Sample Category Title

Daily Pivots: (S1) 0.7032; (P) 0.7053; (R1) 0.7079; More...

AUD/USD bounces notably today but stays in range below 0.7146. Intraday bias remains neutral first. Consolidations could continue and deeper retreat cannot be ruled out. But downside should be contained above 0.6896 support. On the upside, above 0.7146 will resume larger up trend to 100% projection of 0.5913 to 0.6706 from 0.6420 at 0.7213.

In the bigger picture, current development argues that rise from 0.5913 (2024 low) is reversing whole down trend from 0.8006 (2021 high). Further rally should be seen to 61.8% retracement of 0.8006 to 0.5913 at 0.7206. This will remain the favored case as long as 0.6706 resistance turned support holds, even in case of deep pullback.

The US Supreme Court recently ruled that the Trump administration cannot issue tariffs based on the International Emergency Economic Powers Act. This upends Trump’s current trade policy, as a majority of his tariffs are based on this ruling. The administration has other options. Following the ruling, Trump issued a blanket 15% tariff based on Section 122. As many countries faced higher tariffs than 15% before the ruling, the US effective rate tariff rate dropped from 16% pre-ruling to 13.7% post-ruling. In the future, the administration is likely to use a combination of Section 301 and 232 tariffs to bring tariffs back close to original levels (both require lengthy investigations). Though eventual tariff reimbursements and lower short-term effective tariff rates could provide a boost to the US economy, potential upsides are likely to be outweighed by the negative effects of higher uncertainty. That said, as the ruling constrains this administration and futures ones, US trade policy is likely to become more predictable in the longer run.

On 20 February, the Supreme Court finally issued a ruling in “Learning Resources v Trump”. The case revolved around whether Donald Trump could use the International Emergency Economic Powers Act (IEEPA) to set tariffs. In a 6-3 ruling, the Supreme Court ruled against the use of this law to impose tariffs on other countries. The Court noted that the constitution “gave Congress alone the power to impose tariffs during peacetime” and “did not vest any part of the taxing power to the executive branch”. As IEEPA only allows the president to regulate imports (and does not mention the word tariffs), it thus cannot be used to impose tariffs.

The decision is a blow to Donald Trump’s trade agenda. Most of his tariffs were based on IEEPA. Indeed, according to the Yale Budget Lab, the average effective tariff rate dropped from 16% to 9.1% immediately after the ruling. Though the Supreme Court ruling didn’t include a decision on reimbursements, many businesses will now be able to sue the government for tariff reimbursements. An estimated 175 billion USD was collected through IEEPA and could be reimbursed. These reimbursements, if received, would provide a mild stimulus to the economy, but would also exacerbate US budgetary issues.

Other options: Section 122

Though the ruling constrains Trump’s trade policies, the president has other options to impose tariffs without the need for congressional approval. He almost immediately invoked Section 122 from the 1974 Trade Act to impose a 10% global tariff. He announced a raise the day later to 15%. Section 122 allows Trump to impose tariffs on all countries to address balance of payments needs or to prevent a significant depreciation of the dollar. Section 122 comes with constraints, however. Congressional approval is needed after 150 days. Furthermore, 15% is the maximum percentage Section 122 allows to charge. As many countries faced higher tariff rates before the ruling, they will be pleased to see their effective tariff rate drop (see figure 1). Some countries such as the UK had faced a lower tariff before and will see a slight tariff increase. The effective tariff rate for the EU will also increase as fewer goods will be exempt from the 15% rate. Overall, as many countries see their tariff rates drop for now, the effective tariff rate falls from 16% before the ruling to 13.7% today.

Next options: Section 301 and 232

Though countries such as Brazil and China will be pleased to see their effective tariff drop, their relief is likely to be short-lived. The US administration is likely to use other options to bring effective tariff rates close to pre-ruling levels. Most likely is the usage of Section 301 from the 1974 Trade Act (which it announced it intends to do on most major trading partners). This allows the Trump administration to impose tariffs on a trading partner that has gained an “unfair advantage.” However, to impose it, a lengthy and cumbersome investigation normally needs to be done. In the first Trump administration, the investigation into China lasted more than six months.

On top of Section 301 tariffs, the administration will continue using Section 232 tariffs from the 162 Trade Expansion Act. These are tariffs that can be used to protect sectors where imports threaten national security (and also need investigations). They are already used for the car industry, steel & aluminum, kitchen cabinets, and upholstered furniture. Other sectors such as semiconductors are under investigation.

Economic consequences

The ruling will have a few economic consequences. First, as we mentioned there could be a mild stimulative boost from the tariff reimbursements. Second, the lower effective tariff will also likely be stimulative to US growth and lower US goods inflation. That said this effect is likely to be small as the effective tariff only declined by 2.3 percentage points. The drop is also likely to be short-lived as new Section 301 and Section 232 tariffs are likely to be imposed in the coming months.

The small positive economic boost from possible tariff reimbursement and temporary lower effective tariff rates is likely to be outweighed by the negative effect of continued trade policy uncertainty caused by this ruling. Indeed, as we argued last year (see Economic Opinion of 10 February 2025), tariff uncertainty can be as damaging as the direct effect of tariffs themselves as the uncertainty deters investment.

Following Liberation Day, trade uncertainty rose to an unprecedented high (see figure 2). Though it eased since, it remains at very elevated levels. The current ruling will keep uncertainty elevated in the coming months as the administration will gradually announce new Section 301 and Section 232 tariffs and several trade deals will have to be renegotiated.

That said, on the longer run, the Supreme Court’s ruling will lower trade uncertainty. As this administration (and future ones) cannot announce tariff increases on a whim anymore (given the need for investigations in Section 232 and 301), US trade policy is likely to become more predictable. This will eventually give investors some more certainty after a year of erratic trade policy making.

US and European equity markets rebounded yesterday as global investors digested the latest US tariff shake-up and the AI fear trade eased. LegalZoom, for example, which had been heavily hit by fears that Anthropic’s Claude could wipe out its business, jumped 2.5% from its lowest levels on fresh news that Claude unveiled features that could be integrated into the company’s products — making them more customizable and AI‑friendly.

That’s the brighter side of the medal: AI tools can enhance some of these software products — instead of replacing them — potentially helping these companies thrive alongside AI rather than disappear. The iShares Expanded Software ETF rebounded close to 2%.

The software stress is probably not over, but opportunities are clearly emerging.

In the Big Tech space, it was a good day too. Meta announced plans to buy AMD chips — a lot of AMD chips — to deploy up to 6 gigawatts of computing power. One gigawatt is roughly the output of a full-scale nuclear reactor and could power a small city. Meta is talking about the equivalent of six nuclear reactors — just for AI computing. Six gigawatts is enough to power 4–5 million homes. That’s the size of the deal Meta signed with AMD. The deal is worth tens of billions of dollars in revenue for AMD and pushed AMD’s stock price up by nearly 9% yesterday. That’s the good.

The bad is that Meta is spending money against investors’ will and taking on debt — something investors are growing increasingly uncomfortable with: more spending, increasingly on debt.

The ugly is that Meta is receiving warrants that would allow it to buy shares in AMD if the company hits certain performance targets. Meta could ultimately end up owning up to 10% of AMD. Again, the circular nature of AI deals attracts attention. Everybody’s hand is in everybody’s pocket, and if one of the companies stumbles, the whole group — increasingly running on debt — could wobble.

For now, Nvidia and AMD will continue to grow given the hyperscalers’ huge spending plans in AI infrastructure involving chips, despite investors’ reluctance. The risk is, what happens if the big spenders are forced — or decide — to spend less? Could a gap left by Big Tech be filled by smaller spenders? Time will tell. The world is migrating to AI, but the spending increase from outside Big Tech is obviously more granular.

Today, Nvidia will provide clarity on how many chips it sold last quarter and how much it earned. Q4 revenue is projected near ~$65.6–66.1 billion, which would represent nearly 70% year-over-year growth compared with $39.3bn earned in Q4 last year. Note that before the AI boom, this company’s quarterly revenue was around $6–7bn, and growth is expected to continue.

Now, all of this sounds great — but investors won’t just cheer the headline. Last quarter was a good reminder. Nvidia delivered strong top-line numbers, yet the stock didn’t fully ride the wave. Why? Because investors zoomed in on the details — specifically the widening gap between revenue booked and cash actually collected. And that matters in a world of rising leverage and massive AI capex. In this environment, investors don’t just want contracts. They want cash in the door.

So yes — Nvidia has built a track record of meeting and beating expectations in this AI cycle. But this time again, it won’t just be about revenue growth or EPS beats. The devil will be in the details — cash flow, receivables, margins and forward guidance. I’m afraid Nvidia alone may not be able to reverse the fears. Yes, AI spending remains strong, but investors are pulling back — not from Nvidia, but from its biggest clients. Given that hyperscalers make up almost 50% of Nvidia’s client book, the AI stress is likely not over just yet.

Broadly, Nvidia’s results will pretty much mark the end of the earnings season, and the numbers look strong. In Q4 2025, the S&P500 posted 13.2% earnings growth — its fifth consecutive quarter of double-digit earnings growth. Other good news is that the rally has spread to non-tech sectors as well, with the S&P500’s equal-weighted index mostly closing its gap with the tech-heavy, market-cap weighted version.

The S&P 500 looks toppish since the start of the year due to the AI fear trade — both in Big Tech and the software space. The latest AAII investor sentiment index confirms that the bears took the upper hand over the bulls for the first time since November — hinting that much of the selling may already be done. Still, the major US indices need technology to perform well, as the Mag 7 companies make up to a third of the index. Without their help, gains from rotation would be marginal.

Looking at the data, the Conference Board pointed to improved sentiment in February, while Home Depot warned that its customers — middle- and upper-income homeowners — are worried about housing affordability, job stability, and higher financing costs.

Meanwhile, Donald Trump, at the longest State of the Union speech ever, said America is “bigger, better, richer and stronger than ever before. ‘We’re winning so much…’” he added.

Alas, the US dollar weakened in Asia, pushing the EURUSD to the 1.18 level. The USDJPY retraced losses near 156, but Takaichi voiced apprehension regarding further Bank of Japan (BoJ) rate hikes— which could temper the impact of her expansionary fiscal plans aimed at boosting growth — and nominated two reflationist academics to join the BoJ policy board, suggesting that the yen will remain under pressure. Elsewhere, the AUDUSD jumped past 0.71 on stronger-than-expected CPI numbers, reviving Reserve Bank of Australia (RBA) hawks.

Today, euro area CPI figures are expected to confirm softening inflation that could allow the European Central Bank (ECB) to act if trade tensions flare and threaten economies. For now, the Stoxx 600 doesn’t look like it needs any help, trading near an all-time high, supported by stronger-than-expected economic data, and ignoring the fresh tariff uncertainty.

In focus today

In the euro area, the final January inflation data is released. We expect it to confirm the flash release of 1.7% y/y in headline and 2.2% y/y in core. As there were several changes to taxes in the different euro area countries in January (e.g. German VAT on restaurants) the HICP at constant taxes will shed light on the underlying inflation momentum.

In Norway, wage growth in both 2024 and 2025 exceeded the expected outcome from the central wage negotiations, so the wage statistics is getting more relevant. Today, the January figures will be published, and it will be interesting to see whether wage growth continues to decline into 2026, or whether lower unemployment also starts to lift wage growth. We expect that wage growth declined to below 3.5% y/y in January, but this is mainly due to base effects that will be partially reversed again in February.

In Sweden, although the Producer Price Index is interesting in its own right, especially given recent downside surprises to inflation, it is hardly a market mover and with an otherwise empty macro calendar the main events of the day will be the speeches delivered by the Riksbank's Per Jansson and Erik Thedéen.

Economic and market news

What happened overnight

In the US, Donald Trump's State of the Union speech, which was the longest on record at 1h47mins, touched upon many of past year's key policy issues but was light on actual forward-looking policy signals. He emphasized that US will never allow Iran to gain a nuclear weapon, but said he wants 'to solve the issue with diplomacy'. Trump repeated his earlier claims that he has ended eight wars in 10 months, and that inflation is now coming lower thanks to his policies, referring specifically to lower taxes as well as prices of electricity, health care and eggs. He emphasized that tariffs 'will remain in place' under alternative legal statutes, which do not require congressional action, but refrained from more direct attacks against the Supreme Court. We do not expect the speech to have a significant impact on financial markets, or Republicans' popularity in polling ahead of the midterm elections later in the year.

What happened yesterday

In the US, the Conference Board's consumer confidence measure rebounded modestly in February to 91.2 (cons: 87.0, prior: 89.0), though the indices remain at weak levels. Future expectations recovered, while the current situation assessment weakened further. The widely followed 'jobs plentiful' index also rose modestly, but remains at low levels compared to pre-covid.

ADP's latest weekly private employment growth estimate came in at 12.75k. This is a 4W rolling average until 7 February, up from a revised 11.50k last week. At face value, it suggests strengthening jobs growth momentum, marking the fastest pace of hiring since late November. This is equivalent to a monthly increase of over 50k jobs.

On US monetary policy, Chicago Fed's Goolsbee (non-voter) took a notably hawkish stance, emphasising the need to see clear progress on inflation before supporting further rate cuts. His dissent already in December to hold rates steady underscores his position as one of Fed's most hawkish participants. Atlanta Fed's Bostic (non-voter) highlighted the economy's resilience to last year's trade shocks and current AI-driven growth, supporting a 'mildly restrictive' policy, while cautioning that resurging inflation could warrant rate hikes. Markets are currently pricing a coin flip of a cut in June. However, we expect cooling real growth will prompt the Fed to resume policy easing already in June.

In Hungary, the Central Bank of Hungary cut its Base Rate with 25bp to 6.25%, as widely expected.

Equities: Global equities staged a rebound rally of 0.5% after Monday's sell-off, in what was largely a reversal of Monday's loss, albeit not to the full extend. S&P500 rose 0.8%, with Nasdaq 1% higher and Russell2000 1.2% higher. Stoxx600 was 0.2% higher. As the AI scare was not part of the trading session, IT, Industrials and Consumer discretionary was among the best performing sectors. Overnight, equities are higher in Asia, and US futures are up. Looking specifically at the south Korean Kospi, which is our preferred way to express the AI / tech theme, it is up 2.8% today, adding to the "relentless rally" it has been on this year and is up 45% year to date.

FI and FX: Positive risk sentiment dominated yesterday's session with stronger equities. Movements within foreign exchange and fixed income were relatively modest. European rates initially rallied in a curve flattening but the move reversed later in the day. US rates were roughly unchanged. EUR/USD trades a tad higher this morning at 1.180. In its State of the Union Speech, which was the longest such speech on record at 1 hour and 48 minutes, President Trump declared a booming economy and a "golden age" message at the same time as delivering several combative attacks on Democrats and the Supreme Court. Market reaction was complacent.

Daily Pivots: (S1) 1.3686; (P) 1.3705; (R1) 1.3719; More...

USD/CAD edged higher to 1.3724 but quickly retreated. Intraday bias stays neutral for the moment. Consolidations from 1.3480 is in progress and stronger rebound might be seen. But upside should be limited by 55 D EMA (now at 1.3733) to complete the pattern. On the downside, below 1.3630 minor support will bring retest of 1.3480 low. Firm break there will resume larger down trend from 1.4791 to 61.8% projection of 1.4791 to 1.3538 from 1.4139 at 1.3365. However, sustained break of 55 D EMA will bring further rise to 1.3927 resistance and above.

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. For now, medium term outlook will be neutral at best, until there are signs that the correction has completed, or that a bearish trend reversal is confirmed.

Dollar fell broadly again today, pressured by renewed risk appetite as global equities pushed higher. The greenback struggled to attract safe-haven demand despite lingering geopolitical and trade uncertainties, with investors favoring higher-beta currencies instead.

Asian markets set the tone. Both Nikkei 225 and KOSPI hit fresh record highs, tracking the tech-driven rebound in the US overnight. Hardware and AI-linked names continued to draw inflows as dip-buying behavior dominated. The AI disruption theme remains ever-present in markets, but it has yet to spark a durable correction. Instead, volatility episodes are being treated as opportunities to add exposure rather than exit positions.

Trade and geopolitical risks continue to simmer in the background. Tariff uncertainty and elevated tensions with Iran have injected caution, but they have not derailed the broader constructive tone. Risk appetite may be tempered, but it is not reversing. Many analysts now place roughly a 50% probability on a US-led military strike against Iran. That risk has been reflected in higher oil and precious metals prices, yet broader asset classes show limited signs of stress.

Attention now turns to the next round of US-Iran talks in Geneva tomorrow. Diplomatic signals will be closely scrutinized, especially after President Donald Trump reiterated in his State of the Union address that negotiations are ongoing and that he prefers a diplomatic resolution.

On trade, Trump’s remark that tariff revenue could eventually replace federal income tax reinforced the message that tariffs are a structural pillar of his policy agenda. Markets increasingly see tariffs as permanent features rather than temporary tactics.

In currency markets, Aussie led gains, buoyed by improved sentiment and firmer domestic inflation data that strengthens expectations of another rate hike from the RBA in May. Kiwi and Sterling followed, also benefiting from the risk-positive backdrop. In contrast, Dollar languished at the bottom of the performance board, trailed by Loonie and Yen. Euro and Swiss Franc held mid-pack.

In Asia, Nikkei closed up 2.30%. Hong Kong HSI is up 0.42%. China Shanghai SSE is up 0.66%. Singapore Strait TImes is down -0.26%. Japan 10-year JGB yield is up 0.022 at 2.135. Overnight, DOW rose 0.76%. S&P 500 rose 0.77%. NASDAQ rose 1.04%. 10-year yield rose 0.004 to 4.033.

Australia trimmed mean CPI climbs to 3.4%, RBA hike seen inevitable

Australia’s monthly CPI for January came in hotter than expected, reinforcing expectations of further tightening from the RBA. Headline inflation held unchanged at 3.8% yoy, above the 3.7% consensus and marking the joint highest reading since mid-2024.

More concerning for policymakers, trimmed mean CPI rose from 3.3% yoy to 3.4%, also exceeding forecasts and standing at its highest level since Q3 2024. Core inflation has now been at or above 3% since July 2025, remaining clearly outside the RBA’s 2–3% target band.

Housing (+6.8%), food and non-alcoholic beverages (+3.1%), recreation and culture (+3.7%), were the largest contributors to annual price pressures.

Markets had already leaned toward a May rate hike, and today’s data does little to challenge that view. Some economists argue the RBA may be “a little bit behind the curve,” risking a scenario where inflation becomes entrenched and requires more forceful tightening later. With price pressures proving persistent, another rate increase is increasingly viewed as close to inevitable.

CPI supports AUD, but breakout pending; AUD/CAD bullish, GBP/AUD bearish

Australian Dollar strengthened following January’s stronger-than-expected CPI data, but the move has resembled a "steady climb" rather than a "breakout surge". While markets interpreted the firm headline and core readings as reinforcing the hawkish stance of the RBA, positioning remains measured.

One reason is that a May rate hike is already largely priced in. After the RBA’s hawkish increase earlier this month, traders had moved quickly to factor in another step. The latest CPI print confirms that narrative but does not materially extend it. For further upside momentum, markets would likely need to price tightening beyond May. That, however, may depend more heavily on the comprehensive Q1 quarterly inflation report due April, rather than the monthly indicator.

As RBA economic analysis chief Michael Plumb noted yesteday, it will take time to understand the properties and seasonal patterns of the new monthly data. For now, policymakers continue to place greater weight on quarterly measures, limiting the immediate impact of monthly fluctuations.

Global uncertainty also tempers enthusiasm. Ongoing trade tensions, fresh US tariff measures, and persistent US–Iran geopolitical risks act as a natural ceiling for risk-sensitive currencies like the Aussie.

Still, the broader tone for Aussie remains bullish. With inflation holding above target and core measures edging higher, the policy bias is clearly toward further tightening, keeping AUD underpinned on dips.

Technically, AUD/CAD has returned to test 0.9697 resistance level with today's bounce. Decisive break would confirm resumption of the broader rally from the 0.8440 (2025 low) and open the way toward 261.8% projection of 0.8902 to 0.9225 from 0.9055 at 0.9901.

However, failure to clear that resistance cleanly could invite consolidation. Break below 0.9597 support would would bring deeper correction to 55 D EMA (now at 0.9439) first.

While GBP/AUD shows waning downside momentum as daily MACD divergence emerges, there is no clear sign of bottomg yet. The downtrend from 2.1643 (2025 high) high remains intact, with next target at 200% projection of 2.0848 to 1.9984 from 2.0472 at 1.8744.

However, firm break of 1.9327 resistance will indicate short term bottoming, and bring stronger rebound towards 55 D EMA (now at 1.9674).

Fed's Collins sees mildly restrictive rates on hold “for some time”

Boston Fed President Susan Collins  indicated that the Fed is likely to keep interest rates steady “for some time”, pointing to improving labor market conditions and unresolved inflation pressures. In remarks delivered at at event overnight, she said employment data show “at least some more signs” of stability.

Collins  argued that after 175 basis points of easing, policy is now only mildly restrictive and may already be close to neutral. Given that backdrop, she said it is “quite likely” the current rate range will remain "appropriate" while officials seek "more evidence" that inflation is firmly moving back toward 2%.

Turning to trade policy, Collins noted that the Supreme Court’s ruling against sweeping tariffs injects fresh uncertainty into the outlook. She warned that if companies have already passed higher import costs through to consumers, those price increases are unlikely to be reversed, potentially keeping inflation elevated.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3686; (P) 1.3705; (R1) 1.3719; More...

USD/CAD edged higher to 1.3724 but quickly retreated. Intraday bias stays neutral for the moment. Consolidations from 1.3480 is in progress and stronger rebound might be seen. But upside should be limited by 55 D EMA (now at 1.3733) to complete the pattern. On the downside, below 1.3630 minor support will bring retest of 1.3480 low. Firm break there will resume larger down trend from 1.4791 to 61.8% projection of 1.4791 to 1.3538 from 1.4139 at 1.3365. However, sustained break of 55 D EMA will bring further rise to 1.3927 resistance and above.

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. For now, medium term outlook will be neutral at best, until there are signs that the correction has completed, or that a bearish trend reversal is confirmed.

Key takeaways

• RBA may maintain hawkish stance: Australia’s core CPI rose to 3.4% y/y in January, above expectations. Markets are now pricing another hike in May, reinforcing a tightening bias.
• Yield spread favours AUD strength: The Australia–US short-term rate spread has widened sharply, supporting further AUD appreciation. The Aussie is already the best-performing major currency YTD, up 5.8% against the US dollar.
• Bullish technical setup intact: AUD/USD has formed a minor bullish base at the 20-day moving average. A break above 0.7110 opens room toward 0.7140–0.7210, while 0.7020 remains key support.

The RBA, Australia’s central bank, was the first developed nation central bank (other than the Bank of Japan) to kickstart a potential interest rate hike cycle, raising its cash policy rate by 25 basis points to 3.85% on 3 February 2026.

The decision marked the first-rate hike since November 2023, underscoring renewed cost pressures that intensified in H2 2025. Today’s hotter-than-expected core CPI data for January, which recorded a 3.4% year-on-year rise versus 3.3% y/y consensus and above December 2025’s print of 3.3%, is likely to strengthen the hawkish vibes in the RBA.

The latest 3.4% y/y print in Australia’s core CPI is the highest since September 2024 and continued to stay “stubbornly” above RBA’s inflation target band of 2-3%.

Short-term interest rate futures in Australia have started to price in a further rate hike by the RBA in May to increase the cash rate to 4.1%.

Monthly implied future policy interest rate curves spread suggest a hawkish RBA

Fig. 1: AU/US monthly implied future policy interest rate curves spread as of 25 Feb 2026 (Source: MacroMicro)

In addition, the spread between the monthly implied future policy interest rate curves for Australia and the US (derived from short-term interest rate futures) has risen steadily and shifted upwards (see Fig. 1).

The spread for May 2026 is now at 0.52%, a widening of 29 bps from 0.23% recorded three months ago. The current upward trajectory of Australia’s short-term interest rate premium over the United States’ short-term interest rates is likely to support a further strengthening of the Australian dollar against the greenback, which has a year-to-date positive return of 5.8% as of 25 February 2026 at the time of writing, the best-performing major currency against the US dollar.

Let us now focus on the short-term (1 to 3 days) technical trend and key levels to watch on the AUD/USD.

AUD/USD – Minor bullish basing has formed after a retest on the 20-day MA

Fig. 2: AUD/USD minor trend as of 25 Feb 2026 (Source: TradingView)

The recent retest on the 20-day moving average on 20 February and 24 February has formed a potential minor bullish basing formation for the AUD/USD, with its neckline resistance at 0.7110 (see Fig. 2).

Bullish bias with 0.7035/0.7020 key short-term pivotal support on the AUD/USD. A clearance above 0.7110 sees the next intermediate resistances coming in at 0.7140, 0.7175, and 0.7210.

On the flip side, failure to hold at 0.7020 and an hourly close below it negates the bullish tone to see another round of minor corrective decline sequence unfolding to expose the next intermediate supports at 0.6980 and 0.6907/0.6890.

Key elements to support the bullish bias on AUD/USD

• Minor bullish basing formation at the 20-day moving average.
• The hourly RSI momentum indicator of the AUD/USD has shaped a “higher low” above the 50 level, which suggests a potential resurgence of short-term bullish momentum.

From the January 23 high, EURJPY completed a measured three‑swing pullback that reached 180.78. This decline has been identified as wave (4) within the broader Elliott Wave structure. Following the completion of this corrective phase, the pair turned higher in wave (5). However, to fully confirm the bullish continuation and eliminate the possibility of a double correction, price must break decisively above the January 23 peak at 186.87. Until that level is surpassed, traders should remain aware of potential alternative scenarios.

From the wave (4) low, the rally has unfolded in a clear five‑swing sequence, which favors further upside. Wave ((i)) advanced to 182.27, followed by a corrective pullback in wave ((ii)) that ended at 180.8. The pair then nested higher within wave ((iii)). Inside this structure, wave (i) concluded at 183.15, while wave (ii) dipped modestly to 182. The subsequent rally carried wave (iii) to 184.18, before a minor retracement in wave (iv) ended at 183.3.

Near term, the expectation is for EURJPY to continue higher in wave (v), which will complete wave ((iii)). As long as the pivot at 180.78 remains intact, pullbacks should find support in the typical three, seven, or eleven‑swing corrective sequences. This technical condition reinforces the bullish bias and suggests that the pair retains potential for further appreciation.

EURJPY 1-Hour Elliott Wave Chart From 2.25.2026

EURJPY Elliott Wave Video:

https://www.youtube.com/watch?v=SFKEkTQ_-bg

Fiscal anxiety has pushed yields far but fundamentals still point to a 2.0% yield for the 10Y bond in Japan.

There has been a lot of concern around Japan’s bond market, centred around the impact of Prime Minister Sanae Takaichi’s fiscal package. These concerns overlook some of the fundamental shifts in the Japanese economy that will allow the government to sustain greater spending.

To start, it is worth putting the JPY17.1tril package (~10% of GDP) into context. Japan’s primary deficit as a percentage of its GDP of 1.4% is far lower than that of its peers like the US of around 3%. Japan has also made more progress reducing its debt-to-GDP ratio since the pandemic than other major economies and in contrast to the US where, despite a strongly growing economy, this ratio has increased. Compared to its peers, Japan has managed its fiscal position well. With inflation sustaining a 2.0%+ pace, nominal debt will also now be deflated for the first time in decades.

Some may point to Japan’s 1.0% real GDP growth as evidence that it cannot grow out of debt, but this overlooks the drag from a declining population. Adjusting for demographics, per‑capita GDP grew by 4.2% in 2024, broadly in line with the US, UK, South Korea and Australia. With government spending largely tied to population growth rather than headline GDP, modest aggregate growth need not imply deteriorating fiscal dynamics. While population ageing will place upward pressure on social spending, this is likely to be partly offset by arising participation.

Crucially, debt dynamics also benefit from low interest costs. Interest payments remain around 1.0% of GDP, while nominal GDP growth – what matters for debt sustainability – has averaged around 4.0% over the past two years. In this environment, debt‑to‑GDP can stabilise even with modest fiscal deficits, provided per‑capita growth remains robust.

There is also upside for revenue going forward. The labour market is tight as ever, with labour force participation hitting 64.1%, the highest since December 1992, supported by an increase in participation of women and seniors—female labour force participation is at a record high of 56.7%. As we have previously discussed, this trend is unlikely dissipate with Japan’s population continuing to age and shrink. A larger labour force alongside greater nominal wage increases should help support income tax revenues.

Also assisting revenue growth, will be the impact corporate governance reforms have had on profitability. Over the last three years, the Tokyo Stock Exchange requirements have forced firms to unwind their cross-shareholdings and improve capital efficiency which has seen the return on equity climb to an average of 5.5 in the year to September 2025, compared to an average of 3.4 over 1990–2019 and 4.0 over 1960–90. Combined with a shift in price-setting behaviour and strong export earnings, corporate profits have reached levels unseen since before the Lost Decades. The benefits of these corporate reforms are likely to support profitability and hence corporate tax revenue going ahead.

While external risks are significant, particularly China’s competitive position in autos and semiconductor manufacturing, these reforms will also help enhance adaptability. Firms are now allocating capital to research and development versus maintaining inefficient conglomerates.

Alongside serviceability concerns, investors have expressed concerns around excess supply of Japanese Government Bonds (JGBs) as the Bank of Japan slows its purchases of bonds. However, these concerns are overstated. For one, the BoJ has been vocal about reducing its holdings in a way that “avoid[s] inducing destabilizing effects on the financial markets”. This isn’t just rhetoric. The BoJ tapered its pace of purchases in July 2025 from JPY400bn to JPY200bn and have, on numerous occasions, affirmed that “In the case of a rapid rise in long-term interest rates, it will make nimble responses by, for example, increasing the amount of JGB purchases…”. Note as well, their current purchase pace is not insignificant at around JPYs2.9tril a month (which annualises to around JPY36tril a year) against the Ministry of Finance’s (MoF) planned JPY190tril of issuance through FY2025 (ending in March 2026). The MoF also has flexibility on the duration of issuance, offering another way to contain market volatility and an unwanted tightening of financial conditions.

Interest cost concerns also miss the mark for another reason. Interest costs as a share of GDP remain low in Japan compared to peers and, given the BoJ owns around half of outstanding JGBs, almost half of the Government’s initial interest outlay flows back to the government, making them fiscally neutral. The pace of the BoJ’s balance sheet normalisation will be gradual and only as market conditions warrant, and so this interest cost offset is set to remain in place for the foreseeable future.

The portion of the bond market not held by the BoJ is mostly held by domestic investors, with foreign ownership sitting at 14%, compared to 23% in the US and 31% in the UK. This insulates against risks of foreign capital flight in times of uncertainty making comparisons between Takaichi and Truss unjust. Domestic players tend to hold JGBs to match liabilities, particularly important for Japan’s large life insurance sector, and regulatory requirements. The MoF has proven nimble in its flexibility to match issuance tenors to demand to accommodate preferences. In the near term, our Strategy team continues to expect that Japan is unlikely to export as much capital to offshore bonds and will continue to purchase JGBs. Further information on this will come in April as the investment intentions of Japan's mega life insurers are made public.

Given these factors, we anticipate the premium markets are pricing into JGBs will fade with time returning the 10-year government bond yield to 2.0%, roughly 100bps above the terminal policy rate. This is still at the high end of global cash to 10-year curve spreads, but not deleteriously so. We see this adjustment unfolding over the next year, as markets continue to focus on supply dynamics and political noise even as Japan’s underlying fiscal and macro fundamentals remain supportive.

A touch stronger than expected, with minimal risk to our March quarter estimates.

• Electricity and garments & footwear boosted the January CPI more than expected.
• In the month the Trimmed Mean was as expected with revision resulting in a modest uptick in the annual pace to 3.4%yr.
• Our preliminary review of the January Monthly CPI suggests little risk current inflation profile.

We start 2026 with a complete Monthly CPI. In January the CPI gained 3.8% in the year, a touch stronger than Westpac’s estimate of 3.6%yr and the market estimate of 3.7%yr. In the month, the CPI lifted 0.4%, stronger than Westpac’s published near-cast of 0.1% on the back of stronger than expect gains in electricity and garments & footwear offset somewhat by a larger than expected fall in holiday travel and a smaller than expected rise in health.

January is seasonally a soft month with the seasonally adjusted CPI lifting 0.5% in January. Due to the short history of the new monthly expenditure class series, we expect to see ongoing revisions to the CPI seasonal factors with the ABS fine tuning the process as they gather more data. In the December release the ABS estimated a seasonal impact of 0.3% in January, this was reported as 0.1% in the January release. Remembering that the Trimmed Mean is seasonally adjusted, this suggests we should expect to see revisions to the Trimmed Mean until the seasonal adjustment process is more mature.

The Monthly Trimmed Mean (TM) measure was up 3.4% in the year to January, Westpac and the market had estimated 3.3%yr, which is up a touch from 3.3%yr in December.

The TM lifted 0.3% in the month of January, on par with Westpac’s estimate of 0.3% with the higher than expected annual pace due to revisions. The monthly TM has printed 0.3%mth in five of the last six months. This month expenditure classes trimmed off the top included electricity, insurance, garments, child care, veterinary services and take away & fast foods. Trimmed off the lower bound in January included automotive fuel, vegetables and other non-durables.

As Michael Plumb, Head of Economic Analysis Department at the RBA noted in a speech this week, the RBA is using the expanded monthly data to evaluate and compare underlying inflation measures and is examining bias, seasonality, responsiveness and leading properties with a view of eventually moving to a monthly measure of core inflation. But it will take time to understand the properties and seasonal patterns of the data. As such the Bank will continue to focus on the quarterly CPI for forecasting and assessing underlying inflationary pressures.

Consistent with out preliminary review we see little risk to our current inflation profile. Our current estimate for the March quarter TM is 0.9%qtr, lifting the annual pace very slightly to 3.5%yr from 3.4%yr. Our March quarter CPI estimate is 1.1%qtr with the annual pace lifting from 3.6%yr to 3.8%yr as the energy rebates roll off boosting electricity prices in the CPI.

January Monthly CPI Indicator in more detail

Rents were a touch softer than expected lifting 0.3% vs. Westpac’s 0.4% estimate. We are closely watching rents to see if this modest trend continues as expected. Dwellings gained 0.4% in the month, on par with our expectations as we note a strengthening trend which is likely to continue through the first quarter of 2026. The ABS notes that project home builders in some cities have raised base prices in response to increased demand and to pass through higher labour and material costs.

Electricity gained 18.5% in January compared to our forecast for 5.0% with the rise this month driven by households using up the extended EBRF rebates. This has seen the gap between electricity prices reported in the CPI, and the prices before rebates, almost close as it is now just 0.9%. We would expect this gap to close in February and without any new rebates, electricity prices will return to more normal pricing arrangements.

Holiday travel & accommodation fell –7.6% in January, a bit more than our estimate of –5.9% due to a –16.3% decline in international travel being only partially offset by a small 1.3% increase in domestic travel.

A key upside surprise was in clothing & footwear which gained 2.9% in the month compared to our estimate of 0.1%. Most of this discrepancy was due to garments which lifted 2.2% vs. Westpac’s expectation for a seasonal –1.6% decline. Also of note was a robust 4.2% increase in footwear for men and a 5.7% gain in accessories.