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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.

Daily Pivots: (S1) 0.8315; (P) 0.8336; (R1) 0.8357; More...

Intraday bias in EUR/GBP remains neutral and near term outlook is mixed. On the upside, above 0.8376 minor resistance will bring stronger rally towards 0.8472. However, on the downside, break of 0.8290 will resume the fall from 08472 to retest 0.8221 low.

In the bigger picture, rebound from 0.8221 medium term bottom could extend higher through 55 W EMA (now at 0.8435). However, medium term outlook will be neutral at best as long as 0.8624 cluster resistance zone (38.2% retracement of 0.9267 to 0.8221 at 0.8621) holds. Another decline through 0.8221 would remain mildly in favor.

Daily Pivots: (S1) 1.6484; (P) 1.6531; (R1) 1.6562; More...

Intraday bias in EUR/AUD remains neutral for the moment. The favored case remains that consolidation pattern from 1.6800 has completed at 1.6391 already. On the upside above 1.6631 will bring retest of 1.6800 first. Firm break there will resume the rally from 1.5963 to 61.8% projection of 1.5693 to 1.6800 from 1.6391 at 1.6908.

In the bigger picture, with 1.5996 key support (2024 low) intact, larger up trend from 1.4281 (2022 low) is still in favor to resume through 1.7180 at a later stage. Nevertheless, sustained break of 1.5996 will indicate that such up trend has completed and deeper decline would be seen.

Daily Pivots: (S1) 0.9420; (P) 0.9447; (R1) 0.9468; More....

Intraday bias in EUR/CHF stays neutral with mixed near term outlook. On the downside, break of 0.9359 support will revive the case that choppy rise from 0.9204 is merely a correction and has completed. Deeper fall should then be seen back to retest 0.9204 low. However, firm break of 0.9516 and sustained trading above 0.9481 fibonacci level will carry larger bullish implication and extend the rise from 0.9204.

In the bigger picture, sustained trading above 38.2% retracement of 0.9928 to 0.9204 at 0.9481 should confirm that whole fall from 0.9928 has completed at 0.9204. Further rally should then be seen back to 61.8% retracement at 0.9651 and above. However, another rejection by 0.9481 will keep outlook bearish for extending larger down trend through 0.9204.

Gold price rallied further and traded to a new all-time high. Crude oil is showing bearish signs and might decline below $70.00.

Important Takeaways for Gold and WTI Crude Oil Prices Analysis Today

• Gold price started a steady increase above the $2,880 zone against the US Dollar.
• A major bullish trend line is forming with support at $2,885 on the hourly chart of gold at FXOpen.
• WTI Crude oil prices failed to clear the $73.50 region and started a fresh decline.
•  There is a key bearish trend line forming with resistance at $71.00 on the hourly chart of XTI/USD at FXOpen.

Gold Price Technical Analysis

On the hourly chart of Gold at FXOpen, the price found support near the $2,855 zone. The price remained in a bullish zone and started a strong increase above $2,900.

There was a decent move above the 50-hour simple moving average and $2,920. The bulls pushed the price above the $2,930 and $2,935 resistance levels. Finally, the price climbed as high as $2,940 before there was a pullback.

The price tested the $2,880 zone and is currently rising. There was a move above the 23.6% Fib retracement level of the downside correction from the $2,940 swing high to the $2,878 low, and the RSI is stable above 45.

Immediate resistance is near the $2,910 level and the 50% Fib retracement level of the downside correction from the $2,940 swing high to the $2,878 low.

The next major resistance is near the $2,915 level. An upside break above the $2,915 resistance could send Gold price toward $2,940. Any more gains may perhaps set the pace for an increase toward the $2,950 level.

Initial support on the downside is near a major bullish trend line at $2,885. The first major support is near the $2,878 zone. If there is a downside break below the $2,878 support, the price might decline further.

In the stated case, the price might drop toward the $2,855 zone. Any more losses might push the price toward the $2,840 level.

WTI Crude Oil Price Technical Analysis

On the hourly chart of WTI Crude Oil at FXOpen, the price struggled to clear the $73.50 resistance zone against the US Dollar. The price started a fresh decline below the $72.20 support.

The price even dipped below the $71.50 level and the 50-hour simple moving average. The bulls are now active near the $70.20 level. A low was formed at $70.12, and the price is now consolidating losses. If there is a fresh increase, it could face resistance near the 50% Fib retracement level of the downward move from the $71.87 swing high to the $70.12 low at $71.00.

There is also a key bearish trend line forming with resistance at $71.00. The first major resistance is near the $71.85 level. Any more gains might send the price toward the $72.20 level.

The main resistance could be near the $73.35 level. Conversely, the price might continue to move down and revisit the $70.00 support. The next major support on the WTI crude oil chart is $68.80.

If there is a downside break, the price might decline toward $66.50. Any more losses may perhaps open the doors for a move toward the $65.00 support zone.

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In focus this week

Today, European leaders gather in Paris for crisis talks about the future of European security regardless of US engagement, how to support Ukraine and strengthen Europe's position to negotiate. This comes as a response to President Donald Trump opening peace talks with Russia while limiting European involvement in the negotiations.

Markets are continuing to observe the recent movements in politics around the world, with the highlights being the potential ceasefire in Ukraine, the German federal election on Sunday and any signs of Xi-Trump talks related to the recent tariff increases.

The main data print of the week is anticipated to be the release of the PMIs from most major countries on Friday, apart from China, and with US regional surveys coming in the days before. Focus will be on the euro area release as to whether it continues to move in a positive direction supporting the view that the European economy is slowly being supported by rising real incomes and lower interest rates.

Today in Sweden, the monthly labour force survey is due at 08.00 CET where we expect to see a stabilisation of the current weak labour market, but without any marked improvement in the unemployment figure. Such an outcome would be in line with last week's PES report that showed an unchanged unemployment rate and a return of layoffs to their historical average after being at elevated levels in early autumn.

Economic and market news

What happened overnight

In the US, Secretary of State Marco Rubio said that Ukraine and Europe would be part of any real negotiations to end the war in Ukraine. The peace talks will kick off this week in Saudi Arabia between negotiating teams from the US and Russia. Ukraine's representatives apparently will not attend and their role in the process remains unclear. Read more on an alternative 'dirty deal' scenario and the expected market impacts in Research Global - What would a dirty deal in Ukraine mean for markets? 16 February.

In Japan, Q4 GDP came in above expectations at 2.8 % (cons: 1.0 %) and consumption growth for the same period slowed by less than expected, staying in the positives at 0.1% (cons: -0.3%). The strong prints caused the yen to rise and potentially pave the way for additional BoJ hikes down the road.

What happened over the weekend

The Security Conference in Munich, dominated headlines over the weekend, with a primary focus on the US-EU relationship. EU leaders are set to meet in Paris to continue discussions on the future of the EU across several topics.

In the US, January retail sales surprised to the downside across both headline sales at -0.9% m/m (cons: -0.2% m/m) and control group sales (-0.8% m/m SA). Overall, the print was weak, but less than the headline figures would suggest. The modest downtick in US yields is justified, but this should not have dramatic market impact.

In the euro area, employment increased 0.1% q/q in the fourth quarter of 2024, showing that the labour market remains resilient despite weak growth. The picture seen last year appears to be repeating itself, with Spain recording strong employment growth at 1.0 % q/q and Germany stagnating at 0.0 % q/q. We forecast a small increase in the unemployment rate as employment growth stagnates and the labour force grows.

In Norway, the Norwegian Technical Calculation Committee for Wage Settlements released their report ahead of this year's central wage negotiations. Notably, annual wage growth in 2024 came in at 5.3 % and the committee expects inflation to drop to 2.5 % in 2025, which could limit the upside risk to Norges Bank's wage growth estimate for this year of 4.2 %. All in all, the expected rate cut in March is not at risk. We maintain our call for four cuts in 2025, as growth has been weaker than expected, oil investments are about to turn, and domestic inflation keeps falling.

Equities: US and European equities were little changed on Friday and sector performance tightly bunched. This was a well-deserved break for markets, after rallying >1.5% for the week. Risk on was visible on Friday too: Europe outperformed the US (9% ytd vs 4% in the US). Vix dropped below 15, which is the lowest since late January. Investors found financing in defensives, with health care and consumer staples the worst performing sector on Friday. All in all, risk-on continued in markets last week despite the higher inflation print, hawkish Fed speeches and dirty dealmaking in Ukraine. This goes in line with our view that as long as demand stays strong, equity investors will be happy. Futures are higher this morning but note that US markets are closed for holiday.

FI: The direction for global bond yields still seems very uncertain even though we have been pricing out rate cuts from the Federal Reserve since the autumn last year. However, if we look at the movement in 10Y US Treasury yields since the inauguration of Donald Trump there has been no clear direction with 10Y Treasuries trading with a yield between 4.4% to 4.6% based on signals from the Federal Reserve as well as key economic data such as last week's US inflation. However, there has been a clear path for the US 10Y swap spread, which has widened some 10bp since late January.

FX: The broad USD declined last week as markets unwound some of the stretched USD-bullish positioning tied to Trump's policy agenda, particularly on tariffs, where there has been plenty of rhetoric but little immediate implementation. The weaker USD, combined with progress in Ukraine peace talks, supported EUR/USD to just below 1.05. USD/JPY fell back into the 152-153 range amid declining US yields. Both AUD and NZD ended the week on a strong footing, supported by broadly positive risk sentiment. In the Scandies, SEK outperformed, pushing EUR/SEK below 11.25, while EUR/NOK held around 11.65.

Daily Pivots: (S1) 0.6319; (P) 0.6344; (R1) 0.6376; More...

Intraday bias in AUD/USD remains on the upside for 38.2% retracement of 0.6941 to 0.6087 at 0.6413, as a correction to fall from 0.6941. On the downside, however, break of 0.6234 support will suggest that the rebound has completed and bring retest of 0.6087 low.

In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6516) holds.

Daily Pivots: (S1) 1.4153; (P) 1.4178; (R1) 1.4204; More...

Intraday bias in USD/CAD stays on the downside for the moment. Fall from 1.4791 should target 1.3946 cluster support (61.8% retracement of 1.3418 to 1.4791 at 1.3942), as a correction to rise from 1.3418. For now, risk will stay on the downside as long as 1.4378 resistance holds, in case of recovery.

In the bigger picture, long term up trend is tentatively seen as resuming with prior breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.