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Australian Dollar Strengthens as China Prepares Capital Injection for Top Banks

Australian Dollar Strengthens as China Prepares Capital Injection for Top Banks

Australian Dollar Strengthens as China Prepares Capital Injection for Top Banks

The Australian Dollar (AUD) regained some of its recent losses against the US Dollar (USD) on Thursday, benefiting from divergent monetary policy stances between the Reserve Bank of Australia (RBA) and the US Federal Reserve. The AUD also received a boost as China, Australia’s largest trading partner, announced a new round of economic stimulus measures.

Earlier this week, the RBA kept its Official Cash Rate (OCR) unchanged at 4.35%, providing support to the Australian Dollar. RBA Governor Michele Bullock indicated that rates would remain steady for the time being. This contrasts with the US Federal Open Market Committee (FOMC), which recently cut the federal funds rate by 50 basis points, lowering it to a range of 4.75% to 5.0%. According to the CME FedWatch Tool, there is about a 50% chance that the Fed will cut rates by an additional 75 basis points to a range of 4.0%-4.25% by the end of the year.

Market attention now turns to the upcoming release of final US Gross Domestic Product (GDP) figures for the second quarter (Q2), expected later in the North American session.

Market Overview: AUD Supported by Central Bank Divergence

China announced plans to inject over CNY 1 trillion into its largest state-owned banks, which are struggling with shrinking margins, declining profits, and rising bad loans. This capital infusion would be the first of its kind since the 2008 global financial crisis, further bolstering market sentiment for the AUD.

The Reserve Bank of Australia’s Financial Stability Review in September 2024 reaffirmed the resilience of Australia’s financial system. However, the report raised concerns about stress in China’s financial sector and a limited response from Beijing. Domestically, a small but growing number of Australian mortgage holders are falling behind on payments, though only about 2% of owner-occupier borrowers are considered at high risk of default.

Meanwhile, the Commonwealth Bank of Australia (CBA) anticipates that the RBA will downgrade its consumption forecasts in November. This revision, along with rising unemployment and inflation in line with CBA’s expectations, could set the stage for the RBA to implement rate cuts before the year ends.

Fed Governor Adriana Kugler also weighed in, expressing her support for the Fed’s recent 50 basis point rate cut. She indicated that further rate cuts might be warranted if inflation continues to ease.

Geopolitical Developments and Economic Forecasts

Australian Treasurer Jim Chalmers is scheduled to visit China to strengthen economic ties. “Given our reliance on China’s economic stability, it is crucial to engage with key Chinese officials in Beijing,” Chalmers said.

JP Morgan recently advised investors to monitor commodity prices and bond yields in light of China’s stimulus proposals. The bank highlighted that China’s new measures could stimulate global growth and reduce recession risks, though it cautioned about potential reinflation risks.

Australia’s Monthly Consumer Price Index (CPI) rose 2.7% year-over-year in August, down from the previous 3.5% rise and slightly below market expectations of 2.8%.

In response to economic challenges, People’s Bank of China (PBOC) Governor Pan Gongsheng announced a 50 basis point reduction in the Reserve Requirement Ratio (RRR). Additionally, the central bank lowered the seven-day repo rate from 1.7% to 1.5% and reduced the down payment requirement for second homes from 25% to 15%. On Thursday, the PBOC also cut the one-year Medium-term Lending Facility (MLF) rate from 2.30% to 2.0%, following a previous reduction in July.

Technical Outlook: AUD/USD Tests Key Levels

The AUD/USD pair is trading near 0.6830 on Thursday. A technical analysis of the daily chart suggests the pair has fallen below an ascending channel pattern, potentially signaling a weakening bullish trend. However, the 14-day Relative Strength Index (RSI) remains above 50, indicating that bullish sentiment persists.

The AUD/USD could test resistance at 0.6860, the lower boundary of the ascending channel. If the pair returns to the channel, it may resume its upward trend toward 0.6960. On the downside, support is found at the nine-day Exponential Moving Average (EMA) at 0.6809, with stronger support at the psychological level of 0.6700. A break below this level could lead the pair toward a six-week low of 0.6622.

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Japanese Yen Weakens After BoJ Governor Ueda's Dovish Comments

Japanese Yen Softens Following Comments from BoJ Governor Ueda

Japanese Yen Softens Following Comments from BoJ Governor Ueda

The Japanese Yen (JPY) lost ground against the US Dollar (USD) on Tuesday as concerns grew over the Bank of Japan’s (BoJ) reluctance to raise interest rates. BoJ Governor Kazuo Ueda reaffirmed on Friday that it would only be “appropriate to raise rates if trend inflation increases in line with forecasts.”

Governor Ueda emphasized that Japan’s real interest rates remain deeply negative, helping stimulate the economy and push prices higher. He further clarified that the BoJ would consider rate hikes only if economic and price movements align with the quarterly outlook report.

Japan’s Finance Minister Shunichi Suzuki added on Tuesday that he is “monitoring the impact of central banks’ monetary policies.” Suzuki expects the BoJ to maintain close coordination with the government while implementing appropriate measures.

Despite the BoJ’s dovish stance, the USD/JPY pair could face downward pressure due to rising expectations of further rate cuts from the US Federal Reserve in 2024. The CME FedWatch Tool indicates a 50% probability of a 75 basis point reduction, which could bring the Fed’s rate to a range of 4.0-4.25% by the end of the year.

Daily Market Movers: Japanese Yen Remains Tepid Amid BoJ Caution

The Jibun Bank Japan Composite PMI fell slightly in September to 52.5, down from 52.9 in August, which had marked a 15-month high. Nevertheless, this still reflects eight consecutive months of growth, driven mainly by the services sector. The Services PMI rose to 53.9 in September, up from 53.7 in August.

Conversely, Japan’s manufacturing sector showed weakness, as the Manufacturing PMI unexpectedly dropped to 47.0, signaling contraction. Meanwhile, the Services PMI continued its robust expansion, reaching 55.4.

In the US, Minneapolis Fed President Neel Kashkari reiterated his view that further rate cuts are likely in 2024, though he expects them to be smaller than the September reduction. Chicago Fed President Austan Goolsbee and Atlanta Fed President Raphael Bostic also pointed to the need for more rate cuts, with Bostic stating that the US economy is nearing normalized inflation and unemployment rates.

Japan’s newly appointed top currency official, Atsushi Mimura, commented in an interview that the unwinding of past Yen carry trades has likely been completed. However, he warned that a resurgence of such trades could lead to increased market volatility, which the government is monitoring closely.

Inflation data out of Japan shows the Consumer Price Index (CPI) rising to 3.0% year-on-year in August, up from 2.8%, marking the highest level since October 2023. The Core National CPI, excluding fresh food, reached 2.8%, its highest in six months, marking a fourth consecutive month of growth.

Technical Analysis: USD/JPY Holds Above Key Support Near 143.50

The USD/JPY pair is trading around 143.70 on Tuesday, holding above the nine-day EMA at 143.50. The pair continues to move within a descending channel, signaling a bearish outlook. The 14-day Relative Strength Index (RSI) remains below 50, indicating that bearish momentum persists.

A break below the nine-day EMA at 143.01 could push the pair towards the 139.58 support level, marking its lowest point since June 2023. On the upside, immediate resistance is seen at 144.30. A breakout above this level could lead the USD/JPY pair to challenge the 145.00 psychological level.

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Pound Sterling Falls as UK PMI Misses Expectations

Pound Sterling Slips as UK PMI Misses Expectations

Pound Sterling Slips as UK PMI Misses Expectations

The Pound Sterling (GBP) declined on Monday, driven by weaker-than-anticipated preliminary UK S&P Global Purchasing Managers’ Index (PMI) data for September and negative market sentiment. The British currency underperformed against most of its major peers, except for the Euro (EUR), which also fell due to a surprise decline into contraction territory in the Eurozone PMI.

The UK Composite PMI came in at 52.9, down from August’s 53.8, indicating a slower pace of economic growth. Both the manufacturing and service sectors saw larger-than-expected declines.

However, despite the slowdown, the impact on the broader economy is likely to be minimal. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, remained optimistic about the UK’s economic outlook.

“A slight cooling of output growth across manufacturing and services in September should not be seen as too concerning, as the survey data are still consistent with the economy growing at a rate approaching 0.3% in the third quarter, which aligns with the Bank of England’s forecast,” Williamson noted.

Looking ahead, the Pound’s performance will be influenced by market expectations surrounding the Bank of England’s (BoE) interest rate decisions. Traders predict the BoE may cut rates only once during the remaining two policy meetings this year. The BoE recently left its key interest rates unchanged at 5%, following an 8-1 vote after cutting them by 25 basis points in August.

Daily Market Movers: GBP Declines Against the USD

During Monday’s London session, the Pound Sterling fell to around 1.3250 against the US Dollar (USD) after the weak PMI release. At the same time, the US Dollar Index (DXY), which measures the Greenback’s value against major currencies, surged to 101.20.

Market speculation that the Federal Reserve (Fed) may implement a second consecutive 50-bps rate cut has increased, as concerns about the labor market persist. According to the CME FedWatch tool, there’s nearly a 50% chance that the Fed will cut rates by 50 bps in November, bringing the rate to 4.25%-4.50%.

On Friday, Fed Governor Christopher Waller commented that more rate cuts could occur if labor market conditions deteriorate.

Investors will also keep an eye on the US preliminary S&P Global PMI data for September, due at 13:45 GMT. Economists predict that the Manufacturing PMI may rise slightly to 48.5 from 47.9 in August, although a figure below 50.0 signals contraction. The Services PMI is expected to decline to 55.2 from 55.7, indicating a slight slowdown in growth.

Technical Analysis: GBP/USD Slides to 1.3250

The Pound Sterling dropped to around 1.3250 against the US Dollar in European trading hours. Despite the declin, the near-term outlook for GBP/USD remains solid as it holds above the 20-day Exponential Moving Average (EMA), which sits near 1.3150. Earlier, the Cable rebounded from a corrective dip to the trendline plotted from the December 28, 2023, high of 1.2828, triggering a sharp rally after the breakout on August 21.

The 14-day Relative Strength Index (RSI) has dipped slightly but remains above 60, signaling continued bullish momentum.

In terms of resistance, the GBP/USD pair could face challenges near the psychological level of 1.3500. On the downside, the psychological support at 1.3000 will be crucial.

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Gold Price Holds Steady Near Record Highs Despite Positive

Gold Price Holds Steady Near Record Highs Despite Positive Market Sentiment

Gold Price Holds Steady Near Record Highs Despite Positive Market Sentiment

Gold (XAU/USD) continues its upward momentum for the second consecutive day, edging closer to the $2,600 mark—just shy of its all-time high—during early European trading on Friday. This rise follows the Federal Reserve’s (Fed) substantial interest rate cut on Wednesday, with expectations for another 50 basis point reduction by year-end. This dovish stance has capped the recovery in US Treasury yields, weakening the US Dollar (USD) and supporting the non-yielding asset.

In addition to the Fed’s moves, ongoing concerns about an economic slowdown in the US and China, along with heightened geopolitical risks in the Middle East, are contributing to gold’s appeal. However, the prevailing risk-on sentiment may limit further bullish momentum in the short term. Despite this, the commodity remains on track for a second consecutive weekly gain, with fundamentals suggesting potential for continued appreciation.

Key Market Movers: Gold Remains Strong Amid Expectations of More Fed Rate Cuts in 2024

  • The Fed’s large rate cut on Wednesday, coupled with a forecast for another 50 basis point reduction by year-end, failed to provide the US Dollar with any sustained boost following its recovery from the year-to-date low.
  • Fed policymakers also revised their interest rate projections lower, with expectations for rates to fall to 3.4% in 2025 (previously 4.1%) and to 2.9% in 2026 (down from 3.1%). This revision reignited demand for gold on Thursday.
  • Strong US macroeconomic data, including a drop in Initial Jobless Claims to 219K— the lowest since May—and a rebound in the Philadelphia Fed’s manufacturing index, have not significantly bolstered USD sentiment.
  • Concerns about economic growth, spurred by the Fed’s aggressive rate cuts and slowing Chinese demand, have bolstered gold’s safe-haven status.
  • Ongoing geopolitical tensions in the Middle East, as well as the Russia-Ukraine war, continue to support gold prices, alongside political uncertainty in the US ahead of the November presidential election.
  • Additionally, gold buying by Asian central banks and Russia, aiming to diversify away from the US Dollar, further fuels the bullish outlook for the yellow metal.

Technical Outlook: Gold Bulls Eye $2,610-$2,615 as Key Resistance

From a technical perspective, the $2,600 level—reached on Wednesday—serves as an immediate resistance point. The next key barrier lies around $2,613-$2,615, marking the upper boundary of a short-term ascending channel that began in June. With momentum indicators still in positive territory and well below overbought levels, a sustained breakout above this region could trigger further gains for gold in the near term.

On the downside, the $2,551-$2,550 zone offers initial support, followed by the $2,532-$2,530 range. A break below these levels could see gold testing the psychological $2,500 mark. Below that, the $2,476 level, which aligns with the 50-day Simple Moving Average (SMA) and the lower boundary of the ascending channel, would be the next target. A decisive move below this point would indicate a near-term top, potentially leading to a slide towards the 100-day SMA near $2,412 and eventually the $2,400 level.

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Japanese Yen Consolidates as US Dollar Holds Firm Amid Rising Treasury Yields

Japanese Yen Consolidates as US Dollar Holds Firm Amid Rising Treasury Yields

Japanese Yen Consolidates as US Dollar Holds Firm Amid Rising Treasury Yields

The Japanese Yen (JPY) remained steady against the US Dollar (USD) on Tuesday, supported by the hawkish outlook on the Bank of Japan’s (BoJ) interest rate policy. Traders are cautiously awaiting the BoJ’s policy decision on Friday, expecting rates to remain unchanged but with the possibility of hikes in October and December.

Japanese Finance Minister Shunichi Suzuki emphasized on Tuesday that rapid foreign exchange (FX) fluctuations are undesirable, signaling that officials will closely monitor how these movements impact the Japanese economy. The government remains vigilant about the Yen’s strength and will take necessary actions, according to Reuters.

Meanwhile, the US Dollar is holding ground as expectations mount that the Federal Open Market Committee (FOMC) may announce a significant 50 basis point rate cut on Wednesday. The CME FedWatch Tool shows that markets are pricing in a 38.0% chance of a 25 basis point cut, while the likelihood of a 50 basis point cut has risen to 62.0%, up from 50.0% just a day prior.

Market Movers: Japanese Yen Steady Amid Dovish Fed Expectations

Rabobank economists Jane Foley and Molly Schwartz noted on Monday that net long positions in the Yen are at their highest levels since October 2016. While there is little expectation for a rate hike from the BoJ during its September 20 meeting, traders will be watching for signals of potential action in October.

Commerzbank FX analyst Volkmar Baur predicted that the BoJ would stay on the sidelines this week, suggesting that the Fed’s decisions will have a more significant impact on the USD/JPY pair. Baur noted that the Yen could fall below 140.00 per USD even without a BoJ rate hike.

On Friday, Fitch Ratings released a report suggesting that the BoJ may raise rates to 0.5% by the end of 2024, 0.75% in 2025, and 1.0% by 2026. Meanwhile, BoJ policymaker Naoki Tamura indicated that the central bank should aim for a rate of at least 1% by the second half of the next fiscal year, underscoring the BoJ’s commitment to monetary tightening.

In the US, the University of Michigan’s Consumer Sentiment Index rose to 69.0 in September, surpassing market expectations of 68.0 and marking a four-month high. This reflects improving consumer confidence in the US economy. Additionally, the US Producer Price Index (PPI) rose 0.2% month-on-month in August, beating the forecasted 0.1%, with core PPI increasing by 0.3%, exceeding both expectations and the previous month’s figure.

Technical Analysis: USD/JPY Remains Tepid Around 140.50 Amid 14-Month Lows

USD/JPY is hovering around 140.60 on Tuesday, continuing its downward trend within a descending channel, signaling a bearish outlook. The 14-day Relative Strength Index (RSI) remains below 30, indicating an oversold condition and a potential for an upward correction.

On the downside, the pair is testing support at 140.25, the lowest level since July 2023, followed by the psychological barrier at 140.00. A break below this level could strengthen the bearish sentiment and drive the pair toward the lower boundary of the descending channel at 138.30.

On the upside, resistance is expected around the nine-day EMA at 141.95, followed by the 21-day EMA at 143.78. A breakout above these levels could weaken the bearish bias and push the pair toward the upper boundary of the descending channel at 145.40.

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Australian Dollar Strengthens Amid Rising Odds

Australian Dollar Strengthens Amid Rising Odds of Aggressive Fed Rate Cut

Australian Dollar Strengthens Amid Rising Odds of Aggressive Fed Rate Cut

The Australian Dollar (AUD) edged higher against the US Dollar (USD) on Monday, driven by growing speculation that the US Federal Reserve may implement a substantial 50 basis points (bps) rate cut in its upcoming policy meeting. This potential easing by the Fed could further support the AUD/USD pair’s upward momentum. Traders are also awaiting Australian labor market data later this week, which may influence the Reserve Bank of Australia’s (RBA) monetary policy outlook.

The RBA has maintained a hawkish stance, with Governor Michele Bullock emphasizing that it is too soon to consider rate cuts given the persistent inflationary pressures. RBA Assistant Governor Sarah Hunter echoed this sentiment, noting that while the labor market remains tight, wage growth appears to have peaked and is expected to slow down.

In contrast, the US Dollar is under pressure as US Treasury yields decline amid uncertainty surrounding the Fed’s rate cut. The CME FedWatch Tool indicates a 41.0% chance of a 25 bps cut at the Fed’s September meeting, with the likelihood of a larger 50 bps cut rising to 59.0%, up from 50.0% just a day ago.

Market Highlights: Australian Dollar Benefits from Fed Rate Cut Speculation

The University of Michigan’s Consumer Sentiment Index rose to 69.0 in September, surpassing expectations and marking a four-month high. This improvement reflects a more positive outlook from US consumers after months of pessimism.

China’s Retail Sales growth slowed to 2.1% year-on-year in August, down from 2.7% in July and missing the 2.5% market forecast. Given Australia’s close trade ties with China, shifts in China’s economic performance can significantly affect the Australian economy. Additionally, China’s economy showed signs of weakening in August, with continued slowdowns in industrial production and falling real estate prices, putting pressure on Beijing to increase spending.

Meanwhile, the US Producer Price Index (PPI) for August rose by 0.2% month-on-month, exceeding forecasts, while core PPI also accelerated. Despite these stronger figures, uncertainty remains around the Fed’s rate decision.

Former RBA Governor Bernie Fraser has criticized the current RBA Board for focusing too much on inflation at the expense of employment, warning of recession risks if the cash rate isn’t lowered soon. Australia’s Consumer Inflation Expectations dipped to 4.4% in September, slightly easing from August’s 4.5% reading, reflecting the central bank’s balancing act between controlling inflation and supporting job market growth.

Technical Analysis: AUD/USD Tests Key Resistance at 0.6700

The AUD/USD pair is trading around 0.6700, testing the upper boundary of a descending channel. A breakout above this level could signal a bullish shift in momentum, potentially pushing the pair toward a seven-month high of 0.6798 and the psychological barrier of 0.6800.

On the downside, the pair has immediate support around the nine-day Exponential Moving Average (EMA) at 0.6703. A break below this could reinforce the bearish trend, with further support near the lower boundary of the descending channel around 0.6575.

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Nonfarm Payrolls Data to Test US Labor Market

Nonfarm Payrolls Data to Test US Labor Market in August After July’s Slowdown

Nonfarm Payrolls Data to Test US Labor Market in August After July’s Slowdown

The US Bureau of Labor Statistics (BLS) will release the much-anticipated Nonfarm Payrolls (NFP) data for August on Friday at 12:30 GMT.

This labor market data is crucial for assessing the US Federal Reserve’s (Fed) upcoming interest rate decisions, particularly regarding a potential rate cut in September, which is heightening volatility around the US Dollar (USD).

What to Expect in the August Nonfarm Payrolls Report?

Forecasts suggest that the US economy added 160,000 jobs in August, up from the 114,000 added in July.

The unemployment rate is expected to decrease slightly to 4.2% from July’s 4.3%. Meanwhile, wage growth, measured by Average Hourly Earnings, is anticipated to rise by 3.7% year-over-year in August, following a 3.6% increase in July.

The August data will be pivotal in determining the Fed’s approach to interest rates at its September 17-18 meeting. Fed Chair Jerome Powell recently noted that a further cooling of the labor market could justify more aggressive monetary action, possibly leading to a 50 basis point (bps) rate cut.

In July, the Fed adjusted its policy language to reflect increased attention to both inflation and labor market risks, signaling potential shifts in its dual mandate focus.

TD Securities analysts expect a rebound in payrolls, estimating over 200,000 new jobs in August, with the unemployment rate dropping to 4.2% and wages growing by 0.3% month-over-month.

How Will August Nonfarm Payrolls Impact EUR/USD?

The US Dollar has been weakening against major currencies, pushing EUR/USD closer to the 1.1100 level. A dovish NFP report could reinforce expectations of a larger Fed rate cut, benefiting EUR/USD further.

In the run-up to the NFP release, weak US economic data, including disappointing Institute for Supply Management (ISM) Purchasing Managers Index (PMI) numbers and a decline in job openings, have fueled concerns of a hard landing for the US economy.

The ISM’s Manufacturing Index slightly improved to 47.2 in August from 46.8 in July, but remained in contraction territory. US job openings fell to a 3.5-year low of 7.67 million in July, down from 7.91 million in June. Additionally, the ADP report showed private sector employment increased by just 99,000 in August, a decline from July’s revised 111,000.

As a result of the soft data, market expectations for a 50 bps Fed rate cut have risen, with the FedWatch tool now showing a 47% chance, up from 31% earlier in the week.

A weaker-than-expected NFP print (below 100,000 jobs) could further solidify the case for a significant rate cut in September, likely dragging the USD down while pushing EUR/USD higher. On the other hand, a strong NFP report, especially if accompanied by rising wage inflation, could dampen expectations of an aggressive rate cut, offering support to the US Dollar and pushing EUR/USD lower toward the 1.0900 level.

“The pair remains above the 21-day Simple Moving Average (SMA) at 1.1061, with the 14-day Relative Strength Index (RSI) pointing upward at 58, suggesting continued bullish momentum.”

“Buyers need to clear the year-to-date high of 1.1202 to challenge the 1.1250 psychological barrier, with further resistance at the July 2023 high of 1.1276. On the downside, a break below the 21-day SMA at 1.1061 could trigger a deeper correction, with support levels at the 1.1000 mark and the 50-day SMA at 1.0939.”

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Stocks finish mixed as tech stocks face additional pressure

Stocks finish mixed as tech stocks face additional pressure

On Monday, U.S. stocks finished mixed, with shares unable to find direction as fears about the economy’s prospects grew amid rising inflation. The S&P 500 finished the turbulent day down 0.4 percent at 4,008.01. The NASDAQ slid 1.2 percent to 11,662.79 as mega-cap technology giants such as Apple (AAPL) slumped, dragging the index down. The Dow Jones Industrial Average finished at 32,223.42, up marginally.

Even after new GDP statistics from China came in weaker-than-expected, as the latest wave of virus-related restrictions in the country hampered movement, US crude oil prices (CL=F) reversed earlier losses and gained. Retail sales in China fell by 11.1 percent in April compared to the same month last year, the worst loss since March 2020, while industrial production unexpectedly fell by 2.9 percent.

The decline in risk assets on Monday prolonged a recent period of market turbulence. Stocks finished last week with their sixth straight weekly decline, sending the S&P 500 16.1 percent below its January 3 peak. As the Federal Reserve seeks to cool inflation reaching its highest level in four decades, geopolitical upheaval in Ukraine continues, and China grapples with its biggest COVID epidemic since 2020, investors are weighing the chances of a broader economic slowdown.

In response to these worries, Wall Street analysts have become increasingly cautious about equities. In a recent report, Goldman Sachs lowered its S&P 500 year-end price forecast to 4,300 from 4,700. According to David Kostin, Goldman Sachs’ top U.S. stock strategist, the reduced goal reflects “higher interest rates and weaker economic growth than we previously projected.” In a recession, the S&P 500 will likely fall much further to 3,600, according to Kostin. Other strategists emphasized the present multiplicity of equities risks and advised against reading too much into one-day rebounds.

“At this moment, we believe the tipping point is an open question. We’re probably in the middle of two repricings: one caused by the Federal Reserve, and the other induced by the market “U.S. Bank Asset Management’s chief investment officer, Eric Freedman, told Yahoo Finance Live. “When the Fed announces a rate hike, every other asset class must drop in price and increase in yield. So we’re right in the thick of it. Depending on what the Fed decides to do in terms of messaging, this might be a turning moment.”

“However, the next repricing — and the danger of possible additional downside — will occur if higher commodity costs and higher borrowing rates structurally flow into the actual economy and stay there for some time,” he warned. “So I believe we’re in a profoundly oversold state… but we’d still be cautious right now because we believe there’s more potential downside coming.”

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The stock market meltdown may not be ended yet

The stock market meltdown may not be ended yet

A massive outflow of funds, a $11 trillion loss, and the biggest losing run for world markets since the financial crisis of 2008. The bad news is that it may not be over yet. The MSCI ACWI Index selloff has slashed company valuations across the US and Europe, but strategists ranging from Morgan Stanley’s Michael Wilson to Citigroup’s Robert Buckland expect stocks to fall even more amid concerns about high inflation, hawkish central banks, and slowing economic growth, particularly in the US.

According to Bank of America Corp., money is continuing to flow out of every asset class, and the exodus is accelerating as investors flee companies like Apple Inc. The S&P 500 has capacity to fall roughly 14% more before hitting important support levels, according to historically significant technical levels, although the number of businesses that have reached a one-year low is still a long cry from the amount during the economic growth concern that rocked markets in 2018.

“Investors are continuing to cut their positions, especially in technology and growth equities,” said Andreas Lipkow, a Comdirect Bank strategist. “However, sentiment must decline substantially more before a viable floor can be formed.”

On the other hand, some argue that the sell-off has already produced pockets of value in a variety of sectors, including commodities and even technology, which is valued on future profits growth and so avoided during periods of high interest rates. The NASDAQ 100 index rose on Friday, but it still ended the week down more than 2%.

Peter Oppenheimer of Goldman Sachs Group Inc. is one of the most well-known strategists to say it’s time to buy the drop, while Thomas Hayes, head of Great Hill Capital LLC, said “old school tech” equities like Intel Corp and Cisco Systems Inc. are now selling at favorable multiples.

However, despite the value, the larger market appears to be crumbling as the possibility of a recession becomes more widespread. Even as growth concerns deepen, the Federal Reserve’s and other central banks’ focus on inflation means investors can no longer rely on the monetary elixir that has kept the long-running bull market afloat.

The MSCI ACWI has plummeted for six weeks in a row, the Stoxx Europe 600 has lost 6% since late March, and the S&P 500 has lost more than twice as much. Except for the tech boom and the global financial crisis, the S&P 500 is still around 14% above its 200-week moving average, which has traditionally served as a floor throughout all major bear markets. After yet another down week for the US benchmark, Canaccord Genuity strategists predict additional losses on Monday due to forced margin selling.

Despite the recent drops — the S&P 500 is down more than 13% from its March 29 peak — stress indicators aren’t at levels seen during previous downturns. Only around 30% of the benchmark’s members have seen a one-year low, compared to roughly 50% during the 2018 growth concern and 82 percent during the 2008 global financial crisis.

Furthermore, the 14-day relative strength index indicates that the S&P 500 is not yet at the bottom. While the Stoxx Europe 600 Index reached oversold territory last week, the US benchmark has yet to do so, which is usually a sign of approaching recovery. As the threat of slower growth pounds economically sensitive cyclical industries, defensive equities have been in high demand. The Stoxx 600 Defensives Index is expected to remain unchanged in 2022, compared to a 15% loss for cyclicals, according to analysts at Barclays and Morgan Stanley. Claudia Panseri of UBS Wealth Management believes that the cyclical-versus-defensive relative performance is pricing for a “moderate recession.”

Despite the fact that technology companies’ valuations have plummeted — the tech-heavy Nasdaq 100 currently trades at under 20 times forecast profits, the lowest since April 2020 — some strategists believe they will continue under pressure from central banks’ aggressive monetary tightening.

According to Bank of America, tech equities recently had their largest weekly outflows of the year. Even after the price declines, Valerie Gastaldy, a technical analyst at Day By Day SAS, believes the sector might lose another 10% before reaching a bottom. “I don’t believe we’ve seen surrender yet,” Dan Boardman-Weston, CEO of BRI Wealth Management, said. “This week has been particularly severe, and investor mood, particularly in the technology sector, has taken a beating.

When compared to previous eras of defensive strength, more might be on the way. Relative gains this year are still trailing those in 2016, which were sparked by China’s slowdown and Brexit concerns, as well as in the early days of the pandemic in 2020.

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Global stock markets are falling as inflation and economic concerns remain

Global stock markets are falling as inflation and economic concerns remain

On Thursday, global shares slumped to an 18-month low, as investors worried that rising inflation would endure, forcing central banks to continue tightening monetary policy. Stocks in the United States closed a choppy session marginally down, as investors juggled concerns over lingering inflation with evidence that it may be peaking. Since plunging from its all-time high in January, the S&P 500 has come dangerously close to confirming a bear market.

A German warning that Russia was now using energy supply as a “weapon” heightened economic concerns in Europe. The STOXX 600 index was down 0.75 percent throughout Europe. As of 5:09 p.m. ET, the MSCI global stock index was down 0.69 percent (2109 GMT). Oil prices were uneven as a result of supply concerns stemming from the planned European Union embargo on Russian oil. Brent crude dropped 6 cents to $107.45 per barrel. WTI crude oil increased 42 cents, or 0.4 percent, to $106.13 a barrel.

The producer price index for final demand grew 0.5 percent in April, less than the 1.6 percent increase in March, according to the US Labor Department, as growing energy prices slowed. Consumer price growth fell to 8.3 percent in April from 8.5 percent in March, but it still beat experts’ expectations of 8.1 percent.

“Since the Fed hiked rates… and the accompanying robust US jobs market, and CPI statistics have reinforced worries over the scale of the task confronting the Fed,” ANZ bank analysts stated. Overnight, the leading pan-Asian Pacific indices fell 2.5 percent to a 22-month low. The Nikkei 225 lost 1.8 percent. Stocks in emerging markets fell 2.28 percent.

Treasury yields have fallen. After the benchmark US government bond fell to a morning low of 2.816 percent, the yield on 10-year Treasury notes US10YT=RR plummeted 7.1 basis points to 2.843 percent. Germany’s benchmark 10-year yield fell as much as 15 basis points to 0.85 percent, its lowest level in over two weeks.

With the collapse of the so-called stablecoin TerraUSD, selling in bitcoin, and a 15% drop in the next-largest cryptocurrency, ether, the crash in cryptocurrency markets proceeded .Tether, the world’s largest stablecoin by market capitalization with a value directly linked to the dollar, has fallen below its so-called “peg” to the dollar. Crypto markets have already lost over $1 trillion due to the worldwide sell-off. This week, about a third of that loss occurred. “The breakdown of the peg in TerraUSD has resulted in several unpleasant and foreseeable consequences. BTC, ETH, and most ALT coins have suffered widespread liquidation “Other cryptocurrencies, stated Richard Usher, head of OTC trading at BCB Group.

Precious metals were also down. Gold declined 1.7 percent to $1,821.52 an ounce on the spot market. Gold futures in the United States declined 1.64 percent to $1,823.80 per ounce.  In official trade, benchmark copper on the London Metal Exchange was down 3.6 percent at $9,000 per tonne, after sliding as low as $8,938. Prices have dropped 17% after reaching a peak of $10,845 in March.

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NASDAQ is down more than 3% as investors are disappointed by US inflation statistics

NASDAQ is down more than 3% as investors are disappointed by US inflation statistics

After U.S. inflation statistics failed to ease investor concerns about interest rates and the economy, US equities closed substantially lower on Wednesday, with the NASDAQ plunging more than 3% and the Dow plummeting for the fifth day in a row. The S&P 500 index fell 1.7 percent and is now down 18 percent from its record closing high on Jan. 3.

Inflation may have peaked in April, according to the Labor Department’s monthly consumer price index (CPI), but it is expected to remain high enough to put the Federal Reserve on the brakes to cool demand. Last month, the CPI rose 0.3 percent, the weakest increase since August, while experts surveyed by Reuters expected consumer prices to rise 0.2 percent in April.

Quincy Krosby, chief equities strategist at LPL Financial in Charlotte, North Carolina, said, “It didn’t remove the perception that there’s more to go in terms of reigning in inflation.” “The market is trying to figure out if we’ll see growth slow down more than predicted” when the Fed hikes rates, she added.

Apple’s stock fell 5.2 percent, putting the NASDAQ and S&P 500 indexes under the most pressure. “Apple is getting a lot of attention right now,” Krosby added. “From many viewpoints, Apple is the indicator for the market because of its heft.” Growth stocks have been hammered particularly hard by investor fears about whether the Fed would continue to boost interest rates quickly. The consumer discretionary and technology sectors each declined 3%, leading the S&P 500 sector falls.

The Dow Jones Industrial Average sank 326.63 points, or 1.02 percent, to 31,834.11, the S&P 500 dropped 65.87 points, or 1.65 percent, to 3,935.18, and the NASDAQ Composite plunged 373.44 points, or 3.18 percent, to 11,364.24.The Dow’s five-day losing skid was the longest since mid-February. Energy stocks finished higher, helping to keep the S&P 500 and Dow from falling too much. Exxon Mobil Corporation’s stock was up 2.1%

In general, value stocks outpaced growth stocks. The S&P growth index fell 2.8 percent on the day, while the S&P value index fell 0.5 percent. Investors are waiting for fresh inflation data on Thursday, when the US producer price index is released. Stocks have declined this year as a result of rate fears, the Ukraine crisis, and China’s recent coronavirus lockdowns.

Coinbase Global Inc fell 26.4 percent after missing revenue projections in the first quarter, owing to market volatility that has reduced investor demand for risk assets. The total number of shares traded on US exchanges was 15.38 billion, compared to an average of 12.75 billion over the prior 20 trading days. On the NYSE, declining issues outnumbered advancing ones by a 2.16-to-1 ratio; on the NASDAQ, decliners were favoured by a 3.70-to-1 ratio. The S&P 500 index made one new 52-week high and 67 new lows, while the NASDAQ Composite made ten new highs and 1,221 new lows.

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Dow falls for the fourth day in a row

Dow falls for the fourth day in a row

On Tuesday, the market fluctuated between gains and losses as concerns about inflation, interest rates, and the economy weighed on investors. The NASDAQ Composite, which is heavily weighted in technology, was up 2.8 percent at one point. Stocks had virtually lost those gains by late morning, and they seemed to be on course to continue a painful three-day slump. However, as the day progressed, investors’ focus shifted to Wednesday’s consumer price report and the prospect that inflation had peaked, and equities began to recover.

The S&P 500 rose 9.81 points, or 0.2 percent, to 4001.05, a day after the broad index fell 3.2 percent to its year-low. To 11737.67, the NASDAQ Composite Index rose 114.42 points, or 1%. “The market misread the consumer price index, resulting in the afternoon rebound,” said Matt Peron, director of research at Janus Henderson Investors.

The Dow Jones Industrial Average dropped for the fourth trading session in a row, reaching a 52-week low. At 32160.74, it was down 84.96 points, or 0.3 percent. A concoction of geopolitical threats and economic headwinds is unsettling markets and presenting the greatest threat to global growth in years. In the United States, the Federal Reserve has begun raising interest rates in response to rising inflation, and investors are concerned that the move may send the country into recession.

Global markets are also in a state of flux. Resurgent Covid-19 breakouts in China, as well as Beijing’s rigorous response to them, threaten to resurrect the supply chain bottlenecks that drove inflation higher in the first place. The crisis in Ukraine threatens to keep energy costs high in Europe, putting a damper on the region’s prosperity.

“People came in this morning anticipating a relief rally after being hammered the past several days,” said Joe Quinlan, Merrill’s and Bank of America Private Bank’s head of CIO Market Strategy. “However, we have seldom seen three big market-moving factors combine, such as inflation in the United States, Covid difficulties in China, and the crisis in Ukraine.” Some buyers bought equities that had been hammered by the headwinds early Tuesday.

“At this point, everyone is waiting to see if we’ve bottomed,” said Quincy Krosby, LPL Financial’s Chief Equity Strategist. “I have a feeling we haven’t hit bottom yet.” Ms. Krosby expects Wednesday’s publication on new consumer-price index data to show that inflation climbed at a slower pace in April than the previous month. She emphasised that investor opinion may shift on a dime. A speech by Fed Chairman Jerome Powell in January 2019 hinted that the central bank would be conservative with rate hikes, reversing a major market selloff.

Mr. Quinlan believes the market has entered a new period, and investors are more likely to wait for convincing proof that the obstacles have passed before speculating on the equities reaching a bottom. He stated, “Investors are quite suspicious right now.” “They want to see the data,” says the source. They refuse to pay attention to policymakers. Any enhancements will help construct the bottom scaffolding. But we haven’t arrived yet.” Peloton Interactive slumped $1.23, or 8.7%, to $12.90 after announcing lower sales and rising losses as the stationary-bike maker grapples with the return of pre-pandemic consumer habits.

Pfizer said it will purchase the balance of Biohaven Pharmaceutical Holding Co. for roughly $11.6 billion, sending the stock up $56.86, or 68 percent, to $140. After Prologis announced that it had made an offer to purchase Duke Realty for $23.7 billion, the stock gained $1.87, or 3.9 percent, to $49.58. The stock of Prologis dropped $6.96, or 5.3 percent, to $125.41. The yield on the benchmark 10-year Treasury note fell to 2.990 percent on Tuesday, down from 3.080 percent the day before. Overseas, the Stoxx Europe 600 index gained 0.7 percent. In Asia, the Nikkei 225 fell 0.6 percent, the Shanghai Composite jumped 1.1 percent, and the Hang Seng Index in Hong Kong fell 1.8 percent.

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US stock sell-off deepens as S&P & NASDAQ falls

US stock sell-off deepens as S&P & NASDAQ falls

The brutal market sell-off resumed on Monday, with all three main indices finishing down starting the week. The S&P 500 fell below 4,000 for the first time since April 2021, while the tech-heavy NASDAQ fell more than 4%. The Cboe Volatility Index, or stock market fear measure, rose to 34.66 on Monday. Stocks fell even as the yield on the 10-year Treasury note fell to around 3.04 percent, down from 3.1 percent on Friday, as investors sought to avoid the carnage in markets.

So far in 2022, there has been nowhere to hide in markets as equities, bonds, and cryptocurrency have all been crushed, and stocks and bonds are seeing a simultaneous correction for the first time in over 50 years. “Investors, in my opinion, have become too gloomy about the future for the US economy and stock market,” experienced stock market bull Edward Yardeni told the Financial Times on Monday. “I can’t remember such stock bearishness in a long time.”

According to Morgan Stanley analysts in a Monday report, retail traders have now lost all of the money they made during the outbreak. Twitter’s shares dropped on Monday. In the absence of Elon Musk’s takeover attempt, the company’s expected price, according to short seller Hindenburg Research, would be 37% lower. According to the experts, Tesla’s CEO has complete control over the sale and might revise his offer.

According to Bloomberg, Goldman Sachs is planning to discontinue working with most SPACs owing to liability concerns and increased regulation in the market. However, if the SEC relaxes its SPAC supervision standards, the investment bank may reconsider. Lumber prices fell to their lowest level of the year on Monday, as the highest mortgage rates in 13 years weighed on home demand.

Overseas, China’s yuan fell to an 18-month low versus the dollar, as Beijing’s Covid restrictions weighed on the economy and US bond rates remained high. Meanwhile, the three most valuable cryptocurrencies by market capitalization – bitcoin, ether, and solana – all fell on Monday. Coinbase and Silvergate Capital stock dropped in tandem with the overall token selloff. West Texas Intermediate crude fell 6.7 percent to $102.39 a barrel. Brent crude, the worldwide standard, fell 6.4% to $105.20 per barrel. Gold fell 1.53 percent to $1,853.20 per ounce. The 10-year Treasury yield fell 8.4 basis points to 3.04 percent.

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Dollar rises as equity markets are jolted by nervousness

Dollar rises as equity markets are jolted by nervousness

The dollar started the week on a solid note, bolstered by dramatically increasing US yields and investors’ flight to safety as Chinese lockdowns, conflict on the outskirts of Europe, and fear of higher interest rates pushed markets into a frenzy. In early trade, the US dollar hit a 22-month high against the growth-sensitive New Zealand dollar and surged more than 0.5 percent against the Australian dollar to a three-month high while US stock market futures fell 1%. The benchmark 10-year Treasury yield was at its highest since 2018 at 3.1464 percent, while the dollar is a whisker away from a new two-decade high at 130.73 yen.

The dollar has nearly reached a five-year high against the euro, which lost 0.2 percent to $1.0529. Sterling was trading slightly around two-year lows set last week after the Bank of England cautioned that the British economy was entering a slump. “The dollar will be supported by outperformance in the US economy and lower equity prices,” said Joe Capurso, a strategist at the Commonwealth Bank of Australia in Sydney.

“Despite considerable rises in interest rates, financial conditions in the main economies have not tightened much the need to tighten financial conditions and rein in inflation underpins the rationale for significant future increases.” Last week, the US dollar index rose for the fifth week in a row, reaching a nearly 20-year high after the US Federal Reserve raised its benchmark funds rate by 50 basis points and solid employment data bolstered expectations on additional hefty raises.

The index was recently at 103.78. Futures markets are pricing in a 75 percent likelihood of a 75 basis point rate hike at the Fed’s next meeting in June, and more than 200 basis points of tightening by the end of the year. The release of US inflation statistics on Wednesday might inspire even more aggressive wagers, especially if the rate of headline price hikes does not slow to 8.1 percent as forecast.

“Risks around US CPI appear binary; a slowdown from 8.5 percent would be modestly encouraging, but a bounce would undoubtedly reignite expectations for 75 basis point Fed increases, and possibly support the currency,” ANZ Bank analysts said. “As the reality of volatility strikes, the concept that synchronized global tightening would go smoothly feels like a lost dream.”

Cryptocurrencies have been hammered in the rush away from riskier assets, with bitcoin nursing weekend losses and trading at its lowest levels of the year at $34,000, while ether, which slid 4% on Sunday, was trading at $2,525. At the same time, the crisis in Ukraine is upsetting global commodities markets, and China’s lockdowns are slowing GDP. Last month, China’s unemployment rate reached its highest level since March 2020, and the yuan was trading around an 18-month low of 6.7319 per dollar in offshore trade.

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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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GBP/USD Consolidates Around

GBP/USD Consolidates Around Mid-1.3000s, Vulnerable Amid Strong USD

GBP/USD Consolidates Around Mid-1.3000s, Vulnerable Amid Strong USD

The GBP/USD pair struggles to maintain modest recovery gains from the past two days, trading within a narrow range around 1.3050-1.3045 during Monday’s Asian session. Spot prices remain close to last Thursday’s one-month low, signaling potential vulnerability for continued declines from the 1.3435 area, which marked the highest level since March 2022.

The recent drop in the UK’s Consumer Price Index (CPI) to its lowest point since April 2021, below the Bank of England’s (BoE) 2% target, has fueled expectations of a 25 basis point (bps) rate cut in the BoE’s upcoming November 7 meeting. Additionally, money markets are pricing in the possibility of another rate cut in December, which could further weigh on the British Pound (GBP). Combined with ongoing bullish sentiment for the US Dollar (USD), this supports a negative outlook for GBP/USD.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, starts the week on a positive note, stalling its recent pullback from last week’s highest level since early August. Market confidence that the Federal Reserve (Fed) will implement modest rate cuts next year keeps US Treasury yields elevated, providing additional support for the dollar. Geopolitical risks also add to the USD’s safe-haven appeal.

With no significant economic data releases from the UK or US, the current fundamental backdrop suggests that GBP/USD’s downside risk remains the dominant trend. Any intraday upticks may be viewed as selling opportunities. However, bearish traders might wait for the pair to break below the 1.3000 psychological level before placing new bets, targeting support near the 100-day Simple Moving Average (SMA) around the 1.2960 region.

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EUR/USD Extends Losses Following ECB Rate Cut Decision

EUR/USD Extends Losses After ECB Rate Cut

EUR/USD Extends Losses After ECB Rate Cut

The EUR/USD pair continues to decline following the European Central Bank’s (ECB) decision to cut rates by 25 basis points on Thursday. With a lack of bullish momentum, the pair is now down more than 3.5% from late September’s peak above 1.1200, as it extends near-term losses.

The ECB’s rate cut, which was in line with market expectations, lowered the Deposit Facility Rate to 3.25% and the Main Refinancing Operations Rate to 3.4%. Adding further pressure on the Euro, Europe’s Harmonized Index of Consumer Prices (HICP) for the year ending in September dropped more than anticipated, coming in at 1.7% YoY compared to the forecasted 1.8%.

The upcoming EU Leadership Summit on Friday is the last key event on the EU economic calendar. However, it is unlikely to instill confidence in the Euro, as European policymakers continue to face a challenging economic environment, with fears of a deeper slowdown despite reassurances to the contrary.

In contrast, US economic data continues to outperform. September’s Retail Sales grew by 0.4% month-over-month, exceeding forecasts of 0.3% and rebounding from August’s 0.1% rise. Excluding automotive sales, Retail Sales increased by 0.5%, beating expectations of 0.1%. Additionally, US Initial Jobless Claims for the week ending October 11 came in at 241K, lower than the expected 260K, further supporting the US Dollar.

EUR/USD Price Outlook

The EUR/USD is under considerable bearish pressure, having dropped below both the 50-day Exponential Moving Average (EMA) at 1.0996 and the 200-day EMA at 1.0904, indicating a clear shift in market sentiment. The pair is currently trading near 1.0828, approaching multi-week lows as downside momentum builds. A break below the 1.0800 support level could trigger further declines, with the next key support at 1.0750.

The Moving Average Convergence Divergence (MACD) indicator remains deep in negative territory, showing no signs of reversal. The MACD and signal lines continue to diverge, and the expanding negative histogram points to accelerating bearish momentum. Should the pair fail to hold the 1.0800 level, further losses toward 1.0750 and potentially 1.0700 could follow. Conversely, a recovery above 1.0900, aligning with the 200-day EMA, is needed to reduce bearish pressure and offer some relief to bulls.

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EUR/USD Hits 10-Week Low Ahead of ECB Policy Announcement

EUR/USD Hits 10-Week Low Ahead of ECB Policy Announcement

EUR/USD Hits 10-Week Low Ahead of ECB Policy Announcement

EUR/USD continues to show weakness, trading near 1.0850 on Thursday as the currency pair faces significant selling pressure ahead of the European Central Bank’s (ECB) interest rate decision, expected at 12:15 GMT.

According to a Tuesday note from Citi, traders anticipate the ECB will reduce its Deposit Facility Rate by a total of 49 basis points (bps) across its remaining two meetings this year. This implies two 25 bps cuts, one on Thursday and another in December.

A quarter-point rate cut on Thursday would mark the second consecutive reduction, lowering the deposit rate to 3.25%. A dovish decision is widely expected, as the Eurozone faces an economic slowdown and inflationary pressures seem under control.

With strong expectations for another rate cut, investors will closely analyze the ECB’s monetary policy statement and President Christine Lagarde’s press conference for further insights into possible December actions.

Lagarde is expected to focus on strategies to revive economic growth. The Eurozone’s Harmonized Index of Consumer Prices (HICP) fell to 1.7% in September, below both expectations and the preliminary estimate of 1.8%, according to revised figures. Additionally, Germany’s latest economic projections suggest the country will end the year with a 0.2% contraction in output.

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EUR/USD stays below 1.0900; further decline

EUR/USD stays below 1.0900; further decline likely as ECB decision approaches

EUR/USD stays below 1.0900; further decline likely as ECB decision approaches

EUR/USD remains under pressure, trading near 1.0890 during the Asian session on Wednesday after a four-day losing streak. The Euro could face additional downside as the European Central Bank (ECB) is widely expected to announce a 25 basis point cut in both the Main Refinancing Rate and the Deposit Facility Rate during Thursday’s policy meeting.

Ahead of the ECB decision, traders will closely monitor the Eurozone’s Harmonized Index of Consumer Prices (HICP) data, which is set to be released on Thursday. This data could provide critical signals about inflationary trends in the region.

Key events following the ECB meeting will include the release of the Monetary Policy Statement and President Christine Lagarde’s press conference, where insights into the ECB’s future policy direction are expected.

Meanwhile, the US Dollar Index (DXY), which measures the dollar against six major currencies, continues to hover near a two-month high of 103.35, reached on Monday. Strong jobs and inflation data from the US have dampened expectations of aggressive Federal Reserve rate cuts in 2024.

Current market projections suggest a total of 125 basis points in Fed rate cuts over the next year. According to the CME FedWatch Tool, there is a 94.1% probability of a 25-basis-point cut in November, with no significant likelihood of a larger 50-basis-point move.

On Tuesday, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, noted that he expects just one more rate cut of 25 basis points this year, reflecting his projections from last month’s Fed meeting. “The median forecast indicated 50 basis points in cuts, in addition to the 50 basis points already delivered in September,” according to Reuters.

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EUR/USD Holds Below 1.0900 Amid Strong USD

EUR/USD Holds Below 1.0900, Lowest Since August 8, as USD Strengthens

EUR/USD Holds Below 1.0900, Lowest Since August 8, as USD Strengthens

The EUR/USD pair continues its downward slide for the second consecutive day on Tuesday, dipping to the 1.0890 region in the last hour, inching closer to its lowest point since August 8, touched the previous day. However, bearish traders remain cautious, waiting for a decisive break below the 200-day Simple Moving Average (SMA) before making fresh moves ahead of significant central bank developments.

The European Central Bank (ECB) is set to announce its policy decision on Thursday, with expectations of a third rate cut in this easing cycle due to growing concerns over sluggish economic growth. Additionally, Eurozone inflation has dropped below the ECB’s 2% target for the first time since 2021, further supporting the case for policy easing. This weakens the euro, while a stronger US Dollar (USD) further weighs on the EUR/USD pair.

The USD Index (DXY), which tracks the dollar against a basket of major currencies, remains strong near a two-month high amid rising expectations of a less aggressive rate-cutting approach by the Federal Reserve (Fed). Markets have now ruled out the likelihood of another large Fed rate cut in November, keeping US Treasury yields elevated. Geopolitical risks also add to the safe-haven appeal of the USD, potentially fueling further downside pressure on the EUR/USD pair.

Market participants now focus on Tuesday’s key data releases, including the German ZEW Economic Sentiment Index and Eurozone Industrial Production figures. Later in the North American session, the Empire State Manufacturing Index and speeches from key Federal Open Market Committee (FOMC) members will influence USD demand, offering short-term direction for the EUR/USD pair.

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EUR/USD Dips Below 1.0950 Amid Stronger US Dollar

EUR/USD Dips Below 1.0950 Amid Stronger US Dollar

EUR/USD Dips Below 1.0950 Amid Stronger US Dollar

The EUR/USD pair continued its decline, dropping to around 1.0920 during early trading in Asia on Monday. This downward movement is driven by risk aversion, fueled by escalating geopolitical tensions in the Middle East and rising conflicts between China and Taiwan, which are pressuring riskier currencies like the Euro (EUR).

On Monday, a spokesperson from the US Department of State expressed “serious concern” over the Chinese People’s Liberation Army (PLA) military drills in the Taiwan Strait and around Taiwan. They noted that the US will closely monitor these activities and collaborate with allies regarding shared concerns. Any further escalation could increase demand for safe-haven assets like the US Dollar (USD), adding pressure on the EUR/USD pair.

Meanwhile, traders are anticipating a 25 basis point (bps) interest rate cut from the Federal Reserve (Fed) in November, following the release of Friday’s US Producer Price Index (PPI) data. The CME FedWatch Tool now shows an 86.8% likelihood of this rate cut, up from 83.3% before the PPI report.

In Europe, the Euro is also under pressure as the European Central Bank (ECB) is expected to implement further rate cuts in the remaining monetary policy meetings this year. The ECB’s dovish approach is driven by faster-than-expected declines in Eurozone inflation and a fragile economic recovery.

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EUR/USD Struggles Below 1.0950 Ahead of Key German Inflation Data

EUR/USD Struggles Below 1.0950 Ahead of Key German Inflation Data

EUR/USD Struggles Below 1.0950 Ahead of Key German Inflation Data

The EUR/USD pair continues to trade defensively around 1.0935 during early European hours on Friday. A stronger-than-expected U.S. inflation reading on Thursday has bolstered the U.S. dollar, limiting the pair’s ability to move higher.

The U.S. Consumer Price Index (CPI) came in hotter than anticipated, along with a robust September jobs report. This combination strengthens the view that any future rate cuts by the Federal Reserve (Fed) will be gradual. Following the CPI release, the CME FedWatch Tool showed an 83.3% probability that the Fed will lower interest rates by 25 basis points (bps) in November.

Looking ahead, traders will focus on the U.S. Producer Price Index (PPI) for September and the preliminary Michigan Consumer Sentiment Index for October, both due on Friday. The headline PPI is forecast to rise by 1.6% year-over-year (YoY) for September, while core PPI is expected to increase by 2.7%. If the PPI data comes in softer than expected, the U.S. dollar could weaken against the euro.

In Europe, expectations are building that the European Central Bank (ECB) will cut rates to address the region’s economic slowdown, which may weigh further on the euro. The ECB is expected to lower its key rates twice this year, with a 3.5% deposit rate cut anticipated next week. According to a Reuters poll, over 90% of economists expect a rate cut next week, with another likely to follow in December.

Additionally, Germany’s Harmonized Index of Consumer Prices (HICP) inflation data, expected to remain steady at 1.8% YoY for September, will be released later on Friday.

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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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