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The Australian dollar is higher for a third consecutive trading day. In the European session, AUD/USD is trading at 0.6363, up 0.25% on the day. Earlier, AUD/USD climbed as high as 0.6373, its highest level this year.

RBA expected to cut rates to 4.1%

The Reserve Bank of Australia meets on Feb. 18 and is widely expected to lower the cash rate by a quarter-point to 4.1%. The money markets have priced in a rate cut at 90% and this would mark a milestone for the RBA, which has maintained rates since Nov. 2023. While most of the major central banks are well into an easing cycle, the RBA has remained an outlier.

Why has the RBA been reluctant to lower rates? Headline inflation has fallen back to the RBA’s target range of 2-3%, but underlying inflation has declined more slowly. Underlying inflation is a more accurate gauge of inflation trends and the most recent inflation report, which was released at the end of January, showed underlying inflation falling to 3.2%. This appears to have cemented a long-awaited rate cut.

The RBA meeting also has significant political implications. Prime Minister Anthony Albanese’s Labor government is trailing the opposition and an election must be held by May. If, as expected, the RBA cuts rates, Albanese will be quick to claim that the government’s economic policies enabled the RBA to lower rates for the first time since Nov. 2020.

The US wrapped up the week with a soft retail sales report. January retail sales slid 0.9%, much worse than the market estimate of -0.1% and following a solid gain of 0.7% in December. This was the sharpest decline since March 2023, as severe weather and the Los Angeles fires dampened consumer spending. Annually, retail sales eased to 4.2%, down from an upwardly revised 4.4% in December and above the forecast of 3.7%.

AUD/USD Technical

• AUD/USD is putting pressure on resistance at 0.6376. Above, there is resistance at 0.6401
• There is support at 0.6344 and 0.6319

USDJPY remains in red for the third consecutive day and hits again pivotal Fibo support at 151.50 (38.2% of 137.57/158.87).

Recent attack was contained at this zone that validates support, setting scope for another rejection here that would add to scenario of healthy correction before broader bulls resume.

Although daily studies are negative (strengthening bearish momentum / formation of 10/200 DMA death cross) and favor further downside, inverted hammer candlestick on weekly chart warns of potential bounce.

In such scenario, bulls will face several strong obstacles, 200DMA (152.73) and more significant base of thick daily cloud (153.76) violation of which will be required to generate reversal signal and expose next key barriers at 154.80/90 (Feb 12 lower top / 50% retracement of 158.87/150.93 bear-leg).

Watch reaction at 151.00 zone for fresh direction signals.

Res: 152.37; 152.73; 153.12; 153.76
Sup: 151.50; 150.93; 150.00; 149.22

Market Picture

The crypto market has been sluggishly declining since the end of last week, pulling back 0.8% in the last 24 hours to $3.19 trillion. This is marginally higher than levels a week earlier, but we see the market stabilising at a lower level compared to January. The $3.3 trillion capitalisation level is acting as resistance where sellers are taking the initiative.

Trading volumes have pulled back to levels we saw prior to last November as the sentiment index drops from greed to the borderline territory between fear and neutral.

Bitcoin has been moving almost strictly horizontally since the 5th of February, hovering near $95,000 for most of the time. This is below the 50-day moving average, breaking the upward trend. The lack of a sell-off, however, suggests there is still interest in long-term buying on dips near current levels.

Solana pulled back to $180 on Monday morning, attempting to dip below the 200-day moving average. The coin reversed to gains near these levels in December and January. A sustainable move lower would be the second bearish signal for the broader crypto market, following a similar decline in Ethereum in early February.

News Background

The positive weekly trend in US spot bitcoin ETFs broke after six weeks of inflows. According to data from SoSoValue, net outflows from spot bitcoin-ETFs in the US totalled $581.2 million for the week, cumulatively totalling $40.12 billion. Net outflows from ETH-ETFs totalled a small $26.3 million, bringing cumulative all-time inflows to $3.15 billion.

Santiment calculated that the BTC had shed 277,240 active wallets over the past few weeks, which they attribute to fears of further price declines.

Abu Dhabi Sovereign Wealth Management disclosed a $436.9 million investment in BlackRock’s spot bitcoin-ETF (IBIT). Barclays Bank also disclosed a $131.2 million investment in IBIT. The largest institutional investor in IBIT, Goldman Sachs, has invested more than $1.6 billion in IBIT.

Cryptocurrency trading volume on crypto exchange Coinbase grew 137% in the fourth quarter of last year, while online broker Robinhood saw a 393% increase. The drivers were the hope for more sector-friendly regulation after Donald Trump’s victory.

Users of the Wallet custodial mini-app Wallet on Telegram have been given the option to buy Tether’s USDT stablecoin with zero fees. The option was implemented with the support of the Mercuryo payment network and in cooperation with The Open Platform infrastructure platform for developers in the TON ecosystem.

US100, Daily

In the Daily timeframe, US100 made an all-time high after reaching our previous target. Tenkan has crossed upwards from the Kijun at Ichimoku. However, the %R indicates a significant overbought condition, making a minor correction possible before the 10000 pips rise.

• We consider buying US100 only on consolidation above 22200 with a target to 23200;

Today’s XAU/USD chart suggests that gold may be losing its appeal as a safe-haven asset, as increasing media reports of a potential meeting between US and Russian leaders could ease geopolitical tensions.

A sharp decline, indicated by the arrow, highlights the dominance of supply forces, resulting in several bearish signals on the XAU/USD price chart from a technical analysis perspective:

→ Firstly, this drop formed a bearish candlestick on the 4-hour chart with the highest trading volume on the COMEX exchange (part of the CME Group) – a key global centre for gold futures trading.

→ Secondly, a bearish double top pattern (A-B) is evident, with support at $2878 and resistance at $2940. A break below this support could see prices targeting $2816, in line with the pattern’s trading rules.

→ Thirdly, the local support observed on Friday at $2915 quickly gave way to selling pressure and may now act as resistance.

As a result, gold prices have fallen below the lower boundary of the regression channel that started in late January, while the Rate of Change indicator has dropped to its lowest point in 2025.

This could signal a significant shift in market sentiment towards gold in the medium term, potentially influenced by the Trump administration’s intentions to end the war in Ukraine.

For a long-term outlook on gold prices, we recommend reviewing gold price forecasts for 2025 and beyond.

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BoE Governor Andrew Bailey reaffirmed today that the UK remains on "gradual disinflation" path, noting that the lingering effects of past economic shocks are slowly fading.

However, he emphasized that risks are “two-sided,” as highlighted in the BoE’s latest minutes, where differences within the committee surfaced.

On Q4 GDP data, which came in stronger than expected, Bailey downplayed its impact, stating that the economy has been “quite static” since late spring 2024.

Regarding the US government’s evolving stance on tariffs, Bailey expressed concerns about economic fragmentation, warning that such shifts could harm global growth.

However, he acknowledged that the inflationary impact from tariffs remains “ambiguous,” as it depends on factors such as “redirection of trade” and retaliatory measures.

He reiterated that risks exist on both sides, justifying the BoE’s use of “careful” alongside “gradual” in its policy guidance.

Eurozone goods exports rose 3.1% yoy to EUR 226.5B in December. Goods imports rose 3.8% yoy to EUR 211.0B. Trade balance recorded EUR 15.5B surplus. Intra-Eurozone trade rose 1.7% yoy to EUR 191.5B.

In seasonally adjusted term, goods exports fell -0.2% mom to EUR 240.8B. Goods imports fell -0.8% mom to EUR 226.2B. Trade balance reported EUR 14.6B surplus, smaller than expectation of EUR 15.0B. Intra-Eurozone trade rose 0.6% mom to EUR 213.1B.

Full Eurozone trade balance release here.

Markets

Weaker-than-expected US retail sales triggered a rally in Treasuries. Yields declined between 4.1 and 6.2 bps in what was otherwise a dull trading session. German rates still finished marginally in the green, adding up to 2.5 bps at the front. UST outperformance dragged the dollar lower against all major peers. The trade-weighted USD index tumbled to the lowest level since mid-December (106.71). EUR/USD’s winning streak entered its fourth day with the pair closing just south of 1.05. Stock markets struggled for direction ahead of what is a long weekend for the US. Financial markets over there are closed for President’s Day. Lack of US investors usually means uninspired, muted trading but things could turn out different this time. The European session may be a very interesting one. Last week’s phone call between US president Trump and Russian counterpart Putin has served as a wake-up call. Both agreed to kickstart the peace talks with Trump aiming a ceasefire by Easter. Being left out of the negotiations and the US already having met Putin halfway before they even started – US Defense Secretary Hegseth suggested Ukraine should not join NATO and forfeit the areas currently under Russian control - European and Ukrainian officials fear for any future US-made deal. US VP Vance’s speech at the Munich Conference which according to watchers was an implicit tear-up of the transatlantic (military) alliance last Friday added to the sense of urgency. French president Macron summoned a handful of European leaders including from Germany and Italy but also the UK for a summit in Paris. The talks will be focused on what kind of security guarantees the EU can give to Ukraine now that US appetite for continued backing is sharply decreasing. For the outgoing German minister of Foreign Affairs Baerbock it means “We will launch a large package that has never been seen in this dimension before. Similar to the euro or the corona crisis, there is now a financial package for security in Europe. That will come in the near future.” A significant uptick in defense spending is underway, so much is clear. Bund futures point to higher yields at the open later today. The euro isn’t sure which side to pick just yet. EUR/USD is hovering near Friday’s closing levels. The geopolitical narrative alternates with the tariff one, illustrated by Trump considering reciprocal tariffs end last week, making direction FX trading tricky. For Europe, though, the conclusion of the new US administration’s military and economic view is clear (cf. infra). This week’s eco calendar features the February PMIs (Friday) and the UK labour market report (tomorrow) and CPI figures (Wednesday). German elections take place on Sunday.

News & Views

Economic activity in Japan in Q4 of 2024 grew 0.7% Q/Q (2.8% annualized), materially faster than expected (about 1.0%). The details of the report were a bit mixed. Consumption grew a modest 0.1% Q/Q, but still this was higher than expectations for a decline of 0.3% (after a strong 0.7% in Q3). Business investment grew 0.5% Q/Q, slightly less than expected. Inventories made a negative contribution to growth of -0.2%. At the same time, there was a strong positive contribution of net exports (0.7%). Admittedly, this was due to a substantial decline in imports (-2.1% Q/Q). Even as the domestic part of the Q4 growth story was a bit mixed, the data support the case for gradual further policy BoJ policy normalization after the bank raised its policy rate from 0.25% to 0.50% at the January meeting. The Japanese 10-y government bond yield this morning extends the established uptrend, touching 1.38%, the highest level since 2010. The yen also (slightly) outperforms this morning with USD/JPY easing to 151.55.

In an interview with the Financial Times on Friday, former ECB governor and Italian Prime Minister, Mario Draghi, gave a harsh analysis the vulnerabilities of EU economic growth. In particular, he sees two factors that need to be changed profoundly to raise the prospect of European growth going forward. Firstly, Draghi analyses that the EU faces a long-standing inability to tackle its supply constraints which he mainly sees from high internal barriers and regulatory hurdles. He considers them as far more damaging for growth than any tariffs that the US might impose. According to Draghi, the failure to lower internal barriers also contributed to Europe’s unusually high trade openness, that currently proves to be a vulnerability. As a second factor holding back EU growth, he mentions the region’s persistently weak demand, resulting in a recurring EU current account surplus. According to Draghi, weak demand has fed back into exceptionally weak total factor productivity. He also sees a significant deviation in the fiscal policy stance between the US and Europe as an important factor behind the relative weak EU/stronger US demand.

Daily Pivots: (S1) 191.26; (P) 191.88; (R1) 192.29; More...

Intraday bias in GBP/JPY remains neutral for the moment. Overall, corrective pattern from 180.00 is extending, possibly with rebound from 187.04 as another upleg. Above 193.04 will target 194.73 resistance first. Firm break there will solidify this case and target 198.94 next.

In the bigger picture, price actions from 208.09 are seen as a correction to rally from 123.94 (2020 low). Strong support should be seen from 38.2% retracement of 123.94 to 208.09 at 175.94 to contain downside. However, sustained break of 152.11 will bring deeper fall to 100% projection of 208.09 to 180.00 from 199.79 at 171.70, even still as a correction.

Daily Pivots: (S1) 159.39; (P) 159.82; (R1) 160.22; More...

Intraday bias in EUR/JPY remains neutral for the moment. Overall, sideway pattern from 154.40 is still extending with another upleg. On the upside, above 161.17 will target 164.07 resistance and then 164.89.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). Strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction.