacting BOJ Rate Hike Plans

Japan’s Economy Falters, Impacting BOJ Rate Hike Plans

Japan’s economy contracted more sharply than anticipated in the first quarter, exacerbated by the ongoing weakness of the yen, which has put significant pressure on consumers. This presents a fresh challenge for the Bank of Japan (BOJ) as it attempts to move interest rates further from near-zero levels.

Preliminary gross domestic product (GDP) data from the Cabinet Office revealed a 2.0% annualized decline in Japan’s economy for January-March, exceeding the 1.5% drop forecasted by economists in a Reuters poll. This follows a barely perceptible growth in the fourth quarter of 2023, primarily due to downgraded capital expenditure estimates.

Despite the potential for heavy revisions in the final release of capital spending data, the across-the-board declines in all GDP components indicate a lack of major growth drivers in Japan’s economy during the first quarter. This scenario could cause the BOJ to reconsider the timing of future rate hikes, especially given its recent move in March to raise interest rates for the first time since 2007, with intentions to continue tightening policy.

Economist Yoshimasa Maruyama from SMBC Nikko Securities noted that the timing of rate hikes could be delayed depending on how the GDP rebounds in the current quarter. While rising wages are expected to spur economic recovery, uncertainty remains around consumption in the service sector.

The latest GDP data translates to a quarterly contraction of 0.5%, slightly worse than the 0.4% decline predicted by economists. Revised figures for the first quarter will be released on June 10.

The weak yen has created a dual-speed economy in Japan. While the export and tourism sectors benefit from a more competitive exchange rate, households and small businesses are burdened by inflated costs of imported goods. This situation complicates the BOJ’s decision on whether to maintain or unwind its monetary stimulus.

Daiwa Securities’ chief economist Toru Suehiro pointed out that the adverse effects of a weaker yen are becoming a significant concern. While real wages are expected to turn slightly positive in the latter half of the year, they are not projected to rise sharply due to the continued depreciation of the yen.

This year, Japan’s large businesses implemented the biggest wage hikes in three decades, which the BOJ sees as a necessary condition to end decades of radical monetary stimulus. However, households have been tightening their spending as price increases outpace wage gains, reducing their real incomes and purchasing power.

Private consumption, which makes up more than half of the Japanese economy, fell by 0.7%, more than the anticipated 0.2% drop, marking the fourth consecutive quarter of decline—the longest streak since 2009.

Economists remain hopeful that the first quarter’s weakness is temporary and expect that the drag on growth from factors like the Noto earthquake and the suspension of operations at Toyota’s Daihatsu unit will dissipate. However, persistent yen declines and potential spikes in crude oil prices due to the Middle East crisis remain threats to the recovery.

Capital spending, a crucial driver of private demand, fell by 0.8% in the first quarter, against an expected 0.7% decline, despite robust corporate earnings. External demand, defined as exports minus imports, subtracted 0.3 percentage points from the first-quarter GDP estimates.

Policymakers are currently relying on significant pay hikes and planned income tax cuts to boost consumption and avoid a return to deflation. Maruyama suggests that rate hikes or cuts in bond purchases could mitigate the negative impacts of yen weakening, potentially leading to income gains that could fuel consumption. However, if consumption remains weak, raising rates would be challenging.

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Traders Anticipate Post-CPI Surge, Eyeing US 10-Year Yield at 4.3%

Traders Anticipate Post-CPI Surge, Eyeing US 10-Year Yield at 4.3%

Traders Anticipate Post-CPI Surge, Eyeing US 10-Year Yield at 4.3%

Traders in US Treasury options are positioning for a bond rally and a sharp drop in yields following the release of crucial inflation data on Wednesday. Over the past week, there has been significant buying activity centered on options that would benefit from US 10-year yields dropping to around 4.3%, which is about 15 basis points lower than current levels and the lowest in more than a month. One particularly high-risk trade stood out, with the potential to generate a $15 million windfall on a wager of just $150,000 if the 10-year benchmark yield falls further to 4.25% by May 24.

This bet on a bond rally comes as bonds have regained some ground following a challenging April, when prices slumped and yields soared to their highest levels of the year due to diminishing expectations for interest-rate cuts. Since then, Federal Reserve Chair Jerome Powell has alleviated market concerns by downplaying the need for additional rate hikes. Further gains were made after a report on Friday indicated a cooling labor market, which might pave the way for rate cuts despite persistent inflation.

Investors are now focused on the latest data on US consumer prices in April, which will be critical in determining the direction of the rally. On Tuesday, Treasuries advanced after a report provided what Powell described as a “mixed” reading on wholesale prices last month.

Open interest, or the amount of new positioning, has surged recently in options tied to the so-called 110.00 call strike, which corresponds to a roughly 4.3% 10-year yield level, according to CME data. Buying has been concentrated in the June tenor expiring on May 24, capturing this week’s significant economic news, including reports on producer and consumer prices.

Meanwhile, asset managers have continued to add to long bets in futures, increasing bullish positions for the fourth consecutive week, as indicated by data from the Commodity Futures Trading Commission. However, caution is still evident in some parts of the market. For instance, a recent JPMorgan Chase & Co. client survey showed a slight increase in short positions in the cash market for Treasuries, marking a shift from a neutral stance. Notably, the past three consumer price index reports have surprised to the upside, challenging bullish expectations.

Despite this, the futures market has turned less bearish since last week’s jobs report. Traders have unwound bearish futures positions linked to the Fed-sensitive Secured Overnight Financing Rate, removing hedges against potential rate hikes and reviving bets on easing. New long positions have also emerged across various tenors of the futures strip. This has resulted in a pullback from the severe bearishness observed in late April, although short positions remain.

Significant options flows include a large bullish “screen” trade, executed electronically at a cost of $4 million, which appeared as new risk. The same dovish protection was purchased again during Tuesday’s early Asia session. Similarly, there has been heavy buying of risky option strategies known as risk-reversals, where calls are funded by selling puts.

Overall, traders are setting up for a potential bond rally and a sharp drop in yields, with a close eye on the upcoming inflation data to determine the market’s next move.

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US Foreign Exchange Deposits

US Foreign Exchange Deposits Increase for Fourth Consecutive Month, Reaching $549 Million

US Foreign Exchange Deposits Increase for Fourth Consecutive Month, Reaching $549 Million

Retail forex deposits in the United States have seen a continuous rise for the fourth month, according to March 2024 data from the Commodity Futures Trading Commission (CFTC). In this period, the total value of client deposits in the forex market increased to over $549 million, marking a 1.3% growth from February’s figures. This represents a significant recovery, reaching the highest value recorded in over a year and maintaining a growth trajectory since a low in December.

The increase comes after a period of stagnation where, following a downturn, deposits hit a low of $516 million in September 2023. Since then, there has been a consistent upward trend in the volume of funds retail investors are parking in forex trading accounts in the U.S., suggesting a revitalized interest in forex trading among U.S. retail investors.

The CFTC report highlights that the leading broker, Gain Capital, holds deposits of $208.4 million, despite a slight decrease of 0.5% from February’s $209.4 million. Charles Schwab also saw a minor reduction in forex deposits, dropping by less than $300,000 to $62.4 million. On the other hand, other brokers showed positive growth in their deposit figures. Trading.com enjoyed the most substantial percentage increase, with an 8.9% rise bringing their total to $1.8 million. OANDA experienced the largest nominal increase, with a boost of $4.2 million (2.3%), raising its total forex deposits to $183.9 million and securing its position as the second-largest broker after Gain Capital in terms of retail forex obligations.

The CFTC enforces strict regulatory reporting requirements for Retail Foreign Exchange Dealers (RFEDs) and Futures Commission Merchants (FCMs). These entities are required to submit monthly financial reports which include crucial financial metrics like adjusted net capital, client assets, and total retail forex obligations. Retail forex obligations represent all the assets held by FCMs or RFEDs on behalf of their clients, factoring in any gains or losses.

This reporting framework ensures transparency and regular public disclosure of financial commitments by major players in the forex market such as Charles Schwab, Gain Capital, IG, Interactive Brokers, OANDA, and Trading.com, among the 62 registered RFEDs and FCMs. This oversight is crucial for maintaining market integrity and providing investors with the confidence that their interests are being safeguarded by regulatory standards.Overall, the increasing trend in forex deposits reflects a growing confidence and a renewed interest in forex trading among U.S. retail investors, signaling a potentially robust period for the forex market in the United States.

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China Schedules Meeting to Discuss $138 Billion Ultra-Long Debt Offering

China Schedules Meeting to Discuss $138 Billion Ultra-Long Debt Offering

China Schedules Meeting to Discuss $138 Billion Ultra-Long Debt Offering

China is set to launch the initial phase of its ambitious 1 trillion yuan ($138 billion) ultra-long special sovereign bond issuance this Friday, aiming to bolster the world’s second-largest economy. This announcement was made by the Ministry of Finance, which plans to issue various tranches of these bonds, beginning with 30-year bonds this week.

Subsequent offerings are scheduled with 20-year bonds to be issued from May 24 and 50-year bonds from June 14. A final batch of 30-year notes is slated for release in November, though the specific amounts for each issuance have not been disclosed.

Details from Bloomberg earlier on Monday suggest that the bond issuance will be divided as follows: 300 billion yuan in 20-year bonds, 600 billion yuan in 30-year bonds, and 100 billion yuan in 50-year bonds. This information was provided by sources who preferred to remain anonymous due to the sensitivity of the details.

The decision to sell these bonds was first revealed during the National People’s Congress in March, where policymakers expressed their commitment to increasing fiscal support to mitigate the economic strain caused by high debt levels among local governments. This strategy marks only the fourth occurrence of such a sale in the last 26 years, with the previous instance in 2020, intended to finance measures against the pandemic.

This bond sale emerges amidst signs of a contracting credit landscape in April, notable for being the first such contraction as the pace of government bond sales decelerated. The amount of new bonds issued by Chinese authorities and policy banks in the first quarter dropped to half of last year’s figures. This reduction was influenced by borrowing restrictions on highly indebted regions and the ongoing allocation of funds from last year’s sales.

Recently, however, there has been a noticeable acceleration in bond sales. Just last week, provincial governments issued a record amount of new notes since February, heeding the central government’s directive to expedite local bond issuances. The Politburo, in April, also emphasized the urgency of commencing the special sovereign debt sale.

According to Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc, this central bond sale is crucial for expediting fiscal expenditure, which has been sluggish. He predicts that the People’s Bank of China (PBOC) might lower the banks’ reserve requirement ratio by 25 basis points alongside the bond sale to maintain liquidity, potentially paving the way for a reduction in the loan prime rate.

Despite robust performance in the first quarter, challenges persist with consumer demand weakening amid an ongoing property crisis and a tepid job market. Additionally, exports, which have been a highlight this year, face uncertainties due to escalating tensions with key trading partners and concerns over China’s excess manufacturing capacity. Nonetheless, the government is focusing on infrastructure spending as a pivotal strategy to achieve its ambitious growth target of around 5% for the year.

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Mexican Peso Rises as Banxico Holds Key Rate Steady

Mexican Peso Rises as Banxico Holds Key Rate Steady

Mexican Peso Rises as Banxico Holds Key Rate Steady

The Mexican Peso (MXN) experienced significant gains against its major trading counterparts following the Bank of Mexico’s (Banxico) latest policy meeting on Thursday. During the meeting, Banxico’s board unanimously decided to maintain the benchmark interest rate at 11.00%, leading to a robust appreciation of the Peso. This decision was accompanied by a significant upward revision of inflation forecasts, acknowledging ongoing high price pressures. 

Banxico now indicates that interest rate cuts are unlikely in the near future, a stance that tends to strengthen the currency as higher interest rates are attractive to foreign capital looking for better returns.

As a result, major currency pairs such as USD/MXN, EUR/MXN, and GBP/MXN were trading at 16.80, 18.12, and 21.08 respectively at the time of publication. The Peso’s appreciation was evident between roughly a quarter and three-quarters of a percent across these pairs, maintaining its strength well into Friday’s European trading session, with only a slight pullback from Thursday’s peak levels.

The upward revision in the inflation outlook by Banxico is particularly notable. The central bank now expects inflation to decline more gradually towards its target of 3.0%, which it does not anticipate achieving until the fourth quarter of 2025. This represents a delay from earlier projections, which had inflation nearing 3.1% by the second quarter of 2025 and stabilizing around that figure for the remainder of the year. Core inflation forecasts were similarly adjusted.

In its official statement, Banxico highlighted prolonged inflationary pressures, stating, “Considering that inflationary shocks are foreseen to take longer to dissipate, the forecasts for headline and core inflation have been revised upwards for the next six quarters. In particular, services inflation is foreseen to show more persistence compared to what had been previously anticipated.”

These revised forecasts and the decision to hold interest rates steady reflect Banxico’s cautious approach in the face of persistent inflation, which continues to influence the economic landscape. The central bank’s updates underscore the challenges of managing inflation within the targeted range, while also acknowledging the impacts of external economic factors and domestic fiscal policies on the broader economy. This careful balance aims to sustain economic stability while mitigating inflationary impacts, supporting the Peso’s strength in the international currency markets.

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China's Exports and ImportsRebound

China’s Exports and Imports Rebound, Indicating Demand Recovery

China’s Exports and Imports Rebound, Indicating Demand Recovery

China’s exports and imports exhibited growth in April, rebounding from previous contractions and signaling a positive shift in domestic and international demand, which could bolster the nation’s unsteady economic revival.

According to recent customs data, this improvement is largely attributed to a series of policy support measures implemented over the past months, aimed at stabilizing fragile investor and consumer confidence.

Data revealed that shipments from China increased by 1.5% year-on-year in April, aligning with economic forecasts and marking a recovery from a 7.5% decline in March—the first drop since November. 

April’s imports surged by 8.4%, significantly surpassing expectations of a 4.8% increase and reversing a decrease of 1.9% from March. This resurgence in trade figures suggests that policy interventions are starting to positively impact the economy.

Zhang Zhiwei, chief economist at Pinpoint Asset Management, highlighted that despite weak domestic demand contributing to deflationary pressures, it has inadvertently enhanced China’s export competitiveness, making exports a key driver of economic stability this year. However, broader economic indicators such as consumer inflation, producer prices, and bank lending from March indicate potential volatility in maintaining this momentum. Additionally, the ongoing property crisis continues to pressurize the economy, sparking debates on the necessity for further policy stimulus.

In response to these challenges, the Politburo of the Communist Party announced last month its commitment to fortifying economic support through prudent monetary measures and proactive fiscal policies. These include adjustments to interest rates and bank reserve requirement ratios to foster growth. Despite these efforts, and a set economic growth target of around 5% for 2024, analysts remain skeptical about achieving this goal without substantial additional stimulus.

The past year has been challenging for Chinese exporters, as rising global interest rates dampened international demand. With central banks in developed nations like the Federal Reserve showing little intention to reduce borrowing costs soon, Chinese manufacturers could face ongoing difficulties in securing international market share. To mitigate these pressures, exporters are reportedly reducing prices to sustain sales, particularly in industries plagued by overcapacity, which is expected to continue suppressing export prices in the months ahead.

Furthermore, as Chinese firms increasingly invest overseas to circumvent potential U.S. sanctions, exports of industrial inputs such as chemicals, fabric, auto parts, and electrical machinery are expected to rise, according to Dan Wang, chief economist at Hang Seng Bank China.

Concluding the analysis, China’s trade surplus expanded to $72.35 billion in April, up from $58.55 billion in March, although slightly below the projected $77.50 billion. This indicates a robust recovery in trade dynamics, reflecting the complex interplay of global economic conditions and domestic policy effectiveness in shaping China’s economic trajectory.

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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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