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The DAX index continues to head lower and has posted sharp losses in the Friday session. Currently, the index is trading at 11,962.50, down 1.88% since the Thursday close. On the release front, German retail sales dropped 0.7%, well off the estimate of a 0.8% gain. On the inflation front, Eurozone PPI, improved to 0.4%, matching the estimate.

It has been a dreadful week for the DAX, which has shed 4.6% if its value. European stock markets are in red territory on Friday, following US President Trump’s decision to impose stiff tariffs on steel and aluminum imports in order to protect domestic producers. . Under the new scheme, foreign steel will be taxed at 25% and aluminum at 10%. The response to the move was overwhelmingly negative, but abroad and in the US. China and the EU immediately denounced the move US auto makers and oil and gas producers also condemned the tariffs. In imposing the tariffs, Trump relied on a provision which allows such measures for national security, but clearly, US trading partners will not quietly accept these protectionist measures. If these countries retaliate, a nasty trade war could ensue, which would likely unnerve investors and send the markets even lower.

The Federal Reserve has been in the spotlight in recent weeks, culminating with Fed chair Powell’s testimony before congressional and senate committees this week. Market attention will shift to the ECB next week, as policymakers meet on March 8. No major changes are expected, but members could discuss the possibility of removing the Bank’s easing bias towards increasing bond purchases if needed. A removal of the easing bias would likely be interpreted as a plan to tighten policy and would be bullish for the euro. Inflation remains weak, so there is little pressure on the ECB to tighten policy anytime soon. Recent indicators show that inflation in the eurozone is steady, but remains well below the ECB target of around 2 percent. Eurozone CPI dipped to 1.2% in February, down from 1.3% in January.

GBPJPY has been plunging sharply lower since Thursday and reached a more than a 5-month low of 145.40. The pair completed the fourth red day in a row following the significant pullback on the 150.00 psychological level. When looking at the bigger picture the price is creating a bearish correction and fell below the 23.6% Fibonacci retracement level of the last upward movement from 124.00 to 156.60.

From the technical point of view, the market could increase negative momentum in the 4-hour chart. The Relative Strength Index (RSI) is sloping down in the oversold territory, while the stochastic oscillator is also holding in the bearish area.

If price action remains negative, the next level to have in mind is the 38.2% Fibonacci level slightly above the 144.00 barrier. A slip below the aforementioned level could open the door for the key level of 143.00, taken from the highs in September.

Conversely, if the price creates a bullish movement, then the focus could shift to the upside towards the 148.00 resistance level. If this level is breached, it could increase bullish pressure until the price hits 148.50.

The Aussie dollar remains in red after Thursday's bounce from new low at 0.7712 and recovery extension on Friday was capped by broken 100SMA (0.7773). Lower Asian stocks on fears about the impact of new tariffs on imported metals on Asia, keep the Australian dollar at the back foot. The pair may hold in extended consolidation before bears re-take full control, as oversold slow stochastic suggest a breather after recent fall, but daily studies in firm bearish setup, along with deteriorating fundamental outlook, keep bearish bias in play. Close below cracked support at 0.7742 (Fibo 61.8% of 0.7500/0.8135 ascend is needed for fresh bearish signal for extension of pullback from 0.8135 (2018 high, posted on 26 Jan) towards 0.7650 (Fibo 76.4% of 0.7500/0.8135. Broken 100/200SMA's (0.7773 and 0.7782) mark strong barrier (reinforced by daily cloud base/falling 10SMA (0.7817) which is expected to limit recovery attempts.

Res: 0.7773, 0.7782, 0.7817, 0.7843
Sup: 0.7742, 0.7712, 0.7700, 0.7650

The picture on the EUR/USD charts is a complicated mix of technical levels and fundamental events causing various moves. This combination has resulted in a rather high volatility to the upside in the last 24 hours.

In general, the pair bounced off the support of the speculative long term channel, which was strengthened by a weekly pivot point near the 1.2150 mark.

The event coincided with the sudden announcement that Donald Trump will impose tariffs on metal imports. That caused a sudden increase in volatility.

The volatile trading broke various resistance levels until the surge paused on Friday morning near the 200-hour SMA.

Finally the exact location of the dominant support can be marked, as the Pound has fully confirmed the trend line by surging against the US Dollar.

The surge resulted in the breaking of the junior channel down pattern's resistance. However, the ascent of the currency exchange rate was stopped on Friday morning by the 55-hour simple moving average.

In general, the pair is either going to break the SMA and move to the 1.3870 mark or make another attempt to pass the long term support below.

Both scenarios can be played. So watch out for a break out from this rather rare squeeze in.

The Dukascopy research team has abandoned the idea to map the USD/JPY with a short term pattern. The reason for the decision is that the US Dollar is too volatile against the Japanese Yen. The volatility is largely caused by politics and monetary policy.

However, the larger scale descending trend has been confirmed and one can observe that the rate is going lower and lower. Although, the currency pair does make stops near various pivot point levels.

By taking that into account, we expect the pair to next decline down to the 105.17 level where the next support is located at.

The support levels just above the 1,300.00 mark where reached even faster than it was expected.

Mainly the move has been associated with the strength of the US Dollar, but the combination of various supports at the mentioned level managed to force the metal into a rebound.

During the rebound various resistance levels where passed, and by the middle of Friday's trading the bullion was trading sideways above the 1,315 mark.

In general, the situation needs to be watched, as a sudden surge or decline was about to occur.

The ISM Manufacturing PMI release presented a stronger-than-anticipated data, causing a further Dollar strengthening and a subsequent downmove in the EUR/USD exchange rate. The pair declined 10 base points, or 0.08%, reaching the 1.2163 level.

The ISM stated that the US Manufacturing PMI increased from 59.1 in January to 60.8 in February, representing the highest mark since May 2004. The US manufacturing activity strengthened in the reported month mainly due to expending exports that are showing their highest growth rate since April 2011. In fact, growing employment rate also was one of the factors driving the overall expansion in the domestic manufacturing sector.

The pair accelerated further down on Friday, as dollar came under fresh pressure on dears of trade war, with comments from BoJ governor Kuroda, who signaled that the central bank would consider exiting its ultra-easy monetary policy if inflation reaches its target in next two years, further boosting yen.

Fresh weakness extends into third consecutive day and pressures key support at 105.54 (16 Feb low, the lowest since early Nov 2016).

Bears could show hesitation here, as daily techs are oversold and may enter consolidation phase before resuming.

Sustained break below 105.54 pivot could spark stronger bearish acceleration and expose psychological 100.00 support, as no significant obstacles are seen en-route.

The pair is on track for strong bearish weekly close which could add to existing bearish pressure.

Extended upticks are expected to remain below descending 10SMA (currently at 106.81).

Res: 106.10, 106.30, 106.81, 107.00
Sup: 105.54, 104.98, 104.64, 104.09

Risk-off sentiment returned to the markets yesterday, as the White House’s announcement of tariffs on industrial metals sent US stocks falling, creating lower lows. The US 30 Index broke below the 24589.00 level, which was the low of the 22nd of February. However, the price is currently finding support at the Blue supporting trend line around 24500.00, with a second blue rising supporting trend line close by at 24400.0. Below this area, the 24200.00 level and the 24000.00 level are expected to be supportive but a loss here targets 23616.9, followed by 23246.00 and the February low of 23108.9.

Resistance is found at 24675.00, with the descending red trend line at 24717.8. Significant levels have developed with 24876.00, 25000.00 and 25091.50 forming barriers ahead of the moving average cluster around 25140.00. This cluster was tightly packed yesterday and the price was unable to penetrate higher, leading to the drop from 25182.00 on the news of the trade tariffs.

USDJPY

US Dollar weakness has returned, and the risk-off sentiment has led to a strengthening in the Japanese Yen, resulting in a large move in this pair. The price is currently making new lows after breaching trend line supports overnight. The Red trend line at 106.644 was broken yesterday evening, while the first Blue trend line at 106.311 and the second Blue trend line at 105.695 have been broken in the last hour. This leaves the 105.500 level as support, followed by 105.200 and the 105.000 round number area. We are now firmly into prices not seen since 2016. Previous supports can now be regarded as resistive.

Resistance above current price levels comes in at 106.712 and the 50-period MA at 106.870. The 107.300 area will become stronger as the 100-period MA, currently at 107.390, falls closer to it. The 107.917 area was tested twice in mid to late February and is now a key area for sentiment, with a break above potentially leading to tests of the 109.000 and the 110.00 levels.