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This week’s summit between Donald Trump and Xi Jinping went pretty well. Except for a few sticky points around Taiwan. The two leaders complemented each other. Trump was soft and conciliatory, while Xi Jinping struck a firmer tone, invoking the “Thucydides Trap” — the idea drawn from the rivalry between ancient Athens and Sparta that war can become inevitable when a rising power challenges a dominant one. Yet, the two countries agreed to ease trade tensions – mostly on non-critical sectors. China even agreed to help with the Iran negotiations.

Markets rallied, ignoring the ongoing Middle East tensions and their impact on prices and inflation figures. Because yes, inflation data released throughout this week confirmed rising price pressures in the Eurozone, and warned that inflation at both the consumer and producer levels was accelerating faster than expected in the US. The latest US PPI data jumped to 6% – the highest in more than three years – as energy prices spiked, while the Japanese PPI print this morning echoed a similar rise: it came in at an eye-watering 5%, the highest since mid-2023.

Rising inflation kept pushing bond yields higher, reflecting continued hawkish pricing across global central bank expectations. The US 2-year yield spiked past 4%, while the Japanese 10-year yield rose nearly 3.80% this morning to around 2.75% – far above the 1.75% level pointed to as the threshold where Japanese institutional investors (life insurers, pension funds, banks) could start seriously preferring domestic bonds over hedged foreign debt, remember.

US crude is pushing higher, above the $102pb level this morning, as traders swing between conflicting announcements from Trump, first saying that the US could live without the Strait of Hormuz, before urging its reopening a few hours later. US oil inventories fell by 4.3 million barrels last week, and by around 12 million barrels over the past three weeks, as US crude exports rose to help fill the Middle East supply gap. Energy prices will likely remain elevated given the little progress made in Middle East talks in the short run.

Many consumer-facing companies have been insisting that US consumers are running out of money. The retail sales data yesterday hinted at resilience in April, but underneath the surface, 13.1% of US credit card balances are now 90+ days delinquent — the highest level since 2011. It means that Americans borrow to spend, and delay their credit repayments. That’s a ticking bomb.

But guess what? The S&P500 and Nasdaq both hit record highs yesterday. No Matter What.

And indeed, Big Tech has done amazingly well since the beginning of the Iran war, somewhat shrugging off rising energy costs and supply disruption risks. It’s not that these companies aren’t paying for energy, but the AI growth outlook – and optimism that it will accelerate revenue generation – is outweighing the geopolitical challenges.

Roundhill’s Mag7 ETF rebounded nearly 30% since the war dip, hitting a fresh ATH yesterday, supported by strong earnings and even stronger guidance. Cerebras Systems, an AI chip company that went public yesterday, surfed on a giant wave, jumping around 70% on its first day as a publicly traded company and giving it a market cap of around $95bn – the biggest IPO of the year so far.

Investors totally brushed aside the circular deal worries, and their frustration with the massive AI spending increasingly financed by debt. No one cares about rising yields, either. And that’s curious.

Yes, tech stocks performed very well during the latest Fed tightening cycle post-2022, aimed at fighting the post-Covid and Ukraine war-led energy crisis. One of the reasons was that Big Tech companies had ample free cash flow and relatively lower debt, which made them less sensitive to interest rate hikes, defying the theory that growth stocks should be hit harder by higher rates as their valuations depend heavily on future revenues that become less valuable when discounted at higher interest rates.

Today, investors treat tech stocks the same way: thinking they could defy the Iran war, rising energy prices, rising inflation expectations and the prospect of tighter-than-otherwise monetary policy.

The problem is this: massive capital expenditure is eating into their free cash flow and obliging them to seek funding through... bond markets. Huh. It makes Big Tech companies more vulnerable to interest rates compared to earlier cycles.

Take Amazon’s 1.5% coupon bond due June 2030. It now yields around 4.40%; it covers US inflation and still offers a certain premium, but the price is falling as inflation expectations push US yields higher. That means the cost of borrowing is rising for these tech companies that are – together – expected to spend up to $1 trillion in AI infrastructure this year.

That’s the cost side.

And what happens if they back down? What happens if they decide to reduce spending?

It could be worse. Because current valuations are fueled by the prospect of future AI-led revenue. But if companies stop investing, they could hit capacity constraints that limit income potential – a scenario that is not favourable for valuations.

Second, the circular nature of these deals suggests that if one company backs down, it could trigger a domino effect across the rest of the companies in the same circle...

Big Tech today stands at an important crossroads. Investors have digested the massive AI spending, the circular deals and the high valuations, yet for the rally to extend further, the macroeconomic backdrop also needs to remain supportive.

And today, looking at global yields, the macro backdrop is not supportive.

The longer the Middle East war drags on, the higher energy prices rise – fuelling inflation expectations and borrowing costs, and increasing the cost of building that extra data centre.

This, I believe, is a red flag that many tech investors have been ignoring, blinded by shiny earnings and even shinier earnings expectations.

But keep in mind that these expectations do not fully reflect the risk of another period of sticky inflation. And this time, Big Tech has less cash in hand to weather the stormy seas.

Alas, there is one more possibility — the one being priced in today — that the war will end, inflation and yields will come down, and markets will further rally on relief.

Daily Pivots: (S1) 212.97; (P) 213.33; (R1) 213.79; More...

GBP/JPY's break of 212.35 support suggests that rebound from 210.43 has completed at 214.40. Fall from there is seen as the third leg of the pattern from 216.58 high. Intraday bias is back on the downside for 210.43 first. Break there will confirm and target 100% projection of 216.58 to 210.43 from 214.40 at 208.25. For now, risk will stay on the downside as long as 214.40 resistance holds, in case of recovery.

In the bigger picture, while the fall from 216.58 is steep, there is no clear sign of trend reversal yet. The long term up trend could still extend to 61.8% projection of 148.93 (2022 low) to 208.09 (2024 high) from 184.35 at 220.90 on resumption. However, sustained break of 55 W EMA (now at 205.75) will argue that it's already in medium term down trend for 184.35 support.

Daily Pivots: (S1) 184.18; (P) 184.61; (R1) 185.19; More...

Intraday bias in EUR/JPY remains neutral for the moment. As noted before, pullback from 187.93 could have completed at 182.01 already. Further rise is in favor as long as 184.02 minor support holds. Above 185.44 will target a retest on 187.93 high. Nevertheless, break of 184.02 minor support will turn bias back to the downside towards 182.01 again.

In the bigger picture, the pullback from 187.93 is steep, there is no sign of reversal yet. Uptrend from 114.42 is still expected to resume at a later stage to 78.6% projection of 124.37 (2022 low) to 175.41 (2025 high) from 154.77 at 194.88. However, sustained break of 55 W EMA (now at 178.04) will argue that it's already in a medium term down trend to 175.41 resistance turned support and below.

Daily Pivots: (S1) 0.8662; (P) 0.8689; (R1) 0.8729; More…

EUR/GBP's rebound from 0.8618 resumed after brief retreat and intraday bias is back on the upside. Further rise should be seen to 0.8740 resistance turned. Decisive break there should pave the way through 0.8788 to retest 0.8863 high. On the downside, below 0.8695 resistance turned support will turn bias neutral again.

In the bigger picture, focus is back on 38.2% retracement of 0.8821 to 0.8863 at 0.8618. Strong rebound from there will retain medium term bullishness. Rise from 0.8221 should resume through 0.8863 at a later stage. Nevertheless, sustained break of 0.8618 will confirm that whole rise from 0.8221 has completed at 0.8863. Deeper decline should then be seen to 61.8% retracement at 0.8466 at least.

Daily Pivots: (S1) 1.6110; (P) 1.6150; (R1) 1.6187; More...

Intraday bias in EUR/AUD is turned neutral first with current recovery. On the upside, firm break of 1.6293 resistance will suggest that a short term bottom was already formed at 1.6108. Bias will be turned tot he upside for 55 D EMA (now at 1.6471). On the downside, below 1.6108 will extend larger fall from 1.8554 to 1.5913 fibonacci level.

In the bigger picture, fall from 1.8554 (2025 high) is in progress and deeper decline should be seen to 61.8% retracement of 1.4281 to 1.8554 at 1.5913, which is slightly below 1.5963 structural support. Decisive break there will pave the way back to 1.4281 (2022 low). For now, risk will stay on the downside as long as 55 W EMA (now at 1.7039) holds, even in case of strong rebound.

Daily Pivots: (S1) 0.9137; (P) 0.9148; (R1) 0.9154; More....

Intraday bias in EUR/CHF remains neutral first. On the downside, break of 0.9136 will confirm resumption of the fall from 0.9264. More importantly, sustained trading blow 0.9155 cluster support (38.2% retracement of 0.8979 to 0.9264 at 0.9155) will argue that rise from 0.8979 has completed. Deeper fall should be seen to 61.8% retracement at 0.9088 and possibly below. On the upside, break of 0.9177 resistance will bring stronger rally back to retest 0.9264.

In the bigger picture, considering bullish convergence condition in W MACD, a medium term bottom should be in place at 0.8979. Sustained trading above 55 W EMA (now at 0.9241) will add more credence to this case. Further break of 0.9394 resistance will pave the way to 0.9660 resistance next. However rejection by the 55 W EMA will set up another fall through 0.8979 low at a later stage.

Daily Pivots: (S1) 0.7201; (P) 0.7232; (R1) 0.7250; More...

AUD/USD fall sharply today but stays well above 0.7101 support. Intraday bias remains neutral first, and further rise is in favor. On the upside, firm break of 0.7277 will resume larger up trend. However, decisive break of 0.7101 will bring deeper decline back towards 0.6832 support.

In the bigger picture, rise from 0.5913 (2024 low) is still in progress. Decisive break of 61.8% retracement of 0.8006 to 0.5913 at 0.7206 will solidify the case that it's already reversing the down trend from 0.8006 (2021 high). Further rally should then be seen to retest 0.8006. For now, outlook will remain bullish as long as 0.6832 support holds, in case of pullback.

Daily Pivots: (S1) 1.3697; (P) 1.3717; (R1) 1.3736; More...

Intraday bias in USD/CAD remains on the upside. Rebound from 1.3549 is seen as the third leg of the corrective pattern from 1.3480. Further rise would be seen towards 1.3965 resistance. On the downside, below 1.3682 minor support will turn intraday bias neutral first.

In the bigger picture, price actions from 1.4791 are seen as a corrective pattern to the whole up trend from 1.2005 (2021 low). Deeper fall could be seen, as the pattern extends, to 61.8% retracement of 1.2005 to 1.4791 at 1.3069. However, decisive break of 38.2% retracement of 1.4791 to 1.3480 at 1.3981 will argue that the correction has completed with three waves down to 1.3480 already.

Daily Pivots: (S1) 1.1647; (P) 1.1684; (R1) 1.1703; More….

EUR/USD's fall from 1.1848 resumed by breaking 1.1653 support. Intraday bias is back on the downside. Decisive break of 1.1639 resistance turned support will indicate that rebound from 1.1408 has completed as a corrective three-wave move at 1.1848. Deeper fall should then be seen to retest 1.1408 low. On the upside, break of 1.1720 minor resistance will turn bias back to the upside for retesting 1.1848 instead.

In the bigger picture, the strong support from 38.2% retracement of 1.0176 to 1.2081 at 1.1353 suggests that the pullback from 1.2081 is more likely a corrective move. Strong support was also found in 55 W EMA (now at 1.1539). Focus is back on 1.2 key cluster resistance level. Decisive break there will carry long term bullish implications. Nevertheless, break of 1.1408 support will revive the case of medium term bearish trend reversal.

Daily Pivots: (S1) 0.7813; (P) 0.7826; (R1) 0.7846; More….

USD/CHF's break of 0.7847 resistance suggests short term bottoming at 0.7760. Intraday bias is back on the upside for 0.7923 resistance. Firm break there will argue that fall from 0.8041 has completed as a three wave correction, and bring further rise to retest this high. For now, risk will stay mildly on the upside as long as 0.7760 support holds, in case of retreat.

In the bigger picture, as long as 55 W EMA (now at 0.8051) holds, fall from 0.9200 is expected to continue, as part of the larger down trend. Firm break of 0.7603 will target 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382.