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Daily Pivots: (S1) 0.8192; (P) 0.8232; (R1) 0.8278; More….

While USD/CHF's rebound from 0.8038 extended higher today, strong resistance is still expected from 38.2% retracement of 0.9200 to 0.8038 at 0.8482 to limit upside. Break of 0.8330 resistance turned support will turn intraday bias neutral first. Further break of 0.8184 will bring retest of 0.8038 low. However, sustained trading above 0.8482 will dampen this bearish view and target 61.8% retracement at 0.8756 next.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8750) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Daily Pivots: (S1) 144.74; (P) 145.46; (R1) 146.11; More...

USD/JPY's rise from 139.87 accelerates higher today Break of 38.2% retracement of 158.86 to 139.87 at 147.12 suggests that whole fall from 158.86 has completed at 139.87, after defending 139.57 support and 139.26 fibonacci level. Intraday bias stays on the upside for 61.8% retracement at 151.60 next. On the downside, below 145.70 minor support will turn intraday bias neutral again first.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. 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.

Global risk markets surged after the surprising breakthrough in US-China trade negotiations delivered results far beyond market expectations. Just days ago, hopes were low, with even the mere continuation of talks seen as a positive development. Investors had braced for a possible breakdown or at best, a symbolic gesture of engagement. Instead, both countries announced a major easing of tariffs, offering a rare dose of optimism to fragile global sentiment.

The agreement will see tariffs lowered on both sides for a 90-day period. Specifically, the US will cut its tariffs on Chinese goods from 125% to 30%, while China will reduce its duties on US goods from 125% to just 10%. The gap reflects the US’s decision to maintain a 20% base tariff linked to concerns about fentanyl imports. Still, the rollback represents a major de-escalation.

In a joint statement, both governments emphasized the intention to continue discussions in a “spirit of mutual openness” and “cooperation,” with follow-up meetings already being planned. US Treasury Secretary Scott Bessent confirmed he expects to meet Chinese officials again in the coming weeks to build on the momentum.

In the currency markets, Dollar is the strongest performer of the day. Commodity-linked currencies including the Aussie, Kiwi and Loonie are also advancing. In contrast, Yen is under significant pressure while. European majors are also lagging.

AUD/USD would now provide an important gauge to Dollar's underlying strength in this risk-on sentiment. Technically, break of 0.6364 support will confirm short term topping at 0.6511. Deeper decline would then be seen to 38.2% retracement of 0.5913 to 0.6511 at 0.6283. Firm break there will argue that whole rise from 0.5913 has already completed.

In Europe, at the time of writing, FTSE is up 0.64%. DAX is up 0.67%. CAC is up 1.46%. UK 10-year yield is up 0.089%. Germany 10-year yield is up 0.085 at 2.646. Earlier in Asia, Nikkei rose 0.38%. Hong Kong HSI rose 2.98% China Shanghai SSE rose 0.82%. Singapore was on holiday. Japan 10-year JGB yield rose 0.035 to 1.389.

BoE’s Lombardelli: Gradual cuts warranted as wage and services inflation stay high

BoE Deputy Governor Clare Lombardelli reinforced the case for a "gradual and careful" approach to policy easing in a speech today. She noted underlying inflation "have continued to fall" despite noises. Monetary policy is still restrictive and will continue to balance the need to lower inflation with the risk of undermining already soft demand.

Lombardelli highlighted wage growth as a central focus in the disinflation process, particularly given its outsized influence on domestic services pricing. She noted that private sector regular average weekly earnings rose 5.9% in February, still well above levels consistent with BoE’s inflation target. Services inflation, a key proxy for persistent price pressure, remains elevated at 4.7% as of March. Both indicators suggest that while progress has been made, inflationary momentum in wage-sensitive sectors continues to pose a challenge.

She also addressed the global backdrop, warning that higher US tariffs and increasingly uncertain American trade policy could lower growth and inflation in the short term by dampening global demand and trade volumes. However, over the longer term, if trade fragmentation continues, it could "reduce output and productivity and would raise inflationary pressures."

BoE’s Greene says trade risks justify rate cut

BoE MPC member Megan Greene said during a panel discussion today that while wages and inflation are moving in the right direction, they remain uncomfortably high. And more concerningly, "medium-term inflation expectations have also started picking up."

Greene, who voted with the majority last week in favor of a 25bps rate cut, the fourth since last August, revealed that she was initially undecided going into the meeting.

She noted being “torn” between holding rates steady and cutting, but ultimately decided to support easing. A key factor in her decision was the rise in global trade tensions, driven by US President Donald Trump’s sharp tariff hikes.

Despite the subsequent temporary trade truce between the US and China announced today, Greene said it would not have changed her vote.

She also flagged continued uncertainty over US-EU trade relations as a key downside risk for the UK economy, noting that any escalation could further dampen external demand.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 144.74; (P) 145.46; (R1) 146.11; More...

USD/JPY's rise from 139.87 accelerates higher today Break of 38.2% retracement of 158.86 to 139.87 at 147.12 suggests that whole fall from 158.86 has completed at 139.87, after defending 139.57 support and 139.26 fibonacci level. Intraday bias stays on the upside for 61.8% retracement at 151.60 next. On the downside, below 145.70 minor support will turn intraday bias neutral again first.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. 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.

Market Picture

The crypto market slowed down but continued to move upwards over the weekend, reaching $3.35 trillion. For the past few days, it has been trading in the region of the highs since early February. Ethereum and Dogecoin have been the stars of this movement, adding around 40% in seven days, although the former’s contribution is certainly more significant.

The crypto market’s sentiment is consolidating in the greed zone, leaving the corresponding index at 70 for the last three days. This is a good basis for continued gains: not too hot to take profits and not too cold to leave traders on the sidelines.

Bitcoin rallied above $105.5k on Monday morning, entering the area of highs where it has twice failed to hold over the past six months. The impressive corrective pullback from late January to early April, in our opinion, created substantial margin for a new wave of growth. Therefore, we will not be surprised if, along with the positive dynamics of stocks, BTCUSD will move to the renewal of historical highs already this week.

News Background

On the weekly bitcoin chart, after the upward breakout of the ‘bull flag’ pattern, a further rise to $182,000 is possible, given the growth before the downward consolidation. Cointelegraph presented such a scenario.

Significant inflows into spot bitcoin ETFS in the US continued for the third week in a row. According to SoSoValue data, weekly net inflows into spot BTC-ETFS totalled $921 million, bringing the total to $41.16 billion since bitcoin-ETFS were approved in January 2024.

Inflows into spot Ethereum-ETFS in the US broke after two weeks, recording a small net outflow of $38.2 million to $2.47 billion since last July.

Cryptoquant noted that the strategy firm’s pace of bitcoin purchases exceeds the rate at which miners are issuing new coins. The firm’s holdings alone imply an annual deflation of the asset of 2.23%.

Public mining companies sold about 70% of mined Bitcoins in April against a falling mining profitability, TheMinerMag calculated. Since March, miners seemed to be moving away from the HOLDing strategy that had prevailed last year.

Over the years, Coinbase has considered investing a significant portion of its savings in bitcoin, following the example of Strategy, but abandoned the idea because of the risks, said Brian Armstrong, head of the exchange.

BoE MPC member Megan Greene said during a panel discussion today that while wages and inflation are moving in the right direction, they remain uncomfortably high. and more concerningly, "medium-term inflation expectations have also started picking up."

Greene, who voted with the majority last week in favor of a 25bps rate cut, the fourth since last August, revealed that she was initially undecided going into the meeting.

She noted being “torn” between holding rates steady and cutting, but ultimately decided to support easing. A key factor in her decision was the rise in global trade tensions, driven by US President Donald Trump’s sharp tariff hikes.

Despite the subsequent temporary trade truce between the US and China announced today, Greene said it would not have changed her vote.

She also flagged continued uncertainty over US-EU trade relations as a key downside risk for the UK economy, noting that any escalation could further dampen external demand.

WTI oil price jumped over $2 on Monday following success of US-China trade talks over the weekend that eased tensions and signaled that world’s two largest oil consumers are on the way to resolve their trade conflict.

The markets welcomed positive move that significantly brightened the demand outlook and further lifted oil price.

The WTI contract resumed strong rally of the last week (up almost 8%) on Monday and hit the highest in two weeks, marking retracement of over 76.4% of $64.70/$55.14 bear leg.

Bulls focus target at $63.55 (Apr 28 high) the last obstacle en-route to $64.70 breakpoint (Apr 24 high), violation of which to generate reversal signal on completion of daily bullish failure swing pattern.

However, a pause in current rally (due to overbought conditions and 14-d momentum indicator being still in negative territory) may precede fresh push higher, with shallow dips to ideally find ground at $61.00 zone and offer better levels to re-enter bullish market.

Only loss $60 pivot, which previously marked strong barrier and now reverted to solid support, would sideline bulls.

Res: 62.97; 63.55; 64.70; 65.00.
Sup: 61.90; 61.05; 60.71; 60.00.

US-China trade talks over the weekend developed more positively than both we and consensus expected. Below we give a short overview of what happened and the implications in US and China, respectively.

What it means for the US

While both US and Chinese officials had signalled a positive outcome from the Geneva negotiations already on Sunday, the cuts to tariff rates were larger than we had anticipated. Treasury Secretary Scott Bessent announced a 115%-point reduction to the previous rate of 145%, which would take the rate close to pre-Liberation Day level of 30%. Previously, our baseline scenario included a cut down to 60%. The cuts are initially in effect for 90 days, as was the case with the delay of other reciprocal tariffs as well.

Before Trump entered the office, the average tariff rate on Chinese goods imports was around 10-12%. And already before the Liberation Day, the rate was increased twice by 10%-points at a time as part of the so-called 'Fentanyl tariffs'.

For estimating the economic impact, we are going to assume a tariff rate of 30%. It is not immediately clear for us if the 10% universal tariff also applies on top of the pre-Trump rates and the Fentanyl tariffs. This means the rate could be slightly higher around 40-42%.

Before today's announcements, the average tariff rate on all US imports was around 25.8%. Cutting the Chinese rate to 30% reduces the average rate by more than 10%-points to around 15%. The Tax Foundation estimated earlier, that without reductions, the tariffs would weigh on US GDP by around 0.8% or 1.0% including retaliation. After today's announcements, the expected negative impact on US GDP could be nearly halved to only around 0.5%.

It is worth noting that consensus forecast for US GDP growth in 2025 had already been downgraded from 2.2% to 1.4% after the Liberation Day, reflecting a negative impact of 0.8%. Hence, if made permanent, today's tariff announcements could pose upside risks to current consensus growth outlook. While the easing does not naturally alleviate all of the negative consequences already seen in international trade and consumer/business sentiment, in our view today's announcement significantly reduces the risk of an outright recession down the line.

What it means for China

From a Chinese perspective the talks were also a success. China had several goals met:

First and foremost, tariff rates have been significantly reduced, which means trade can resume and Chinese companies exporting goods for Halloween, Christmas, Black Friday etc. can ship their goods at tariff rates that are manageable. China could soon see tariff rates reduced by a further 20% if they strike a deal on Fentanyl, which seems likely based on positive comments from Bessent on China's efforts to meet the US on this point.

With tariff rates significantly lower, the Chinese growth outlook for the coming quarters looks a lot better.

Second, negotiations according to the Chinese delegation happened in a good atmosphere with mutual respect, sincerity and understanding for the other side. These are key points for China and often underestimated. And in China it vindicates that the initial strong retaliation has paid off with the US showing more respect now instead of bullying. People matter in diplomacy and Bessent and Greer seem to be the right people at the table. You can disagree and have demands but if you show respect and understanding, it is much easier to get results when dealing with China.

Second, negotiations according to the Chinese delegation happened in a good atmosphere with mutual respect, sincerity and understanding for the other side. These are key points for China and often underestimated. And in China it vindicates that the initial strong retaliation has paid off with the US showing more respect now instead of bullying. People matter in diplomacy and Bessent and Greer seem to be the right people at the table. You can disagree and have demands but if you show respect and understanding, it is much easier to get results when dealing with China.

Where to go from here?

US-China talks are set to continue over the coming months. One of the tracks are related to Fentanyl and could very well lead to a further reduction in US tariffs on China by 20%- points. In the medium to longer term, trade talks will likely take time and could easily face bumps on the road due to disagreements on industrial policy, Chinese purchases of US goods etc.

It is worth keeping in mind that achieving significant reductions in US trade deficit with China, which remains a high priority for the US side according to Greer, appears unlikely without a significant reduction in US demand. During Trump’s 1st term, China failed to reach the levels of US goods purchases outlined in the so-called ‘Phase One’ trade deal agreed in 2019, and achieving a deal that satisfies all demands for both sides will be difficult to reach this time around as well – especially within the timeframe of only 90 days. However, it now seems more likely we could end up close to our original baseline scenario where US tariff rates on China are ultimately around 40%. A headwind but manageable for both sides.

Market implications

The agreement has fuelled a rally in global stocks, higher yields and a decline in EUR/USD and USD/CNY. The move reflects lower perceived risk of a US-driven growth slowdown, and was also evident in oil prices ticking higher. In the short-end of the USD curve, markets now price in only a 10% chance of the Fed cutting rates in June, and the next 25bp rate cut is fully priced in only by the September meeting. With trade talks on a better footing, macro data will likely start to matter more for market developments in the coming months – not least US data.

The price of a troy ounce of gold fell to 3,273 USD on Monday, losing about 1% compared to the previous session’s level.

Key factors driving gold’s movement

The primary reason for the decline is positive signals regarding trade talks between the US and China, which have reduced the demand for safe-haven assets.

Negotiations between representatives of the two countries concluded over the weekend, and the results offer some grounds for optimism. Beijing announced plans to initiate formal talks, while Washington reported progress towards an agreement.

US Treasury Secretary Scott Bessent stated that he could provide further details at a full briefing on Monday. Today's developments are expected to generate significant market reactions.

Geopolitically, the ceasefire between India and Pakistan remained in place until Sunday, despite mutual accusations of violations shortly after its conclusion.

Earlier, additional pressure on gold came from statements made by the Federal Reserve. The regulator warned of rising inflation and risks within the labour market. At the same time, Chairman Jerome Powell ruled out the possibility of a pre-emptive rate cut in response to tariff threats.

Technical analysis: XAU/USD

On the H4 chart, XAU/USD has formed a consolidation range around the 3,322 level. Today, we expect a possible decline to 3,195. After reaching this target, a correction to the 3,255 level is possible. Upon completing this correction, a new wave of decline to the local target of 3,070 may follow. Technically, this scenario is confirmed by the MACD indicator, as its signal line is below the zero level and is pointed decisively downwards.

On the H1 chart, XAU/USD has broken below the 3,290 level and continues to move towards 3,235. This target level will likely be reached today. A corrective move towards the 3,322 level cannot be ruled out. Subsequently, a decline to at least 3,200 is expected. Technically, this scenario is confirmed by the Stochastic oscillator; its signal line is below the 80 level and is directed steadily downwards towards the 20 level.

Conclusion

Gold remains under pressure amid improving trade sentiment and hawkish commentary from the Fed, with technical indicators pointing to further downside potential. Traders will be closely watching today’s briefing for any new market-moving details.

Gold price fell around 2.5% at the start of the week, as positive news (US-China trade deal / India – Pakistan ceasefire) dominated in early Monday and strongly contributed to fading safe haven demand.

Fresh optimism that disastrous scenario of escalation of trade war between world’s two largest economies has been avoided, lifted US dollar and pushed metal’s price to the lowest in almost two weeks.

All eyes are now on potential direct peace talks between Russia and Ukraine, with any signs of progress to further deflate gold price.

Positive signal on clear break of pivotal $3300 support zone (psychological / Fibo 38.2% of $2956/3500 upleg) weakened near-term structure, as negative momentum strengthened further and 10/20DMA’s formed bear cross.

Bears cracked next significant support at $3228 (Fibo 50% / daily Kijun-sen) and eye breakpoint at $3200 (floor of consolidation range under new record high), break of which to complete a failure swing pattern on daily chart and generate stronger reversal signal.

However, headwinds at $3200 zone can be expected, due to significance of support, with limited upticks likely to mark positioning for fresh acceleration of pullback from $3500 (new record high), if current factors that drive gold price persist.

Broken $3292/$3300 supports reverted to solid barriers which should cap potential stronger upticks and keep bears in play.

Break of $3200 trigger to unmask targets at $3164 (Fibo 61.8%), $3100 (round-figure) and $3084 (Fibo 76.4% of $2956/$3500).

Res: 3242; 3265; 3292; 3310.
Sup: 3200; 3164; 3116; 3100.

US stock futures climbed, and the dollar gained after China and the US made strong progress in trade talks, fueling hope that tensions will ease.

A regional stock index rose 0.7%, with the Hang Seng Index up for the eighth straight day, marking its best streak in a year. S&P 500 futures increased 1.5%, Nasdaq 100 jumped 2%, and European futures rose 0.8%.

Global bonds fell as Treasury yields rose and European debt futures dropped. Stocks in India climbed 3%, while those in Pakistan surged 9% after the two nations agreed to a ceasefire.

On the FX front, safe havens are struggling this morning as optimism over a trade deal. The dollar rose 0.4% to 145.93 yen and 0.5% to 0.8337 Swiss francs.

The dollar index stayed steady near a one-month high but remained 3.6% lower since the April 2 announcement of Trump’s "Liberation Day" tariffs.

The New Zealand dollar rose 0.3% to 0.5927, and the Australian dollar also gained 0.3% to 0.6432. Meanwhile, the euro dropped 0.2% to 1.1228, and the British pound fell 0.3% to 1.3288.

Currency Strength Chart:

Source: OANDA Labs Blog

US-China trade talks

China's Vice Premier He Lifeng called the weekend talks with US officials “an important first step” toward improving trade relations.

Though no specific actions were announced on Sunday, Lifeng said both sides agreed to set up a system for future discussions, to be led by US Treasury Secretary Scott Bessent and himself. Bessent promised more details and a joint statement on Monday.

Lifeng stressed that China-U.S. trade is about mutual benefits, rejecting the idea that one side must lose for the other to win. He said China is ready to work with the US to handle differences, strengthen collaboration, and “expand shared opportunities.”

Markets are likely to take cues from developments around the US-China talks and any announcements that are forthcoming. US Treasury Secretary Bessent to brief on China talks at 3AM EST, according to US Officials.

Economic data releases

From a data standpoint, it is a quiet start to the week. The biggest highlights will come from the Bank of England Bank Watchers conference 2025 at King’s Business School.

We will hear from BoE policymakers Lombardelli and Green who are both speaking at the event.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Chart of the day - DAX

From a technical standpoint, the DAX has gapped up over the weekend and pushed to within a whisker of the 24000 handle.

The DAX index has now printed all-time highs but with a lack of historical price action, technical analysis remains somewhat of a challenge.

I will be paying attention to psychological level and round numbers which tend to illicit a response.

Resistance ahead may be found at 24250 and 24500.

Immediate support rests at 23471 and 23212 respectively.

DAX Daily Chart, May 12, 2025

Source: TradingView.com (click to enlarge)