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Daily Pivots: (S1) 147.09; (P) 148.21; (R1) 149.11; More...

Intraday bias in USD/JPY remains on the downside for the moment. Fall from 158.86, as the third leg of the corrective pattern from 161.94 high, is in progress for 61.8% retracement of 139.57 to 158.86 at 146.32. Sustained break there will pave the way back to 139.57 low. On the upside, 149.32 minor resistance will turn intraday bias neutral and bring consolidations again, before staging another fall.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). In case of another fall, strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 0.8800; (P) 0.8863; (R1) 0.8900; More…

Intraday bias in USD/CHF remains on the downside for the moment. Rise from 0.8374 should have completed at 0.9222, after rejection by 0.9223 key resistance. Deeper fall should be seen to 61.8% retracement of 0.8374 to 0.9200 at 0.8690 next. On the upside, above 0.8924 minor resistance will turn intraday bias neutral first. But rise will now stay on the downside as long as 0.9035 resistance holds, in case of recovery.

In the bigger picture, rejection by 0.9223 key resistance keep medium term outlook bearish. That is, larger fall from 1.0342 (2017 high) is not completed yet. Firm break of 0.8332 (2023 low) will confirm down trend resumption.

Risk sentiment in the forex markets appears to be tilting towards risk aversion in Asian trading, marking a shift from the broad Dollar selloff earlier in the week. Overnight, US President Donald Trump granted temporary tariff exemptions for Canadian and Mexican goods under the USMCA, delaying a full-scale implementation until April 2. While this provided some relief for Canadian Dollar, overall market sentiment remained fragile, with major US equity indexes closing in the red, led by losses in NASDAQ.

The temporary exemption covers roughly 50% of Mexican imports and 38% of Canadian imports. However, Trump's move has done little to inspire confidence, as markets remain skeptical about his erratic trade policies. Investors have become wary of his inconsistent messaging—one day insisting on strict tariff enforcement, the next day granting exemptions. This unpredictability has left traders cautious, unsure of how to position for potential future shifts in trade policy.

Despite the tariff delay, risk-sensitive currencies like Australian and New Zealand Dollars have come under renewed selling pressure in Asia. The broader market focus has shifted toward the April 2 deadline, when Trump’s proposed “reciprocal tariffs” are set to take effect. These tariffs will target foreign nations that impose import taxes on US goods, keeping trade war fears firmly in play.

Adding to market unease is the upcoming US non-farm payrolls report. With sentiment already on shaky ground, any significant weakness in the jobs data could deepen risk aversion. While a weaker NFP might increase expectations for a Fed rate cut, traders are growing concerned that deteriorating labor market conditions could signal a sharper economic slowdown. This dynamic suggests that even rising Fed cut bets may not be enough to offset broader recession fears.

So far for the week, Dollar remains the worst-performing currency, struggling to find any solid footing. Canadian Dollar follows closely as the second weakest, alongside Australian Dollar. On the stronger side, Euro continues to outperform, driven by optimism over fiscal expansion plans in Europe. Sterling and Swiss Franc are also holding firm, while Yen and Kiwi are settling in the middle.

In Asia, the time of writing, Nikkei is down -2.07%. Hong Kong HSI is down -0.06%. China Shanghai SSE is up 0.15%. Singapore Strait Times is down -0.01%. Japan 10-year JGB yield is up 0.023 at 1.535. Overnight, DOW fell -0.99%. S&P 500 fell -1.78%. NASDAQ fell -2.61%. 10-year yield rose 0.021 to 4.286.

NFP in focus: NASDAQ and S&P 500 at risk of deeper correction

US markets are standing on precarious footing, with investors attention on the February non-farm payrolls report due later in the day. There has been noticeable anxieties surrounding the impact of fiscal and trade policies changes. A set of weaker-than-expected NFP data could be taken as another signal of swift deceleration in the economy and rattle market sentiment further.

Cooldown in the job market might prompt Fed to resume rate cuts earlier. Markets are currently pricing in 53% chance of a 25bps rate cut in March, reflecting growing belief that Fed will need to act sooner rather than later. However, the immediate market response to downside surprises may not be relief over monetary easing but rather heightened concerns about the pace of economic weakening, given recent policy uncertainties and trade disruptions.

Markets anticipate 156k increase in NFP for February, up from 143k in January. The unemployment rate is forecast to remain at 4.0%, while average hourly earnings should hold steady at 0.3% m/m.

The latest indicators paint a mixed picture: ISM Manufacturing PMI Employment subindex dropped to 47.6 from 50.3, while ISM Services PMI Employment inched up to 53.9 from 52.3. Meanwhile, ADP Employment reading of 77k missed last month’s 186k, and the 4-week moving average of jobless claims rose to 224k—its highest level so far this year.

Technically, NASDAQ has been sliding for two consecutive weeks, now testing its 55-week EMA at 17,874.13. A decisive break below this level would confirm that the index is at least in a correction relative to the broader uptrend from the 10,088.82 low in 2022. The next key support to watch is the 38.2% Fibonacci retracement of 10,088.82 to 20,204.58, which comes in at 16,340.36. Extended losses here could set a negative tone for broader U.S. equities.

The S&P 500, still trading comfortably above its 55-week EMA at 5,590.31, may follow in the NASDAQ’s footsteps if sentiment sours further. Should the index breach this EMA convincingly, it would likely confirm that the fall from 6,147.43 is a correction of the uptrend from the 3,491.58 low in 2022. This scenario would set a 38.2% retracement target around 5,132.89, marking a significant downside pivot.

Overall, whether today’s NFP meets, misses, or exceeds expectations, the market’s reaction will hinge on how investors interpret the labor data in the context of looming trade uncertainties and weakening growth momentum. A softer reading could drive near-term Fed cut bets higher but might also deepen concerns that the U.S. economy is losing steam, thereby raising the stakes for traders and policymakers alike.

Technically, NASDAQ is now eyeing 55 W EMA (now at 17874.13) with the extended decline in the past two weeks. Sustained break there will confirm that it's at least in correction to the up trend from 10088.82 (2022 low). Next target will be 38.2% retracement of 10088.82 to 20204.58 at 16340.36.

Extended selloff in NASDAQ could be a prelude to the similar development in S&P 500. While it's still well above 55 W EMA (now at 5590.31), sustained break there will align the outlook with NASDAQ. Fall from 6147.43 would then be correcting the up trend from 3491.58 (2022 low) at least, and target 38.2% retracement of 3491.58 to 6147.43 at 5132.89.

Fed’s Waller: No immediate rate cut, but open to future easing

Fed Governor Christopher Waller suggested that another rate cut at the next FOMC meeting is unlikely, but he remains open to further easing down the line.

“I would’t say at the next meeting, but could certainly see [cuts] going forward," he noted. Waller particularly highlighted the February inflation report and the evolving impact of trade policies as key factors in shaping the Fed’s outlook.

Waller acknowledged the challenges in assessing the economic effects of tariffs, citing changing economic conditions and President Trump’s harder trade stance as factors complicating policy decisions.

He noted that evaluating the impact of tariffs is more difficult this time, adding, “It’s very hard to eat a 25% tariff out of the profit margins.”

Fed’s Bostic: Economy in flux, no rush to adjust policy

Atlanta Fed President Raphael Bostic emphasized the high level of uncertainty in the US economy due to evolving policies under the Trump administration. With inflation, trade policies, and government spending all in flux, he suggested that meaningful clarity may not emerge until "late spring or summer". Given this, he reiterated "We'll have to just sort of really be patient."

Speaking overnight, he described the situation as being in "incredible flux," with rapid shifts in trade and fiscal policies making it difficult to predict economic trends. Given this backdrop, Bostic urged caution, stating, "You've got to be patient and not want to get too far ahead."

He noted that just this week, there have been significant swings in expectations regarding economic policy. "If I was waiting before to see and get a clear signal about where the economy is going to go, I'm definitely waiting now," he said.

BoE’s Mann: Larger rate cuts needed as global spillovers worsen

BoE MPC member Catherine Mann argued that recent monetary policy actions have been overshadowed by “international spillovers.” Financial market volatility, particularly from cross-border shocks, has disrupted traditional policy signals, making "founding premise for a gradualist approach to monetary policy is no longer valid".

Mann said that larger rate cuts, like the 50bps reduction she supported at the last BoE meeting, would better "cut through this turbulence" and provide clearer guidance to the economy.

She believes that a more decisive policy stance would help steer inflation expectations and stabilize economic conditions, rather than allowing uncertainty to linger with smaller, incremental moves.

Despite her stance, the BoE opted for a smaller 25bps rate cut in its latest decision, with Mann and dovish member Swati Dhingra being outvoted 7-2.

China’s exports rise 2.3% yoy, imports fall -8.4% yoy

China’s exports rose just 2.3% yoy to USD 539.9B in the January–February period, coming in below forecasts of 5.0% yoy and down sharply from December’s 10.7% yoy.

Meanwhile, imports sank -8.4% yoy to USD 369.4B, missing expectations of 1.0% yoy growth and marking a noticeable drop from December’s 1.0% yoy.

As a result, trade balance resulted in USD 170.5B surplus exceeding projections of USD 147.5B.

Looking ahead

Germany factory orders, Swiss foreign currency reserves and Eurozone GDP revision will be released in European session. Later in the day, Canada employment will also be published alongside US NFP.

USD/CHF Daily Outlook

Daily Pivots: (S1) 0.8800; (P) 0.8863; (R1) 0.8900; More…

Intraday bias in USD/CHF remains on the downside for the moment. Rise from 0.8374 should have completed at 0.9222, after rejection by 0.9223 key resistance. Deeper fall should be seen to 61.8% retracement of 0.8374 to 0.9200 at 0.8690 next. On the upside, above 0.8924 minor resistance will turn intraday bias neutral first. But rise will now stay on the downside as long as 0.9035 resistance holds, in case of recovery.

In the bigger picture, rejection by 0.9223 key resistance keep medium term outlook bearish. That is, larger fall from 1.0342 (2017 high) is not completed yet. Firm break of 0.8332 (2023 low) will confirm down trend resumption.

US markets are standing on precarious footing, with investors attention on the February non-farm payrolls report due later in the day. There has been noticeable anxieties surrounding the impact of fiscal and trade policies changes. A set of weaker-than-expected NFP data could be taken as another signal of swift deceleration in the economy and rattle market sentiment further.

Cooldown in the job market might prompt Fed to resume rate cuts earlier. Markets are currently pricing in 53% chance of a 25bps rate cut in March, reflecting growing belief that Fed will need to act sooner rather than later. However, the immediate market response to downside surprises may not be relief over monetary easing but rather heightened concerns about the pace of economic weakening, given recent policy uncertainties and trade disruptions.

Markets anticipate 156k increase in NFP for February, up from 143k in January. The unemployment rate is forecast to remain at 4.0%, while average hourly earnings should hold steady at 0.3% m/m.

The latest indicators paint a mixed picture: ISM Manufacturing PMI Employment subindex dropped to 47.6 from 50.3, while ISM Services PMI Employment inched up to 53.9 from 52.3. Meanwhile, ADP Employment reading of 77k missed last month’s 186k, and the 4-week moving average of jobless claims rose to 224k—its highest level so far this year.

Technically, NASDAQ has been sliding for two consecutive weeks, now testing its 55-week EMA at 17,874.13. A decisive break below this level would confirm that the index is at least in a correction relative to the broader uptrend from the 10,088.82 low in 2022. The next key support to watch is the 38.2% Fibonacci retracement of 10,088.82 to 20,204.58, which comes in at 16,340.36. Extended losses here could set a negative tone for broader U.S. equities.

The S&P 500, still trading comfortably above its 55-week EMA at 5,590.31, may follow in the NASDAQ’s footsteps if sentiment sours further. Should the index breach this EMA convincingly, it would likely confirm that the fall from 6,147.43 is a correction of the uptrend from the 3,491.58 low in 2022. This scenario would set a 38.2% retracement target around 5,132.89, marking a significant downside pivot.

Overall, whether today’s NFP meets, misses, or exceeds expectations, the market’s reaction will hinge on how investors interpret the labor data in the context of looming trade uncertainties and weakening growth momentum. A softer reading could drive near-term Fed cut bets higher but might also deepen concerns that the U.S. economy is losing steam, thereby raising the stakes for traders and policymakers alike.

Technically, NASDAQ is now eyeing 55 W EMA (now at 17874.13) with the extended decline in the past two weeks. Sustained break there will confirm that it's at least in correction to the up trend from 10088.82 (2022 low). Next target will be 38.2% retracement of 10088.82 to 20204.58 at 16340.36.

Extended selloff in NASDAQ could be a prelude to similar development in S&P 500. While it's still well above 55 W EMA (now at 5590.31), sustained break there will align the outlook with NASDAQ. Fall from 6147.43 would then be correcting the up trend from 3491.58 (2022 low) at least, and target 38.2% retracement of 3491.58 to 6147.43 at 5132.89.

China’s exports rose just 2.3% yoy to USD 539.9B in the January–February period, coming in below forecasts of 5.0% yoy and down sharply from December’s 10.7% yoy.

Meanwhile, imports sank -8.4% yoy to USD 369.4B, missing expectations of 1.0% yoy growth and marking a noticeable drop from December’s 1.0% yoy.

As a result, trade balance resulted in USD 170.5B surplus exceeding projections of USD 147.5B.

Atlanta Fed President Raphael Bostic emphasized the high level of uncertainty in the US economy due to evolving policies under the Trump administration. With inflation, trade policies, and government spending all in flux, he suggested that meaningful clarity may not emerge until "late spring or summer". Given this, he reiterated "We'll have to just sort of really be patient."

Speaking overnight, he described the situation as being in "incredible flux," with rapid shifts in trade and fiscal policies making it difficult to predict economic trends. Given this backdrop, Bostic urged caution, stating, "You've got to be patient and not want to get too far ahead."

He noted that just this week, there have been significant swings in expectations regarding economic policy. "If I was waiting before to see and get a clear signal about where the economy is going to go, I'm definitely waiting now," he said.

Key Highlights

• USD/JPY extended losses and traded below the 149.20 support.
• A key bearish trend line is forming with resistance at 149.30 on the 4-hour chart.
• GBP/USD surged above the 1.2800 and 1.2850 resistance levels.
• The US nonfarm payrolls could change by 160K in Feb 2025.

USD/JPY Technical Analysis

The US Dollar remained in a bearish zone below 150.00 against the Japanese Yen. USD/JPY extended losses below 149.20 to move further in a bearish zone.

Looking at the 4-hour chart, the pair settled below the 149.20 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). The pair even dived below the 148.50 support zone.

It tested the 147.30 zone. On the downside, immediate support sits near the 147.20 level. The next key support sits near the 146.50 level. Any more losses could send the pair toward the 145.00 level.

On the upside, the pair seems to be facing hurdles near the 148.25 level. The next major resistance is near the 148.50 level. The main resistance is now forming near the 149.20 zone. There is also a key bearish trend line forming with resistance at 149.30 on the same chart.

A close above the 149.30 level could set the tone for another increase. In the stated case, the pair could even clear the 150.00 resistance.

Looking at GBP/USD, the pair also started a decent increase and the pair even cleared the 1.2850 resistance zone.

Upcoming Economic Events:

• US nonfarm payrolls for Feb 2025 – Forecast 160K, versus 143K previous.
• US Unemployment Rate April 2025 - Forecast 4.0%, versus 4.0% previous.

Fed Governor Christopher Waller suggested that another rate cut at the next FOMC meeting is unlikely, but he remains open to further easing down the line.

“I would’t say at the next meeting, but could certainly see [cuts] going forward," he noted. Waller particularly highlighted the February inflation report and the evolving impact of trade policies as key factors in shaping the Fed’s outlook.

Waller acknowledged the challenges in assessing the economic effects of tariffs, citing changing economic conditions and President Trump’s harder trade stance as factors complicating policy decisions.

He noted that evaluating the impact of tariffs is more difficult this time, adding, “It’s very hard to eat a 25% tariff out of the profit margins.”

BoE MPC member Catherine Mann argued that recent monetary policy actions have been overshadowed by “international spillovers.” Financial market volatility, particularly from cross-border shocks, has disrupted traditional policy signals, making "founding premise for a gradualist approach to monetary policy is no longer valid".

Mann said that larger rate cuts, like the 50bps reduction she supported at the last BoE meeting, would better "cut through this turbulence" and provide clearer guidance to the economy.

She believes that a more decisive policy stance would help steer inflation expectations and stabilize economic conditions, rather than allowing uncertainty to linger with smaller, incremental moves.

Despite her stance, the BoE opted for a smaller 25bps rate cut in its latest decision, with Mann and dovish member Swati Dhingra being outvoted 7-2.

Parallels between the current situation and the late 2010s highlight the risks of undershooting the inflation target should a major global shock hit – something that is all too plausible now.

The national accounts and other recent key data have broadly tracked as expected. Growth is starting to improve as household incomes recover, though only modestly. Inflation and wages growth continue to decline a little faster than previously expected. Productivity growth disappointed and the labour market remained tight, both partly driven by the expansion in the care economy. Some elements of this set of outcomes are reminiscent of the period immediately before the pandemic. There are also important differences, and it might seem like B.C. (Before COVID) is ancient history. So this is probably a case of history rhyming rather than repeating. The parallels with those years may nonetheless point to some important risks around the outlook.

The late 2010s were not a great time for the Australian economy. Growth was disappointing, and inflation persistently undershot the RBA’s 2–3% target range, despite very low interest rates. Household demand was weak, with a rising tax take squeezing household incomes as the then federal government engaged in fiscal consolidation. Productivity growth was extremely weak in 2017/18 and 2018/19: as a graph in a recent speech by RBA Head of Economic Analysis Michael Plumb showed, much weaker than in the years either side of those two. And like the most recent few months, labour force participation reached a new peak in 2019, at the time the highest rate since records began in 1910.

Along with the drag from tax and fiscal consolidation, a few underlying causes of the sogginess in the late 2010s data suggest themselves. First, with wages growth low and high participation rates making labour plentiful, there just wasn’t much incentive for firms to economise on labour-saving technology, so of course labour productivity growth lagged. Second, the non-mining part of the economy had been squeezed to fit the mining investment boom. That boom was well and truly rolling off by 2018 – WA was effectively in recession. However, the rest of the economy simply could not bounce back quickly enough to fill the gap.

Turning to the current situation, we could see a similar failure to bounce back occurring as the ramp-up in the care economy ends. That suggests a risk to growth beyond the very near term. Judging by the minutes of its February meeting, the RBA Board seems to be alive to this risk. More broadly, the minutes seem to hint that the Board put more weight on the downside risks to growth beyond the very near term than the staff did. And whether they saw the parallels with the pre-pandemic period or not, the Board also seemed to understand the risks of undershooting the target when inflation had already surprised on the downside.

That risk of undershooting also helped drive the Board’s decision to cut the cash rate in February. The minutes and the Deputy Governor’s speech this week both described the results of a scenario where the cash rate was held unchanged at 4.35%, and inflation settled between 2.3% and 2.5%. This result was first noted in Deputy Governor Hauser’s Bloomberg TV interview, and the RBA probably wishes it was included in the Statement on Monetary Policy in the first place. It would certainly have clarified the explanation of the decision to cut despite not agreeing with the market path.

Notice, though, that the base-case was the staff forecasts, which are not entirely model-driven, while the ‘red swathe’ of the unchanged-rates scenario was the span of two very different economic models. So while the difference between 2.7% with 90bp of cuts and roughly 2.3% with no cuts seems like a lot of inflation sensitivity relative to history, perhaps the answer is that the staff forecast using the market path involved some upward judgement that the models did not incorporate.

All of this smacks of fine-tuning, as we have previously discussed. In his speech this week, Deputy Governor Hauser acknowledged the point and – as we had also highlighted – conceded that this was an outworking of the wording of the latest Statement on the Conduct of Monetary Policy. He also repeated the Governor’s comment in Parliament that aiming for the exact midpoint of the target range maximises the chances of actually landing in that range. This, too, is reminiscent of the late 2010s, when some commentators advocated ever more aggressive monetary policy action (fiscal and other levers never came into the discussion) to get inflation right to the midpoint.

As is usually the case though, this interpretation is based on a few unstated assumptions. First, it assumes that the risks around that forecast are symmetric. This is far from assured. Second, it assumes that the base-case forecast is unbiased. A bias need not be intentional: forecasting is hard, models are imperfect, and it is possible that when the wind blows one way, the monetary policy gunsight veers off-centre and needs correction.

Third, it assumes that the appropriate horizon over which to hit the target is the existing forecast horizon. But the length of the forecast horizon is typically determined by how far out your current (or past) approach produces reasonable forecasts. It could also be the optimal horizon to return inflation exactly to 2½% following a shock, taking the nature and duration of the shock and all other policy considerations into account. But if it were, that would be quite a coincidence.

With all those caveats in mind, the reality is that a lot of energy is going into finessing the last 0.2ppt of disinflation. As Deputy Governor Hauser also acknowledged this week, there are plenty of other uncertainties facing Australia that are way bigger than this one. This week marked the moment the US-led trade war went live, along with a major geopolitical realignment around Ukraine. Confidence in the US is already starting to crack, as both financial markets and consumer surveys show. That said, Australia is a small direct target for US tariff policy, and China is likely to stimulate its own economy to offset the tariff hit. The situation is incredibly fluid, though, and – more likely than not – negative for global growth. One wonders if an institution focused on fine-tuning will pivot quickly enough should the situation require it.