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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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Gold Price Consolidates Below $2,750 Amid Mixed Market Signals

Gold Price Consolidates Below $2,750 Amid Mixed Market Signals

Gold prices (XAU/USD) continue to trade within a narrow range near the $2,740 level during early European trading on Tuesday. The market remains influenced by conflicting factors, leaving traders hesitant to make strong directional moves.

US President Donald Trump’s renewed trade tariff threats have sparked inflationary concerns, driving a modest rebound in US Treasury bond yields. This, in turn, supports a recovery in the US Dollar (USD) from its recent one-month low, creating downward pressure on gold prices.

However, fears of potential economic disruptions from Trump’s trade policies are providing support for the safe-haven asset, helping limit its downside. Market participants are also exercising caution ahead of the upcoming two-day Federal Open Market Committee (FOMC) meeting, while US macroeconomic data due later in the day could further influence market sentiment.

Key Developments Impacting Gold Prices

  1. Trade Tariff Concerns:
    President Trump recently announced emergency tariffs of 25% on Colombian imports, though implementation was delayed following an agreement on the acceptance of illegal migrants returned from the US. Trump also signaled impending tariffs on pharmaceuticals, computer chips, aluminum, copper, and potentially steel. These moves have heightened fears of inflation and pushed US Treasury bond yields higher, bolstering the USD and weighing on gold.
  2. Monetary Policy Speculation:
    Despite Trump’s tariff announcements, markets are pricing in two potential 25-basis-point interest rate cuts by the Federal Reserve this year. This expectation could cap bond yields and limit USD gains, offering some support to gold prices.
  3. Data and Events to Watch:
    Later on Tuesday, US economic data such as Durable Goods Orders, the Conference Board’s Consumer Confidence Index, and the Richmond Manufacturing Index may provide additional trading cues. The spotlight will then shift to Wednesday’s FOMC decision, which could significantly impact USD dynamics and set the tone for gold’s next directional move.

Technical Outlook: Resistance and Support Levels

Gold prices showed resilience on Monday, holding above the 23.6% Fibonacci retracement level of the December-January uptrend. Daily chart oscillators remain in positive territory, reinforcing the case for an upward bias.

  • Support Levels:
    Immediate support lies near $2,730, followed by the $2,725-2,750 zone. A break below these levels could push prices toward the 38.2% Fibonacci retracement level near $2,707-2,705, and further to the 50% level around $2,684.
  • Resistance Levels:
    The nearest resistance is at $2,755-2,757, with further hurdles at $2,772-2,773 and $2,786. A decisive break above $2,800 would signal renewed bullish momentum, potentially leading to a test of the all-time high near $2,790 and further gains.

Outlook for Gold

Gold prices remain range-bound as traders weigh opposing forces of inflationary concerns and safe-haven demand. A move above $2,755-2,757 is necessary for bulls to regain control in the short term, while a break below $2,730 would signal deeper corrections. With critical economic data and the FOMC decision on the horizon, gold’s next big move may hinge on shifting market dynamics in the coming days.

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Supermicro Stock Skyrockets 29% After Investigation Clears Fraud Allegations

Super Micro Computer (NASDAQ: SMCI), popularly known as Supermicro, saw its stock price soar by 29% on Monday, closing around $42 per share. This significant jump follows the conclusion of a governance investigation that found no evidence of fraud or misconduct, boosting investor confidence.

Investigation Findings: No Fraud or Misconduct

The investigation, initiated by a special committee in August, addressed concerns raised by Ernst & Young (EY), Supermicro’s former auditor, regarding governance, sales practices, and financial reporting. Key findings include:

  1. Management Integrity: The committee found no substantial concerns regarding the integrity of Supermicro’s senior management, audit committee, or financial reporting practices.
  2. Audit Independence: The audit committee demonstrated appropriate independence and oversight during financial reporting.
  3. Rehiring Practices: The company’s decision to rehire certain employees was deemed consistent with a commitment to legal compliance and accurate financial reporting.

EY’s concerns were ultimately found unsupported, with the committee emphasizing the accuracy of interim and final findings.

Governance Overhaul and Next Steps

To strengthen its governance, Supermicro has embraced the committee’s recommendations, including:

  • Leadership Appointments: Hiring a new Chief Financial Officer (CFO), appointing Kenneth Cheung as Chief Accounting Officer, and recruiting a Chief Compliance Officer and General Counsel.
  • Enhanced Oversight: Improving internal accounting and compliance systems, with better training, monitoring, and oversight practices.

The company has also filed a compliance plan with Nasdaq to catch up on overdue financial reports, ensuring continued listing.

Stock Performance: Recovery in Progress

Supermicro’s stock had plummeted by 85% in mid-November, hitting $17 per share, following its October 10-for-1 stock split and governance concerns. However, confidence rebounded after the investigation’s positive findings. Since November 15, the stock has surged back to $42, marking a 48% year-to-date increase.

With a price-to-earnings (P/E) ratio dropping from 79 in March to 16, Supermicro’s valuation is now drawing comparisons to AI-driven market leaders like NVIDIA. Its focus on AI-enabled servers for high-performance computing positions it as a key player in the tech sector.

Investor Considerations

While the governance investigation cleared Supermicro of fraud, investors are advised to exercise caution until the company releases its delayed financial reports. These filings will provide deeper insights into its financial health and help solidify its recovery. For now, Supermicro’s low valuation and strong earnings potential make it a compelling, albeit cautious, investment opportunity.

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Asian Stocks Decline on Geopolitical Tensions; Nikkei Falls on Inflation Data

Asian Stocks Drop Amid Geopolitical Tensions; Nikkei Slides on Strong Inflation Data

Asian Stocks Drop Amid Geopolitical Tensions; Nikkei Slides on Strong Inflation Data

Asian equities fell on Friday as geopolitical concerns and strong economic data from Japan weighed on sentiment. The escalation of the Russia-Ukraine conflict further dampened risk appetite, while China’s tech sector provided a rare bright spot amid easing regulatory fears.

Key Market Highlights

Geopolitical Tensions Weigh on Markets
Russia intensified its attacks on Ukraine, targeting energy infrastructure and escalating the conflict. President Vladimir Putin issued threats to strike decision-making centers in Kyiv with ballistic missiles, exacerbating global geopolitical uncertainty.

Broad Declines Across Asia

  • Thailand’s SET Index: Dropped 0.2%.
  • Indonesia’s Jakarta Composite: Declined 0.8%.
  • South Korea’s KOSPI: Fell nearly 2%, driven by a 1.8% drop in Samsung Electronics and a 0.7% decline in SK Hynix. Concerns over slowing economic growth deepened after data showed declines in industrial output, retail sales, and facility investment in October.
  • Australia’s ASX 200: Edged 0.3% lower.
  • Malaysia’s KLCI: Dipped 0.2%.

Japan’s Nikkei Slips Amid Yen Strength
Japan’s Nikkei 225 fell 0.5%, and the TOPIX index declined 0.3% as the yen strengthened to a one-month high against the U.S. dollar. Strong inflation data from Tokyo fueled speculation of a Bank of Japan (BOJ) rate hike in December.

  • Tokyo’s core consumer prices exceeded expectations in November, highlighting persistent inflationary pressures.
  • BOJ Governor Kazuo Ueda signaled plans to tighten monetary policy further, supported by a “virtuous cycle” of rising wages and steady inflation.

Chinese Tech Stocks Buck the Trend
Contrary to broader declines, Chinese equities rallied:

  • Shanghai Shenzhen CSI 300: Rose 1.6%.
  • Shanghai Composite: Gained 1.4%.
  • Hang Seng Index: Jumped 1.3%.

Reports suggested that the U.S. may impose less severe sanctions on China’s semiconductor industry than initially feared.

  • Semiconductor Manufacturing International Corp (SMIC) surged over 4%.
  • Hua Hong Semiconductor climbed 3.7%.

Investors are optimistic about Beijing’s recent stimulus measures, and a Reuters poll anticipates modest growth in China’s manufacturing Purchasing Managers’ Index for November, due Saturday.

Outlook

The Asia-Pacific region remains under pressure from geopolitical risks and mixed economic signals. Japan’s inflation dynamics could shift BOJ policy, while China’s tech rally might offer temporary relief amid broader concerns of an economic slowdown.

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WTI Steady at $69 Amid Geopolitical Risks and US Crude Inventory Build

WTI Steadies Near $69.00 Amid Mixed Signals from Geopolitical Risks and US Crude Inventory Build

WTI Steadies Near $69.00 Amid Mixed Signals from Geopolitical Risks and US Crude Inventory Build

West Texas Intermediate (WTI), the US benchmark for crude oil, is trading near $68.95 during Thursday’s session, maintaining a steady stance amid conflicting market drivers. A modest build in US crude inventories and weak Chinese demand weigh on prices, while escalating geopolitical tensions between Russia and Ukraine offer potential support.

US Crude Inventory Build Weighs on Prices
The Energy Information Administration (EIA) reported an increase of 0.545 million barrels in US crude stockpiles for the week ending November 15, slightly above market expectations of a 0.400 million barrel rise but significantly lower than the previous week’s 2.089 million barrel build. The smaller-than-expected inventory increase adds mild pressure to oil prices.

Weak Chinese Demand Adds Downside Pressure
China’s demand for crude oil continues to show weakness, dampening the outlook for global consumption. In October, China’s crude oil demand fell by 5.4% year-on-year. The International Energy Agency (IEA) projects demand growth in China to reach just 140,000 barrels per day (bpd) for 2024, a sharp decline compared to the 1.4 million bpd growth seen in 2023.

Geopolitical Risks Provide Support
Heightened geopolitical tensions involving major oil producers Russia and Ukraine are keeping supply-side concerns alive. This week, Russia accused Ukraine of targeting a facility in the Bryansk region with ATACMS missiles, prompting Russian President Vladimir Putin to lower the threshold for a potential nuclear response. Such risks could disrupt oil supplies, offering a counterbalance to bearish demand factors.

John Kilduff, a partner at Again Capital, highlighted, “These risks to supply are definitely keeping the support here and offsetting to a degree concerns around the global demand outlook.”

Outlook
WTI prices remain at the mercy of mixed signals, with inventory builds and sluggish Chinese demand capping gains while geopolitical risks lend underlying support. Traders will look toward further updates on geopolitical developments and upcoming economic data to gauge the balance between supply and demand factors in the oil market.

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

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

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

Gold (XAU/USD) continues to trade lower for the second consecutive session on Thursday, impacted by a stronger U.S. Dollar following former President Donald Trump’s victory in the recent U.S. election. The dollar-denominated precious metal is seeing diminished safe-haven appeal as market optimism increases, supported by clearer political outcomes.

Investor focus is now on the upcoming U.S. Federal Reserve decision, with markets largely anticipating a 25 basis-point rate cut. If realized, this could offer some support for Gold, as lower interest rates tend to reduce the opportunity cost of holding non-yielding assets like precious metals. The CME FedWatch Tool currently indicates a 98.1% likelihood of this modest rate reduction.

Market Dynamics: Gold Struggles Amid Higher Yields and “Trump Trades”

Non-yielding Gold faces additional pressure from surging U.S. Treasury yields, with the 2-year and 10-year bond yields hitting 4.31% and 4.47%, respectively, their highest levels since July. Furthermore, the prospect of increased inflation due to Trump’s policy stance, which includes higher trade tariffs and fiscal spending, could prompt some investors to seek Gold as a long-term inflation hedge.

Trump’s proposed economic policies—such as imposing tariffs, expanding the fiscal deficit, and cutting taxes—might conflict with the Federal Reserve’s inflation control goals, likely resulting in a slower pace of monetary easing.

Gold prices have been relatively unaffected by ongoing geopolitical tensions, including Iran’s warning of potential retaliation against Israel’s recent actions.

Additionally, mixed U.S. economic data from this week’s ISM and PMI releases reflect a resilient services sector. The ISM Services PMI rose to 56.0 in October from 54.9 in September, exceeding forecasts, while the S&P Global Services PMI reported a slight dip, coming in at 55.0.

Technical Outlook: Key Support and Resistance Levels for Gold

Gold currently trades near $2,650 per ounce, with technical indicators suggesting a continuation of bearish momentum. On the daily chart, Gold remains below the nine- and 14-day Exponential Moving Averages (EMAs), and the 14-day Relative Strength Index (RSI) remains under 50, both indicating a bearish trend.

On the downside, the next support level sits around $2,603.53, representing a three-week low. A break below this level could push Gold toward the critical $2,500 mark.

Conversely, immediate resistance is found near the psychological level of $2,700, with further resistance at the nine-day EMA of $2,711.40. A breakout above this zone could position Gold to retest its recent high of $2,790.11 reached on October 31.

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Gold Price Holds Steady Near Record High, Awaits US Macro Data for Direction

Gold Price Holds Steady Near Record High, Awaits US Macro Data for Direction

Gold price (XAU/USD) remains robust as it approaches the European session on Tuesday, trading just above the $2,750 mark and close to last week’s all-time high. Geopolitical risks and political uncertainties in the US continue to boost demand for the safe-haven metal. Additionally, lower US Treasury yields and cautious market sentiment lend further support to gold.

At the same time, expectations for smaller Federal Reserve (Fed) rate cuts are expected to support US bond yields, which could help the US Dollar (USD) recover some of the previous session’s losses. This, in turn, tempers new bullish momentum in non-yielding gold as investors await key US economic data releases this week, likely to influence the Fed’s rate outlook and provide new direction for XAU/USD.

Market Movers: Gold Supported by Mixed Factors, USD Buying Limits Gains

The retreat in US Treasury yields led to an intraday pullback in the USD from recent highs, encouraging some dip-buying near $2,725 early this week. Recent positive US data dampened expectations for substantial Fed rate cuts, potentially bolstering bond yields amid concerns about deficit spending after the November 5 election. With the US election drawing near, markets face additional uncertainty as Vice President Kamala Harris and Republican candidate Donald Trump engage in a close race for the presidency. Moreover, heightened tensions in the Middle East have added to market caution, with the US warning Iran of potential consequences if it continues retaliatory strikes.

In the broader market, China reported an 11.18% decline in gold consumption year-over-year for the first three quarters, citing high prices as a dampening factor on jewelry demand. Investors now eye the upcoming US Consumer Confidence Index and Job Openings and Labor Turnover Survey (JOLTS) for insight into the Fed’s rate plans and USD dynamics, likely to affect short-term gold price movements.

Technical Outlook: Gold Awaits Breakout for Bulls to Regain Control

On the technical front, a sustained move above the $2,750 resistance could trigger further buying interest, pushing gold prices past the all-time high around $2,759 and towards the four-month-old ascending trend-line resistance at $2,770–2,775. A continued rally could eventually target the psychological $2,800 level.

However, the Relative Strength Index (RSI) on the daily chart is approaching overbought levels, signaling potential caution for bulls. A short-term consolidation or minor pullback could provide a better entry for additional upside.

If a corrective decline occurs, support could emerge near the $2,725 level, followed by $2,715—the lower boundary of a recent trading range. A decisive break below this range might prompt technical selling, potentially leading gold prices below $2,700 and toward the $2,675 and $2,657–2,655 support areas.

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WTI Struggles Below $70 Amid Demand Concerns and USD Strength

WTI Struggles Below $70 Amid Demand Concerns and USD Strength

WTI Struggles Below $70 Amid Demand Concerns and USD Strength

West Texas Intermediate (WTI) crude oil prices are hovering just below the $70.00 mark during Tuesday’s Asian session, remaining in a tight range around $69.70-$69.75. The commodity has struggled to build on the previous day’s modest gains and stays near the three-week low it touched last Friday. WTI seems vulnerable to continuing its recent downtrend, which has persisted for over two weeks.

The brief positive reaction to the People’s Bank of China’s (PBOC) interest rate cut on Monday was short-lived, as concerns about slowing demand, particularly from China, continued to weigh on oil prices. Both OPEC and the International Energy Agency (IEA) reduced their global demand forecasts last month due to economic challenges in China, the world’s largest oil importer. IEA chief Fatih Birol further fueled these concerns, warning that China’s economic weakness could dampen global oil demand for years to come.

Adding to WTI’s challenges, the US Dollar (USD) has surged to its highest level since early August, driven by expectations of more cautious monetary easing from the Federal Reserve (Fed). A stronger USD tends to weigh on oil prices by making crude more expensive for holders of other currencies.

However, the potential for further escalation in the Middle East conflict, which could disrupt oil supplies from the region, provides some support to WTI prices. This geopolitical risk cautions against overly bearish positions, despite the recent sharp drop from the nearly two-month high of $78.00 reached on October 8.

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In the idle markets, XAU/USD remains protective at $1,800

In the idle markets, XAU/USD remains protective at $1,800

As global markets battle for clear directions to extend the previous optimism, gold (XAU/USD) prices drop from intraday highs, being range-bound near $1,813-18. During a sluggish Asian session on Wednesday, the precious metal maintained its previous day’s fall from the 200-DMA.

The current Fed speak is more hawkish than previous ones, but reports about the EU’s oil ban on Russian imports, as well as China’s COVID restrictions, put optimists to the test. Despite this, traders remain optimistic due to stronger GDP data from Japan and the Euro zone, buoyant Retail Sales from the US, and the UK’s robust jobs report.

“The Fed should boost rates to 2.25 percent -2.5 percent neutral ranges ‘expeditiously,'” Fed policymaker Evans seems to have weighed on the market’s mood by raising fears of a fast rate hike. Fed Chair Jerome Powell and normally hawkish St Louis Fed President James Bullard argued for a 50 basis point rate hike on Tuesday, putting pressure on the dollar.

In terms of the report, initial Euro zone GDP for Q1 2022 increased past 5.0 percent YoY to 5.1 percent, as well as above 0.2 percent QoQ estimates to 0.3 percent. In April, however, US retail sales increased by 0.9 percent MoM, somewhat higher than the projected 0.7 percent but lower than the upwardly revised 1.4 percent gain (from 0.5 percent). Japan’s preliminary GDP figures for Q1 2022 climbed past -0.4 percent estimates to -0.2 percent QoQ, while Annualized GDP improved to -1.0 percent from -1.8 percent expected.

The Financial Times (FT) reports that China is diverting anti-poverty funds to COVID testing as the crisis worsens, adding to the market’s concerns about the European Commission’s (EC) decision to move away from Russian energy imports. In this environment, US 10-year Treasury rates increased by 0.5 basis points (bps) to 2.988 percent, while S&P 500 Futures struggle to find a clear direction despite Wall Street’s strong advances.

However, if the US Dollar Index, which is currently flat near 103.35, benefits from the latest cautious optimism, gold traders may see additional losses. The greenback gauge could be influenced by second-tier housing figures as well as qualitative factors such as corona virus and geopolitics.

Despite maintaining inside a $5.00 trading range recently, gold prices have maintained the prior day’s retreat from the 200-DMA. XAU/USD may return an annual horizontal support range between $1,790-85, given the bearish MACD signals and the metal’s failure to cross the major moving average, which was around $1,838 by press time.

However, the bears would need a clear downside break of the $1,800 level before trying for the yearlong support. A successful run-up over the 200-day moving average of $1,838, on the other hand, will not be an open welcome to gold buyers, as a downward sloping trend line from late April and multiple resistances from January 25, respectively around $1,845 and $1,855, will test bulls.

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Oil prices starting to fall as EU tries for Russia import ban

Oil prices starting to fall as EU tries for Russia import ban

Oil prices fell in early Asian trade on Tuesday as the European Union’s efforts to establish a ban on Russian oil imports, which would reduce global supply, were met with opposition from Hungary. At 0004 GMT, Brent crude prices were down 35 cents, or 0.3 percent, to $113.89 a barrel, while WTI crude futures were down 52 cents, or 0.5 percent, to $113.68 a barrel. Following Russia’s invasion of Ukraine, EU foreign ministers failed to persuade Budapest to reverse its veto on a proposed oil embargo against the country. All EU countries would have to agree on an embargo.

On the demand side, statistics from China indicated that the world’s second-largest country processed 11% less crude oil in April than a year ago, owing to stringent COVID-19 lockdowns, with daily output falling to its lowest level since March 2020 as refiners cut operations due to lower demand.

While Chinese demand falls, manufacturers in the United States ramp up production to refill supplies reduced by Russia’s war on Ukraine, which Moscow refers to as a “special military operation,” and the coronavirus outbreak. According to the US Energy Information Administration (EIA), oil output in the Permian Region in Texas and New Mexico, the country’s largest shale oil basin, is expected to grow 88,000 barrels per day (bpd) to a record 5.219 million bpd in June.

The Strategic Petroleum Reserve’s inventory decreased to 538 million barrels on Monday, the lowest level since 1987, according to figures released by the US Department of Energy.

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Gold is rising from three-month lows as bond rates in the United States fall

Gold is rising from three-month lows as bond rates in the United States fall

Lower U.S. Treasury rates maintained demand for zero-yield metal afloat above the important psychological support level of roughly $1,800 per ounce on Monday, lifting gold from a more than three-month low reached the previous session. As of 0227 GMT, spot gold was up 0.1 percent at $1,812.15 per ounce. Gold futures in the United States rose 0.1 percent to $1,809.80.

“With $1,800 being such a large round figure, it’s natural for it to give some amount of support as some (traders) try to be bold and buy a dip, while others close out lucrative shorts,” said Matt Simpson, senior market analyst at City Index. Gold prices fell more than 1% on Friday, hitting its lowest level since February 4 at $1,798.86 per ounce, before finishing at $1,811.15.

“However, things aren’t looking good for gold bugs right now. Even if we see a recovery from $1,800, the momentum is obviously pointing lower “Simpson explained. As investors sought shelter owing to concerns about global growth, the dollar began the week barely below a 20-year high against peers, making rival safe-haven gold less appealing to purchasers holding other currencies.

However, 10-year Treasury rates in the United States decreased, boosting demand for non-interest bearing gold. Before the Federal Reserve can fairly conclude that inflation has peaked, it must fall for “many months,” Cleveland Fed president Loretta Mester said Friday, adding that if the numbers do not improve, she would be willing to support a rate rise sooner than the September meeting.

Despite its reputation as an inflation hedge, bullion is vulnerable to rising short-term interest rates and bond yields in the United States, increasing the opportunity cost of keeping it. Silver fell 0.1 percent to $21.06 per ounce, platinum was constant at $938.46, while platinum increased 0.3 percent to $1,949.88.

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As oil stocks rise, Wall Street is turning away from big tech

As oil stocks rise, Wall Street is turning away from big tech

On Wall Street, big tech stocks were all the rage, with speculators buying them up to absurdly high levels. For example, the legendary quintuple of Facebook (now Meta), Amazon, Apple, Netflix, and Google (now Alphabet) took up about a fifth of the S&P 500 at one point—a surprising proportion given that the S&P 500 is often seen as a proxy for the US economy as a whole. Investors, on the other hand, avoided the oil and gas sector due to years of low shareholder returns, growing debt, and shrinking earnings.

The tables have now reversed, with the once-dominant NASDAQ plummeting and oil stocks emerging as the new FAANG: the Technology Select Sector SPDR ETF is down 24.3 percent year-to-date, while its energy counterpart, the Energy Select Sector SPDR ETF, is up 35.9%. Softbank, the embodiment of the excesses that powered the technology stock boom, announced a loss of roughly 1.71 trillion yen, or $13.2 billion, for the fiscal year ended in March on Thursday. The world’s largest technology investor suffered its greatest loss in its four decades of existence.

Energy investors, on the other hand, are ecstatic, since the black gold rush has fueled record profits. Energy equities presently account for only 4.4 percent of the S&P 500, compared to 28 percent for technology. “We’re not claiming that Energy is set to go back in-line with Tech as it did in the mid-2000s when commodities had a tremendous bull run following the Dot Com crisis,” Fowler adds, “but it’s certainly not impossible either.”

For the first time, the world’s most valuable firm is an energy company: Saudi Aramco, the world’s largest oil company, has surpassed Apple in market value, making the Saudi oil behemoth the most valuable company on the planet. This happened after the company’s stock rose 46.20 riyals, boosting its market worth to $2.464 trillion (9.24 trillion riyals), compared to $2.461 trillion for Apple. But the road back to the top for oil is not without bumps. The market is extremely volatile, and the sector’s near 10% drop on Monday indicates that there is a sizable group of short sellers betting against it.

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Gold drops as investors consider US Inflation data

Gold drops as investors consider US Inflation data

In Asia on Thursday morning, gold was down. Investors are analyzing the US consumer price index (CPI), which showed that inflation is still strong but has peaked in April, alleviating fears about the Federal Reserve raising interest rates more aggressively. By 11:12 p.m. ET, gold futures had fallen 0.01 percent to $1,853.58. (3:13 AM GMT). The dollar rose on Thursday morning, moving in the opposite direction of gold.

Inflation in the United States fell marginally in April, although it remained close to a 40-year high. The CPI increased 0.3 percent month over month in April, the lowest increase since August, according to the US Bureau of Labor Statistics, compared to a 1.2 percent increase in March, the highest increase since September 2005.

The Federal Reserve of the United States hiked its interest rate to 1% last week to combat inflation, the largest increase in 22 years. Investors are fearful that the Fed’s tighter policies would cause a recession. The 10-year US Treasury yield fell to 2.90 percent.

The Producer Price Index and first unemployment claims will be released later today in the United States. On the same day, San Francisco Fed President Mary Daly will speak. Silver has rose 0.1 percent against other precious metals. Palladium slipped 0.7 percent and platinum dropped 0.2 percent.

 

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Gold rates are approaching their lowest in three months, while silver prices are also down

Gold rates are approaching their lowest in three months, while silver prices are also down

Gold prices in plummeted to near three-month lows ahead of the release of monthly US inflation statistics, which experts believe would have an influence on the Federal Reserve’s monetary policy stance. Later in the day, at 6 p.m., the US inflation reading will be released. Gold prices on the MCX were down 0.3 percent to $50,421 per grams, while silver futures were down 0.5 percent to $60,310 per kg. Gold has been under pressure since early March, when the dollar rose against the backdrop of rising US Treasury rates, dampening investor excitement for the safe haven commodity.

The US Federal Reserve hiked its benchmark overnight lending rate by half a percentage point last week, but many analysts are questioning whether it has gone too far in tightening monetary policy. Gold is viewed as an inflation hedge and a safe haven in times of political and economic turmoil, but it is especially vulnerable to increasing short-term US interest rates, which boost the opportunity cost of keeping zero-yield metal.

Spot gold sank to a three-month low in international markets Wednesday, ahead of critical US inflation data. As the dollar index stayed near 20-year highs, spot gold was down 0.3 percent at $1,832.06 per ounce. For holders of foreign currencies, a rising dollar makes greenback-priced bullion less appealing. Spot silver declined 0.1 percent to $21.23 per ounce, while platinum rose 0.1 percent to $964.64 and palladium dropped 1.2 percent to $2,040.25.

“Despite some reprieve in the US dollar and US bond rates, gold and silver prices continued to fall. Tuesday’s morning session saw gold and silver rally a little, but they couldn’t hold on to their gains and slid below important support levels of $1840 for gold and $21.30 for silver. “Gold and silver prices plummeted on Tuesday after a member of the United States Federal Reserve stated aggressive interest rate rises may be implemented to combat inflation.

“The dollar was turbulent on Tuesday, swinging between minor gains as traders awaited the US Consumer Price Index data on Wednesday, which might give insight into the Federal Reserve’s future monetary policy path.” Investors have been in a risk-on attitude, with the yield on the benchmark US 10-year note easing down below the psychological barrier of 3%, after reaching its highest level since 2018 at 3.20 percent “On Monday, I ordered.”

“The support level for gold is $1822-1810, while the resistance level is $1850-1862. The support level for silver is $21.10-20.80, while the resistance level is $21.58-21.70. Silver has support at 60,140-59,750 and resistance at 61,150–61,510 in rupee terms, while gold has support at 50,330–50,110 and resistance at 50,880–51,050 “

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Crude Oil Prices May Fall Further Following Saudi Price Cut

Crude Oil Prices May Fall Further Following Saudi Price Cut

Following a significant overnight decrease, WTI crude oil prices were expected to fall further in Asia-Pacific trade. Bloomberg reported that the European Union is modifying its stance on a potential embargo on Russian oil, which appeared to trigger the most of the selling. Hungary’s objections were the major element preventing the EU from outright banning Russian oil.

Hungary’s Prime Minister, Viktor Orban, has cited security concerns over the ban, which has been in the works for weeks since Germany caved last month. Hungary continues to rely heavily on Russian energy products. The EU has granted exemptions to Hungary and Slovakia, but Mr. Orban has declared that his country would want a five-year exemption as well as cash to overhaul Hungary’s infrastructure.

Meanwhile, fears about the world economy are being fueled by rising prices and China’s economic downturn as a result of its Covid lockdowns. Central banks are undertaking strong moves to battle inflation, attempting to prevent high expectations from getting ingrained in the economy, which would only serve to exacerbate high inflation. Shanghai officials increased limits around the city last week, despite a decline in case numbers.

Saudi Aramco, the country’s state-owned oil company, announced a price cut for June. The increase reduces the premium paid by Asian purchasers from more than $9 per barrel to $4.40 per barrel. The premium paid by the majority of European customers will be cut as well next month. The action indicates that the big OPEC producer expects demand to fall, most likely as a result of the Covid outbreaks in China. Given the uncertainties surrounding China’s Covid issue as well as the current war in Ukraine, a greater pullout seems doubtful.

WTI CRUDE OIL TECHNICAL FORECAST

Prices fell below a significant trendline and the 50-day Simple Moving Average (SMA), indicating a breach below confluent support that has supported oil since December 2021. The 100 psychological level is currently being seen as the most immediate area for potential assistance. A dip below that would bring the 100-day SMA, which is now at 95, into focus.

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Japan's Insurers' Yen Hedge Falls

Japan’s Insurers’ Yen Hedge Falls to Decade Low

Japan’s Insurers’ Yen Hedge Falls to Decade Low

Japanese life insurers have significantly reduced their protection against a strengthening yen to the lowest level in a decade, and they may continue to cut these positions in the coming months.

As of March 31, nine of Japan’s largest life insurers had only 47% of their foreign securities hedged with derivatives to protect against a rising yen, according to earnings reports compiled by Bloomberg. This is the lowest level since September 2011 and a sharp drop from the 63% hedge ratio in March 2020.

This reduction in hedging likely reflects insurers’ expectations that the yen will either weaken further or that any potential strengthening will not substantially erode foreign investment gains in yen terms. Over the past month, the yen has weakened by 1.4% against the dollar, making it the worst performer among the Group-of-10 currencies.

Analysts suggest that the declining trend in currency hedge ratios will continue, as the yield differentials between Japan and other major economies are unlikely to narrow significantly. This perspective diminishes the pressure for yen appreciation.

There are growing concerns that the yen’s weakness is not solely due to yield differentials but also due to significant capital outflows through direct investments. Japan’s economic competitiveness is waning, prompting businesses to invest more overseas.

Interest rate outlooks are also influencing this trend. While central banks in the euro area, Canada, and Switzerland have started to lower key borrowing costs, the Bank of Japan has moved towards normalizing its monetary policy after ending yield curve control and negative interest rates in March. However, a substantial difference in short-term interest rates has kept the cost of currency protection high, making hedged foreign bonds less attractive. For example, ten-year Treasuries yield -1.2% for Japanese investors with currency protection, compared to 4.22% without it.

Most major life insurers are showing little appetite for hedged overseas bonds, opting to either maintain their current holdings or reduce them further. According to their investment plans for the fiscal year ending March 2025, firms like Meiji Yasuda Life Insurance Co. and Taiju Life Insurance Co. plan to increase their holdings of foreign bonds without currency hedging.

Life insurers may continue to hold onto their unhedged foreign bond positions unless there is a significant appreciation of the yen against the dollar, according to Shoki Omori, chief desk strategist at Mizuho Securities Co. in Tokyo.

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Fed Officials Advocate Patience, Hint at Rate Cut Timing

Fed Officials Advocate Patience, Hint at Rate Cut Timing

Fed Officials Advocate Patience, Hint at Rate Cut Timing

On Tuesday, several Federal Reserve officials emphasized the need for more concrete evidence of cooling inflation before considering lowering interest rates. They also provided some insights into when such a move might be expected.

Fed Governor Adriana Kugler indicated that a rate cut could be appropriate “sometime later this year” if economic conditions evolve as she anticipates. Meanwhile, St. Louis Fed President Alberto Musalem suggested it might take “quarters” for the data to justify a cut, highlighting the cautious approach the Fed is taking.

Both New York’s John Williams and Richmond’s Thomas Barkin refrained from offering a specific timeline for a rate reduction. However, they, along with other officials, stressed the importance of economic data in guiding future policy decisions. The Fed has maintained borrowing costs at a two-decade high for nearly a year and appears in no hurry to lower them. Last week, Fed officials projected only one rate reduction for 2024, down from the three initially expected in March.

Earlier this year, inflation unexpectedly rebounded in the first quarter, surprising Fed officials who had observed a significant cooling in price pressures during the latter half of 2023. Despite recent encouraging price data, policymakers remain cautious. Boston Fed President Susan Collins highlighted the importance of not “overreacting to a month or two of promising news.”

When asked about the possibility of one or two rate cuts this year, Collins suggested that scenarios consistent with both could be imagined, although she noted that her view on the extent of easing needed this year has diminished based on the data.

The Fed’s cautious stance was evident in the quarterly projections released last week, with four officials forecasting no cuts in 2024. Musalem noted that he would need to see a period of favorable inflation, moderated demand, and expanding supply before supporting a rate reduction, suggesting this process could take months or even quarters.

Recent economic reports have painted a mixed picture. While employment growth remains strong, consumer spending has tempered, and inflation has cooled following a surprising acceleration in the first quarter. Data published Tuesday showed that US retail sales barely rose in May, with prior months’ figures revised lower, although payrolls surged by 272,000 in the same month.

Kugler expressed confidence that the current monetary policy stance is sufficiently restrictive to cool the economy and bring inflation back towards the 2% target without causing a sharp economic contraction or significant labor market deterioration. This cautious and data-dependent approach underscores the Fed’s commitment to carefully navigating the path toward potential rate cuts.

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Fed's Harker Advocates for Single

Fed’s Harker Advocates for Single Rate Cut in 2024 Based on Economic Forecast

Fed’s Harker Advocates for Single Rate Cut in 2024 Based on Economic Forecast

Patrick Harker, President of the Federal Reserve Bank of Philadelphia, believes that one interest rate cut this year would be suitable, based on his current economic outlook. He emphasized the need for more consistent signs of declining inflation before considering a rate reduction, despite a recent report showing a drop in consumer prices in May.

Harker advocates a cautious approach to monetary policy, suggesting that several months of favorable data would be required before he would support changing interest rates. His comments came during a Q&A session in Philadelphia, following a period in which the Federal Reserve opted to maintain the benchmark rate at its highest in two decades.

The Fed recently revised its rate outlook for 2024, now anticipating only one cut this year, a decrease from the three projected in March. This adjustment aligns with Harker’s views, as he sees potential economic growth slowing yet staying above the trend, with a slight increase in unemployment rates and a gradual return to the 2% inflation target set by the Fed.

Harker outlined possible scenarios where either two rate cuts or none might be necessary within the year, depending on upcoming economic data. Although he does not have a vote on monetary policy this year, he believes the current policy rate has been effective in combating inflation, despite the process being uneven.

He concluded by asserting the effectiveness of maintaining the current high rate for a while longer to help bring inflation back to the desired target and address potential risks. This stance reflects a policy geared towards cautious and data-driven decision-making in the face of ongoing economic uncertainties.

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Japan's Core Machinery Orders Drop in April

Japan’s Core Machinery Orders Drop in April, Sparking Capital Spending Worries

Japan’s Core Machinery Orders Drop in April, Sparking Capital Spending Worries

Japan’s core machinery orders experienced a decline in April for the first time in three months, according to data released by the Cabinet Office on Monday. This development raises concerns about the robustness of capital spending, a critical component for a sustainable economic recovery. The decline follows the Bank of Japan’s (BOJ) recent decision to begin reducing its extensive bond purchases, with a detailed plan expected to be announced next month on managing its nearly $5 trillion balance sheet.

In April, core machinery orders fell by 2.9% month-on-month, slightly better than the 3.1% decline anticipated by economists in a Reuters poll. This drop marks the first decrease in three months for this highly volatile data series, which is often used as a leading indicator of capital spending in the next six to nine months. Despite the decline, the Cabinet Office maintained its assessment that machinery orders are showing signs of picking up.

Japanese companies typically draft substantial spending plans to enhance their factories and equipment but often delay execution due to economic uncertainties. The ongoing weakening of the yen has not significantly boosted domestic capital investment, as Japanese firms prefer to invest directly overseas where demand is stronger. This trend has further complicated the domestic capital spending outlook.

Breaking down the data by sector, core orders from manufacturers plummeted by 11.3% month-on-month in April, a stark contrast to the 19.4% increase observed in March. On the other hand, core orders from non-manufacturers rose by 5.9% in April, recovering from an 11.3% decline in the previous month. This mixed performance across sectors highlights the uneven nature of the recovery in capital spending.

On a year-on-year basis, core machinery orders increased by a modest 0.7% in April. This slight annual gain underscores the challenges faced by the Japanese economy as it navigates through a complex landscape of domestic and international economic factors. The upcoming detailed plan from the BOJ on reducing its bond holdings will be closely watched for its potential impact on capital spending and overall economic recovery.

As Japan continues to grapple with these economic challenges, the latest machinery orders data serves as a reminder of the fragile nature of its capital spending and the need for continued vigilance in economic policy and investment strategies.

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US CPI Steady in May Ahead of Fed Decision

US CPI Steady in May Ahead of Fed Decision

US CPI Steady in May Ahead of Fed Decision

The Bureau of Labor Statistics (BLS) is set to release the eagerly awaited Consumer Price Index (CPI) inflation data for May on Wednesday at 12:30 GMT. This report is highly significant as it could trigger substantial volatility in the US Dollar, with any unexpected figures potentially influencing the market’s expectations regarding a Federal Reserve (Fed) interest rate cut in September.

Expectations for May CPI Data Inflation in the US, as measured by the CPI, is projected to rise at an annual rate of 3.4% in May, maintaining the same pace as observed in April. The core CPI, which excludes volatile food and energy prices, is anticipated to be at 3.5%, slightly down from the 3.6% recorded in April. On a monthly basis, the CPI is expected to increase by 0.1% in May, compared to a 0.3% rise in April, while the core CPI is likely to hold steady at 0.3%.

Market Sentiment and Fed’s Stance Federal Reserve Chairman Jerome Powell recently adopted a more cautious tone on the interest rate outlook, indicating that confidence in inflation returning to lower levels is not as strong as before. This dovish stance aligns with the softening of headline and core CPI inflation seen in April. However, recent US business activity and employment data had reinforced market expectations for a Fed rate cut in September until a robust labor market report shifted sentiment.

The latest Nonfarm Payrolls data showed an increase of 272,000 jobs in May, significantly exceeding the forecasted 185,000 jobs. Additionally, Average Hourly Earnings rose by 4.1% year-over-year, surpassing expectations. This data suggested continued tightness in the labor market and rising wage inflation, which tempered bets on a September rate cut. According to the CME Group’s Fed Watch Tool, the probability of a 25 basis points rate cut in September dropped from 55% to 43% after the labor market report, with markets now pricing a roughly even chance of two rate cuts by the end of 2024.

Implications for EUR/USD The reaction of the EUR/USD to the upcoming CPI data could be significant. A monthly core CPI increase of 0.3% or higher could bolster market confidence in the Fed extending its pause on rate hikes, especially after strong labor market data. This scenario would likely strengthen the US Dollar against major currencies. Conversely, a lower-than-expected core inflation figure, around 0.1%, could renew hopes for a continued disinflationary trend and reinforce expectations for a September rate cut, potentially leading to a USD sell-off.

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BOJ May Consider Reducing Bond Purchases

BOJ May Consider Reducing Bond Purchases as Rate Hike Approaches

BOJ May Consider Reducing Bond Purchases as Rate Hike Approaches

The Bank of Japan (BOJ) is anticipated to discuss reducing its bond purchases at a policy meeting concluding on Friday, with expectations also set for preparations to increase interest rates as early as next month.

All but one economist in a Bloomberg survey expect the BOJ to maintain its policy rate between 0 and 0.1% after the two-day meeting. However, a majority foresee a decision to decrease monthly bond purchases from approximately ¥6 trillion ($38.6 billion). Discussions earlier in the month suggested that the BOJ might consider the timing suitable for slowing down bond buying.

Such a move would signify the BOJ’s initial firm steps towards quantitative tightening, having shifted from its extensive stimulus strategy in March. Although the BOJ states it does not aim to control foreign exchange rates, a reduction in bond purchases or a definite move towards more restrictive policy could help alleviate the ongoing depreciation of the yen.

Amid these expectations, upcoming U.S. data is projected to reveal a slowdown in inflation for May. The Federal Reserve is also expected to maintain its current interest rates, with focus on any new signals from Chair Jerome Powell regarding future rate cuts.

The challenges for BOJ Governor Kazuo Ueda are mounting, as he seeks to balance bond purchase reductions without causing undue market disruption. In his previous press conference in April, Ueda’s nonchalant remarks on the yen’s strength led to the currency hitting a 34-year low, resulting in significant intervention by the finance ministry.

The BOJ has been closely monitored for its bond buying strategy, especially after a market shake-up on May 13 when it reduced its purchases, followed by a lack of sellers in a subsequent operation—a first since 2013. With bond redemptions expected to reach ¥71.4 trillion this year, a monthly purchase rate below ¥5.95 trillion would imply a decline in the BOJ’s bond holdings, aligning with quantitative tightening.

Economists are split on how the BOJ will approach the reduction of its bond buying, with some predicting a slowdown of ¥1 trillion per month, while others anticipate a more cautious initial reduction. Many expect the BOJ to soon outline a formal plan for decreasing its bond purchases.

With the yen remaining weak, there is growing speculation that the BOJ might raise its policy rate in July, marking its second rate hike in 17 years. Observers are keenly awaiting any indications from Ueda at this week’s meeting, with one-third of surveyed economists predicting a rate hike in July, up from 19% in April. Ueda is expected to strike a careful balance in his statements to avoid triggering a spike in yields alongside the planned bond purchase reduction.

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Australian PM's Support Falls After Weak GDP Growth

Australian PM’s Support Falls After Weak GDP Growth

Australian PM’s Support Falls After Weak GDP Growth

Support for Australia’s center-left Labor government has slumped following a week of unfavorable economic news and political tensions over immigration, according to a new poll. Prime Minister Anthony Albanese’s party has hit its lowest point since winning power two years ago.

A Newspoll survey published by The Australian newspaper on Sunday revealed that 50% of Australian voters support the Labor government on a two-party preferred basis, while the other 50% lean toward the center-right Liberal National Coalition. This represents Albanese’s worst polling result since November and marks a significant decline from the strong support his government enjoyed shortly after being elected in May 2022. The prime minister’s net satisfaction rating has also dropped to -7, down from a net rating of 0. 

Meanwhile, opposition leader Peter Dutton has seen a boost in popularity, though he still trails Albanese as the preferred prime minister.Australia is scheduled to hold an election within twelve months, adding urgency to the political landscape. The drop in support for the Albanese government follows a challenging week, highlighted by disappointing economic data. Last week, new figures showed Australia’s economy grew by just 0.1% in the first quarter of 2024, falling short of economists’ expectations. On a year-on-year basis, the gross domestic product (GDP) grew by 1.1%, which also missed estimates.

This represented the weakest economic growth outside of the COVID-19 pandemic since the first quarter of 1992, when the country was emerging from a recession. Treasurer Jim Chalmers defended the government’s decision to increase spending in the May budget, describing the growth as “flat.”

Additionally, the Albanese government faced political scrutiny after April’s monthly inflation figures indicated that inflation was more persistent than anticipated. The past week also saw the government defending its immigration policies. The opposition accused Labor of weakening deportation directives at the behest of the New Zealand government. Following intense debate in Parliament, Immigration Minister Andrew Giles issued new directives on Friday, emphasizing community safety.

These combined factors have contributed to the decline in support for the Albanese government, leaving the political climate increasingly contentious as the next election approaches.

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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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