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Daily Pivots: (S1) 148.85; (P) 150.17; (R1) 150.93; More...

Intraday bias in USD/JPY remains neutral for consolidations above 149.26 temporary low. Outlook will stay bearish as long as 154.79 resistance holds. Fall from 158.86 is currently seen as the third leg of the pattern from 161.94 high. Break of 149.26 will target 61.8% retracement of 139.57 to 158.86 at 146.32 next.

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) 0.8953; (P) 0.9003; (R1) 0.9031; More…

Consolidations from 0.9200 is still in progress and intraday bias stays neutral. While deeper pull back might be seen, outlook will stay mildly bullish as long as 38.2% retracement of 0.8374 to 0.9200 at 0.8884 holds. On the upside, firm break of 0.9223 key resistance will carry larger bullish implication. However, sustained break of 0.8884 will indicate bearish reversal, and target 61.8% retracement at 0.8690 instead.

In the bigger picture, decisive break of 0.9223 resistance will argue that whole down trend from 1.0342 (2017 high) has completed with three waves down to 0.8332 (2023 low). Outlook will be turned bullish for 1.0146 resistance next. Nevertheless, rejection by 0.9223 will retain medium term bearishness for another decline through 0.8332 at a later stage.

Daily Pivots: (S1) 1.2552; (P) 1.2597; (R1) 1.2631; More...

Intraday bias in GBP/USD remains on the upside for the moment. Current rally from 1.2099 should target 1.2810 resistance. Firm break there should target 61.8% retracement of 1.3433 to 1.2099 at 1.2923 next. On the downside, below 1.2562 minor support will turn intraday bias neutral again first. But another rise will remain in favor as long as 1.2331 support holds, in case of retreat.

In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

Daily Pivots: (S1) 1.0446; (P) 1.0475; (R1) 1.0532; More...

Outlook in EUR/USD remains unchanged despite today's mild dip. Consolidation from 1.0176 is still extending and intraday bias remains neutral. Stronger rebound might be seen but outlook will remain bearish as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds. On the downside, break of 1.0176 will resume whole fall from 1.1213. However, decisive break of 1.0572 will raise the chance of reversal, and target 61.8% retracement at 1.0817.

In the bigger picture, immediate focus is on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, reversal from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

Trading is rather subdued in the forex markets today, with most major pairs and crosses stuck within yesterday’s range. Loonie failed to react to significantly stronger-than-expected retail sales data. Euro dipped earlier following weak PMI reports, but selling pressure quickly fizzled out. Yen saw some volatility during the Asian session, initially weakening alongside Japanese bond yields after BoJ Governor Kazuo Ueda’s comments, but selling was short-lived.

For the week so far, Yen remains the strongest performer, although it could now pause for consolidation after its recent rally. Sterling pound ranks second, followed by Aussie. On the weaker side, Euro has slipped to the bottom, just below Loonie and Dollar. However, the gap between the three remains tight, leaving room for shifts before the weekly close. Meanwhile, Swiss Franc and Kiwi are positioning in the middle.

In Europe, at the time of writing, FTSE is up 0.02%. DAX is up 0.29%. CAC is up 0.52%. UK 10-year yield is up 0.0044 at 4.619. Germany 10-year yield is down -0.0478 at 2.492.Earlier in Asia, Nikkei rose 0.26%. Hong Kong HSI rose 3.99%. China Shanghai SSE rose 0.85%. Singapore Strait Times rose 0.06%. Japan 10-year JGB yield fell -0.0229 to 1.428.

Canada's retail sales surge in 2.5% mom Dec, but Jan set for pullback

Canada’s retail sales jumped 2.5% mom to CAD 69.6B in December, far surpassing market expectations of 1.6% mom. Sales increased across all nine subsectors, with the strongest contributions from food and beverage retailers and motor vehicle and parts dealers.

In volume terms, retail sales also rose 2.5% mom, indicating that the increase was not solely due to price effects.

For Q4, retail sales climbed 2.4% qoq, marking the second consecutive quarterly gain. Adjusted for inflation, sales volumes rose 1.8% qoq.

However, momentum may have slowed at the start of 2025. Advance estimate for January suggests retail sales declined by -0.4% mom.

Eurozone PMI manufacturing rises to 47.3, but services falls to 50.7

Eurozone Manufacturing PMI improved from 46.6 to 47.3 in February, a nine-month high. However, Services PMI declined to 50.7 from 51.3, dragging Composite PMI flat at 50.2, indicating near stagnant overall growth.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, highlighted that services sector price pressures remain elevated, creating complications for the ECB ahead of its next meeting. Persistent wage growth and rising input costs in manufacturing, driven by energy prices, add to inflationary risks.

Regionally, France’s services sector led the slowdown, with business activity deteriorating at an accelerated pace since September. In contrast, Germany maintained modest growth, supported by expectations of greater political stability ahead of its federal elections.

UK PMI composite dips to 50.5, stagflation dilemma for BoE

UK’s PMI Manufacturing dropped from 48.3 to 46.4 in February, a 14-month low. PMI Services edged up slightly to 51.1 from 50.8, while Composite PMI dipped to 50.5 from 50.6, indicating minimal overall growth.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that business activity remained "largely stalled" for the fourth straight month, with job losses accelerating amid declining sales and rising costs. He cautioned that the combination of stagnant growth and mounting price pressures is creating a "stagflationary environment," presenting a "growing dilemma" for BoE.

A primary driver of inflationary pressure is the increase in firms raising prices to offset rising staff costs tied to the National Insurance hike and minimum wage increase announced in the autumn Budget. However, these same fiscal measures have also exacerbated job cuts, with employment falling at its fastest pace since the global financial crisis, excluding the pandemic period.

UK retail sales rebound sharply by 1.7% mom in Jan

UK retail sales volumes surged 1.7% mom in January, far exceeding market expectations of 0.3% m/m, marking a strong recovery from December’s -0.6% mom decline.

This sharp rebound pushed monthly sales index levels to their highest since August 2024.

However, the broader trend remains mixed. Over the three months to January 2025, sales volumes declined by -0.6% compared to the previous three months. On a year-over-year basis, sales volumes rose 1.4%, showing some improvement in spending patterns compared to early 2024.

Despite the monthly rebound, UK retail sales volumes remain -1.3% below pre-pandemic levels from February 2020.

BoJ's Ueda pledges action against sharp JGB yield rise, Yen tumbles

Yen pulled back sharply from its recent rally, along with steep fall in 10-year JGB yield from its 15-year high. The move came after BoJ Governor Kazuo Ueda reminded markets of the central bank’s commitment to curbing excessive yield volatility.

In parliamentary comments, Ueda stated, “We expect long-term interest rates to fluctuate to some extent.”

However, he cautioned that "when markets make abnormal moves and lead to a sharp rise in yields, we are ready to respond nimbly to stabilize markets.”

The pledge to increase bond purchases, if necessary, knocked the 10-year JGB yield off its 15-year high

Ueda declined to specify when BoJ might conduct emergency bond market operations, stating only that the central bank would closely monitor the market for signs of destabilization.

Japan's core CPI jumps to 3.2% in Jan, above expectations

Japan’s inflation accelerated in January, with core CPI (ex-food) rising from 3.0% yoy to 3.2% yoy, surpassing expectations of 3.1% yoy and marking the fastest pace in 19 months, driven by higher rice and energy costs.

This was also the third consecutive month of acceleration, with core CPI rebounding sharply from 2.3% yoy in October. Inflation has now remained at or above BoJ’s 2% target since April 2022.

Core-core CPI (ex-food and energy) climbed to 2.5% yoy, up from 2.4% yoy, signaling broader price pressures beyond energy and food. Food prices, excluding perishables, surged 5.1% yoy, up from 4.4% yoy, driven by a 70.9% yoy spike in rice prices, the largest increase since data collection began in 1971. This sharp rise was attributed to supply shortages and higher production and transportation costs.

Energy prices also saw a notable increase of 10.8% yoy, up from 10.1% yoy in December, as gasoline costs rose following government subsidy reductions. Meanwhile, services inflation slowed slightly to 1.4% yoy from 1.6% yoy.

Headline CPI surged from 3.6% yoy to 4.0% yoy, a two-year high.

Japan’s PMI improves, but business confidence hits lowest since 2021

Japan’s PMI data for February showed slight improvements, with PMI Manufacturing rising from 48.7 to 48.9. Meanwhile, PMI Services edged up from 53.0 to 53.1. Composite PMI increased from 51.1 to 51.6, the highest in five months.

According to Usamah Bhatti, Economist at S&P Global Market Intelligence, the "modest improvement" was driven by sustained growth in services, with firms crediting business expansion plans and improved sales.

However, optimism about future business activity weakened, with confidence dropping to its lowest level since January 2021. Companies cited labor shortages, persistent inflation, and weak domestic economic conditions as major concerns.

Employment growth slowed to its weakest pace in over a year, reflecting businesses’ caution about hiring amid economic uncertainty. Additionally, input price inflation remained elevated, similar to January’s historically high levels.

RBA’s Bullock: More rate cuts possible, but patience needed

At a parliamentary committee hearing today, RBA Governor Michele Bullock explained that this week’s 25bps rate cut was based on better-than-expected inflation data, weaker private demand, and wage growth aligning with forecasts.

Also, she acknowledged that the board is mindful of timing, stating, “What’s also playing on the board’s mind is that the board also doesn’t want to be late, and arguably we were late raising interest rates on the way up.”

While further easing remains on the table, Bullock emphasized the need for caution. "We are not pre-committed. We're going to be data-driven on this and I think people just have to be patient," she added.

Deputy Governor Andrew Hauser echoed this sentiment, reinforcing the RBA’s wait-and-see approach. He remarked, "If we're wrong and inflation moves more quickly downwards, you could celebrate that fact and policy will need to respond, but we'd rather wait and see than assume that's what's going to happen."

Australia’s PMI composite hits 6-month high, but business confidence dips

Australia’s PMI data for February showed continued expansion in private sector activity, with Manufacturing PMI rising to from 50.2 to 50.6, its highest level in 27 months. Meanwhile, Services PMI edged up from 51.2 to 51.4, and Composite PMI ticked up from 51.1 to 51.2, both reaching six-month highs.

According to Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, the latest figures indicate a “modest” but steady improvement in economic conditions, while growth was broad-based.

However, business sentiment weakened to its lowest level since October 2024. This caution also affected pricing strategies, with businesses reluctant to fully pass on cost increases, leading to a slowdown in selling price inflation.

RBNZ’s Conway: 50bps cut the clear choice, signs of economic turnaround emerging

RBNZ Chief Economist Paul Conway revealed in a Reuters interview that the central bank considered both 25bps and 75bps rate cuts ahead of this week's policy decision. But the bank ultimately concluded that a 50bps reduction “was the way to go” given the state of the economy and inflation.

Conway pointed to recent data in manufacturing and services, indicating that some businesses may already be "starting to feel a bit of a turnaround." However, he acknowledged that companies remain cautious.

Regarding the labor market, Conway noted that employment trends typically lag economic activity. He added that"businesses need to have confidence that growth is returning and that growth will be sustained into the future before they start to think about employing someone.”

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0446; (P) 1.0475; (R1) 1.0532; More...

Outlook in EUR/USD remains unchanged despite today's mild dip. Consolidation from 1.0176 is still extending and intraday bias remains neutral. Stronger rebound might be seen but outlook will remain bearish as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds. On the downside, break of 1.0176 will resume whole fall from 1.1213. However, decisive break of 1.0572 will raise the chance of reversal, and target 61.8% retracement at 1.0817.

In the bigger picture, immediate focus is on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, reversal from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

Canada’s retail sales jumped 2.5% mom to CAD 69.6B in December, far surpassing market expectations of 1.6% mom. Sales increased across all nine subsectors, with the strongest contributions from food and beverage retailers and motor vehicle and parts dealers.

In volume terms, retail sales also rose 2.5% mom, indicating that the increase was not solely due to price effects.

For Q4, retail sales climbed 2.4% qoq, marking the second consecutive quarterly gain. Adjusted for inflation, sales volumes rose 1.8% qoq.

However, momentum may have slowed at the start of 2025. Advance estimate for January suggests retail sales declined by -0.4% mom.

Full Canada retail sales release here.

The Canadian dollar is showing small losses on Friday. USD/CAD is trading at 1.4196 in the European session, up 0.14%. On Thursday, the Canadian dollar took advantage of broad US dollar weakness and gained 0.45%.

Canada’s retail sales expected to jump

Will the week end on a high note? Canada releases retail sales for December 2024 later today and the market estimate stands at 1.6% m/m. This would mark a sparkling rebound from the flat reading in November, which was marked by lower food sales.

Retail sales have been accelerating in the second half of 2024 and the trend is expected to continue into this year. The potential headwind to consumer spending is the Trump administration’s threat to impose tariffs on Canadian products. With around 75% of Canadian exports heading to its southern neighbor, a trade war with the US would cause significant damage to Canada’s economy and Ottawa will be pulling out all the stops to placate President Donald Trump and avoid tariffs.

US tariffs would boost global inflation, which threatens to und0 the progress the major central banks have made to contain inflation. The Federal Reserve has pointed to tariffs as an upside risk to inflation and Bank of Canada Governor Tiff Macklem has acknowledged that the tariffs are causing uncertainty. The US has suspended tariffs aimed at Canada until March 3 and whether the tariffs are reinstated or not could impact the BoC’s decision at its meeting on March 12.

The US wraps up the week with manufacturing and services PMIs for February. Manufacturing PMI is expected to improve to 51.5 from 51.2, which would point to weak expansion. The services sector is slightly stronger, with a market estimate of 53.0, compared to 52.9 in January.

USD/CAD Technical

• USD/CAD is testing resistance at 141.96. The next resistance line is 142.25
• There is support at 141.47 and 141.18

The British pound has steadied on Friday against the US Dollar after climbing 0.6% a day earlier. GBP/USD is trading at 1.2655 in the European session, down 0.1% on the day.

UK retail sales jump 1.7%

UK retail sales sparkled in January, climbing 1.7% m/m. The reading crushed the market estimate of 0.3% and bounced back from an upwardly revised -0.6% in December. This was the fastest pace since May 2024 and was largely driven by a sharp increase in food store sales. Annually, retail sales climbed 1%, down from 2.8% in December but above the market estimate of 0.6%.

UK consumer confidence remains low, but there was a slight improvement in February. The GfK consumer confidence index rose to -20 from -22, above the market estimate of -22. Consumers were less pessimistic about economic conditions, which may have resulted from the Bank of England’s rate cut last month. Still, consumer confidence is mired in negative territory, as consumers are in a sour mood.

The UK economy barely registered any growth in the second half of 2024 and the BoE cut in half its forecast for economic growth in 2025. Meanwhile, inflation is moving the wrong way. In January, CPI surprised to the upside and hit 3%, a ten-month high. Low growth and high inflation has policymakers concerned about stagflation, which could cause significant damage to the economy.

UK PMIs for February were a mixed bag. Manufacturing PMI ease to 46.4, down from 48.3 in January and shy of the market estimate of 48.4. It was the lowest level since Dec. 2023 as output and employment levels declined. The services sector is in better shape and the PMI rose to 51.1 from 50.8, indicating weak expansion.

GBP/USD Technical

• GBP/USD is testing support at 1.2637. Below, there is support at 1.2602
• 1.2705 and 1.2740 are the next resistance lines

The US dollar is giving back gains despite the tariff talk, rate cuts in Australia and New Zealand and despite the hawkish Federal Reserve (Fed) minutes that hinted that the Fed officials are inclined to keep the rates unchanged until they see ‘further progress on inflation before making additional adjustments’. The dollar index tested the 100-DMA yesterday and is consolidating near that level this morning. The major support to the September to January rebound – or say the Trump rebound – is seen near the 106 level. A move below this level could mark the end of the kneejerk Trump rally in the US dollar and send the greenback into the medium-term bearish consolidation zone and let the major peers regain some ground despite dovish expectations there.

In this context, the Reserve Bank of Australia (RBA) cut its interest rates for the first time in more than four years, but the AUDUSD spent yesterday recovering losses. The EURUSD on the other hand remains under pressure – except yesterday’s rebound - as the European Central Bank (ECB) expectations remain soft and sweet despite a higher-than-expected CPI print in France. The ECB is now expected to pull the interest rates below 2% to help the underlying economies deal with the economic weakness and the US threat. The latter divergence between the ECB and the Fed expectations should keep the EURUSD’s upside potential limited above the 1.05 psychological level. Many traders could also chose to turn neutral before Sunday’s German election.

Across the Channel, sterling hawks got a boost from the higher-than-expected CPI report released earlier this week – which showed that headline inflation in Britain returned to 3% in January. Combined with the US dollar’s recent weakness, Cable is drilling above 1.2650, the major 38.2% Fibonacci retracement on September to January selloff. The pair has freshly stepped into the medium-term bullish consolidation zone and could extend gains on the back of more hawkish Bank of England (BoE) outlook and hope that Britain could get less harmed by Trump policies. But UK’s growth outlook is on a slippery ground and Rachel Reeves growth plans are not going... according to the plan. On the contrary, consumer confidence in the UK sank to the lowest levels since Labour came to power. And lower confidence and spending from households means trouble for the UK economy that relies heavily on services. As such, Cable’s rally could bump into solid offers near the 200-DMA – that stands a few pips below the 1.28 mark.

On the trade front

Donald Trump said earlier this week that 25% levies would probably be imposed on cars, chips and pharmaceuticals, but didn’t really provide clarity on whether the cars made under the free trade agreement with Canada and Mexico would be impacted. German DAX index gave back gains this week, along with the rising political tensions into this weekend’s snap election. The EURUSD is under pressure this morning.

More details on US tariffs are expected to land around April 2nd... But more specifically on the European front, the US’ pulling back its military support is reviving discussions about how much to spend on defence to get the European armies up to date and how to finance costs. The US safety shocker could wake up the sleeping European Beauty – but it will take time.

On the Chinese front, the news are surprisingly well. Not only that Xi Jinping met with the Chinese Big Tech leaders to show off their now-improved relationship, but Trump also said that there could be a trade agreement with China as he’s got a ‘great’ relationship with Xi. And to top it all, Alibaba announced strong quarterly results – its fastest in a year – and said that AI is their ‘primary objective’. Alibaba shares gained more than 12% in Hong Kong today and they are up by more than 75% since mid-January.

Overall, the Chinese AI story is developing with Alibaba’s AI model on one hand and DeepSeek’s ChatGPT-like AI model on the other hand. Both feed into other companies’ services. Apple for example chose to integrate Alibaba’s AI model in its Chinese phones hoping to boost sales, while BYD and Tencent – the provider of the Chinese WeChat app - are teaming up with DeepSeek to enhance their services. And Chinese companies’ ambition to integrate AI models into existing services in a fast fashion is boosting appetite for investors globally – along with Xi’s most obvious support. As such, the HSI index is testing the highest levels since last October with sizeable upside potential. Chinese technology stocks are trading at significant discounts compared to their US counterparts. The Nasdaq Golden Dragon Index, which tracks major Chinese companies listed in the US, is trading at a forward PE ratio near a record low relative to the Nasdaq 100 Index.

Market picture

The cryptocurrency market has added 1.3% in the last 24 hours to $3.24, approaching the upper boundary of the consolidation range after the collapse in early February. Only the ability to rise above $3.3 trillion would signal an exit from consolidation and be a prologue for a return to the $3.50 area or a move to all-time highs near $3.70.

Bitcoin has risen to $98,000, once again trying to break above the 50-day moving average. As with the crypto market, Bitcoin has found enough buyers on dips and has done the easy part with a return to meaningful resistance levels. Only a confident move higher will mark the start of a new rally phase.

News Background

JPMorgan notes that the observed weakening of institutional demand for Bitcoin and Ethereum futures on the CME is a bearish signal for the near term. The lack of positive catalysts and fading price momentum are the reasons.

QCP Capital records demand for high delta call options on Bitcoin, indicating growing expectations of strong price growth in the future. Implied volatility has shifted in favour of calls across all maturities, indicating bullish market positioning.

Trump linked Bitcoin’s highs to his policies. According to him, BTC has set new records because everyone knows he is committed to making the US the crypto capital of the world.

Stacks platform CEO Muneeb Ali said most second-tier bitcoin-based projects will disappear within three years. He said the market is evolving in a highly competitive environment, and enthusiasm around L2 solutions has waned markedly.

The CBOE has filed a Form 19b-4 proposal with the SEC asking it to approve staking in 21Shares’ Ethereum-based ETF. The NYSE previously filed a similar proposal for Grayscale’s Ethereum-ETF.

The SEC has softened its stance on regulating cryptocurrencies and DeFi. The regulator filed a motion to withdraw an appeal of a ruling limiting the application of securities laws to users of cryptocurrencies and DeFi services.

Ten companies have been approved to issue stablecoins in the European Economic Area (EEA) under MiCA rules. Tether, the USDT issuer, is absent from the list. Circle, the issuer of USDC, the main competitor of USDT, received the right to issue stablecoins in the EEA back in July.

Solana’s (SOL) annual inflation rate rose 30.5% after the implementation of a new fee allocation model on the platform (SIMD-0096), Blockworks notes. Recent scandals surrounding LIBRA, and previously TRUMP, MELANIA, BARRON and HAWK, have undermined Solana’s reputation and increased pressure on the altcoin market.