Sample Category Title

The US dollar rose on Tuesday, adding 0.65% against a basket of popular world currencies amid Donald Trump’s statements about his desire to increase the universal tariff on all imported goods above the current 2.5%.

News of the tariffs supports the US dollar as it suggests a reduction in the US trade deficit and an increase in demand for local goods. Currently, this represents a market reaction to plans that have yet to be implemented, but the information has supported the dollar from a technical analysis perspective.

Last week, the DXY index finished below its 50-day moving average, breaking a four-month uptrend. However, a quick return above that level this week allows the decline on Friday to be viewed as a temporary deviation.

With further growth of the dollar, the decline of the previous two weeks can be interpreted as corrective, which allowed to fix profits and clear the way for further growth with the renewal of the January highs. The Fibonacci extension points to a potential target for the DXY index around 116, which corresponds to a rise to 161.8% of the initial momentum. But in practice, the path may be less straightforward.

Later this week, the Fed meets, where no change in the key rate is expected. The focus will be on plans for 2025 and whether expectations of two rate cuts are confirmed.

Tariff threats may encourage the Fed to stick to tighter monetary policy, but this is at odds with Donald Trump’s recent demands for rate cuts to stimulate growth. In the currency market, low rates help weaken the dollar, offsetting the effect of higher tariffs, with the economy receiving an additional boost to inflation. This raises the question of the Fed’s tolerance for inflation. Both in Trump’s first term and immediately after the last election, the Fed tightened its rhetoric at the prospect of the effects from tariffs.

Higher inflation at healthy growth rates could help the US reduce its government debt-to-GDP ratio by depreciating the dollar’s real purchasing power. However, this is a complex process that requires a high level of international coordination. The United States succeeded in the 1980s with the Plaza Accord, but the question remains whether it can do so again.

US Conference Board Consumer Confidence Index dropped to 104.1 in January, down from 109.5 and falling short of expectations at 105.7. Present Situation Index saw steep decline by -9.7 points to 134.3. Expectations Index fell by -2.6 points to 83.9, but remained above the critical recession signal threshold of 80.

Dana Peterson, Chief Economist at The Conference Board, noted that consumer confidence has been fluctuating within a relatively stable range since 2022. While January marked the second consecutive monthly decline, the index still falls within that range, albeit closer to its lower boundary.

Peterson added that consumers’ optimism about future business conditions and income also declined. Notably, December’s growing pessimism about future employment prospects was confirmed in January.

Full US consumer confidence release here.

Daily Pivots: (S1) 1.0453; (P) 1.0493; (R1) 1.0532; More...

Intraday bias in EUR/USD remains neutral for the moment. On the downside, break of 1.0371 support will indicate rejection by 38.2% retracement of 1.1213 to 1.0176 at 1.0572 and retain near term bearishness. Retest of 1.0176 low should be seen next. On the upside, though, decisive break of 1.0572 will raise the chance of bullish reversal, and target 61.8% retracement at 1.0817.

In the bigger picture, outlook is mixed as fall from 1.1274 (2023 high) could either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. Strong support from 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will favor the former case, and sustained break of 55 W EMA (now at 1.0722) will argue that the third leg might have started. However, sustained trading below 1.0199 will favor the latter case and bring retest of 0.9534 low.

Daily Pivots: (S1) 1.2443; (P) 1.2483; (R1) 1.2540; More...

Intraday bias in GBP/USD remains neutral for the moment. Rebound from 1.2099 is seen as a corrective move. While another rise cannot be ruled out, strong resistance could be seen 38.2% retracement of 1.3433 to 1.2099 at 1.2609 to limit upside. On the downside, below 1.2292 minor support will bring retest of 1.2099 low. However, sustained trading above 1.2609 will raise the chance of reversal and target 61.8% retracement at 1.2923.

In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

Daily Pivots: (S1) 153.40; (P) 154.82; (R1) 155.94; More...

Intraday bias in USD/JPY remains neutral for the moment. On the upside, break of 156.74 resistance will indicate that fall from 158.86 has completed as a correction. Intraday bias will be back on the upside for 158.86 and above to resume the whole rally from 138.57. On the downside, below 153.70 will resume the fall from 158.86 to 38.2% retracement of 139.57 to 158.86 at 151.49.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Markets

The dust settled after yesterday’s violent sell-off in the US tech sector. Dip-buying already emerged during the day in certain individual companies. Others closed near or at their intraday lows only to be picked a day later. US indices as a whole kick off more or less unchanged though. Core bond yields recoup some marginal ground with Treasuries trading on par with German Bunds. Rates in both areas add between 2-3 bps across the curve. Some second-tier economic data failed to inspire. US durable goods unexpectedly dropped 2.2% on a monthly basis but that’s due to a 46% plunge in commercial aircraft orders. Stripping for such notoriously volatile items, core gauges printed much better. These include a 0.6% m/m gain in capital goods shipments that excludes military equipment and commercial aircraft (and as such gives a glimpse on GDP-related business investments). The ECB in Europe released its fourth-quarter Bank Lending Survey, offering some last-minute input to Thursday’s policy meeting. Banks reported a renewed net tightening of credit standards for company loans. The most pronounced tightening since 2023Q3 was driven by higher perceived risks related to the economic outlook and a lower risk tolerance, especially in France and Germany. Both suffered from heightened political uncertainty during the survey’s reference period. Banks expect a further tightening of standards in 2025Q1. Credit standards for household loans for house purchases were more or less unchanged after three quarters of easing with increased competition offsetting a lower risk tolerance. On the demand side, firms’ net demand for loans continued to increase but remained weak overall with little improvement expected in the running quarter. Demand for housing loans increased strongly again whereas other consumer credit demand picked up, be it only slightly. Both were supported by declining interest rates.

Currency markets are more or less a reversal of yesterday. The US dollar prints some of the biggest gains whereas JPY and CHF take a breather. Dollar strength was inspired by early-morning comments from president Trump. Treasury Secretary Bessent in the Financial Times is said to favour a step-by-step tariff approach, applying a 2.5% universal levy that increases by the same amount each month. Trump responded he wants “much bigger” tariffs than that. EUR/USD stumbles towards 1.043 & DXY tried to take out 108. USD/JPY is back above 155. Sterling is on track for a four-day winning streak. EUR/GBP tested support around 0.838.

News & Views

French consumer confidence rose from 89 to 92 in January, the highest level since October. Details showed consumers turning less pessimistic on their (future) personal financial situation and the standard of living. The reversal of some of the initial 2025 budget proposals played a role here. New PM Bayrou will likely face a no-confidence vote linked to that budget as soon as next week. In a similar vein, they turned slightly more optimistic on the likelihood of future unemployment (47 from 54). Indicators measuring savings capacity and purchasing opportunities remained unchanged.

The Hungarian central bank kept its policy rate as expected unchanged at 6.5% and vowed to keep it that way for a sustained period. Hungarian inflation rose more than expected in December (4.6% Y/Y) and will continue to rise in January. The MNB flags an increased risk of a higher inflation path this year with CPI returning to the tolerance band later than projected in the December inflation report. The council closely monitors pricing decisions in the services sector while household inflation expectations have been on an upward trend since July. Anchoring inflation expectations, preserving financial market stability, and a disciplined monetary policy are crucial for the consumer price index to return to the central bank target in a sustained manner. The MNB also calls for disciplined budget deficit targets to help improve Hungary’s risk perception. A careful and patient approach to monetary policy remains warranted. In the Council’s assessment, geopolitical tensions, a volatile financial market environment, and risks to the outlook for inflation warrant the maintenance of tight monetary conditions. They by far outweigh downside risks to the economy. On FX markets, the bottom below the Hungarian forint (EUR/HUF 415) is becoming stronger. The pair is trying to paint a technical double top with neckline support located around 406.50. A break below would improve the short term technical picture of the forint.

Daily Pivots: (S1) 0.8966; (P) 0.9019; (R1) 0.9074; More…

Intraday bias in USD/CHF remains neutral for the moment. Rise from 0.9374 remains intact so far with strong support support seen from near term rising channel. On the upside, break of 0.9107 will target 0.9200 and 0.9223 key resistance. On the downside, however, break of 0.8964 will resume the fall from 0.9200 to 38.2% retracement of 0.8374 to 0.9200 at 0.8884 next.

In the bigger picture, as long as 0.9223 resistance holds, price actions from 0.8332 (2023 low) are seen as a medium term corrective pattern. That is, long term down trend is in favor to resume through 0.8332 at a later stage. However, sustained break of 0.9223 will be an important sign of bullish trend reversal.

The global financial markets are finding their footing following the turmoil triggered by yesterday’s tech-driven selloff. European stocks have moved into positive territory, while US futures signal a flat start to trading. Nvidia, which lost a staggering -17% on Monday—erasing nearly USD 600B in market capitalization—is poised for a partial rebound. Meanwhile, investors appear to have shrugged off US durable goods orders data, which showed a sharp contraction, as the weakness was primarily attributed to volatile transportation equipment orders rather than broader economic concerns.

From a technical perspective, NASDAQ’s sharp decline appears to be merely a part of the ongoing consolidation from its record high of 20204.58. Volatility of this nature is not unusual during such phases. For now, more sideway trading is likely and deeper pull back might be seen. But downside should be contained by 38.2% retracement of 15708.53 to 20204.58 at 18787.09 to bring rebound, and then up trend resumption.

In the currency markets, Dollar is the day’s strongest performer so far, supported by ongoing tariff discussions. It is followed by Loonie and then Swiss Franc. On the other hand, Aussie is the weakest with anticipation ahead of critical inflation data. Kiwi and Euro are also under pressure, with the latter impacted by weak German business climate data and concerns about prolonged structural economic challenges in Europe. Sterling and the Swiss Franc are sitting in the middle of the pack.

Attention is now shifting to Australia’s CPI release in the upcoming Asian session, which could heavily influence expectations for RBA's February 17-18 policy meeting. Quarterly inflation is forecast to slow from 2.8% yoy to 2.5%, while the monthly CPI reading is expected to show an uptick from 2.3% to 2.5%. Money markets currently assign an 80% probability to an RBA rate cut in February. However, a meaningful decline in trimmed mean CPI, from 3.5% to 3.3% or lower, should be needed to provide RBA with sufficient confidence to begin easing.

AUD/JPY will be a focal point for traders reacting to Australia’s inflation data. Repeated rejection by falling 55 D EMA is keeping near term outlook bearish. Break of 96.05 support will suggest that decline from 102.39, as the second leg of the corrective pattern from 90.10, is resuming. Next target is 61.8% retracement of 90.10 to 102.39 at 94.79.

US durable goods orders down -2.2% mom, driven by transportation equipment

US durable goods orders fell -2.2% mom to USD 276.1B, much worse than expectation of 0.8% mom. Transportation equipment, down four of the last five months, drove the decrease, down by -7.4% mom to USD 86.1B.

Ex-transport orders rose 0.3% mom to USD 189.9B, slightly below expectation of 0.4% mom. Ex-defense orders fell -3.1% om to USD 258.2B.

Germany faces deep economic crisis amid structural weakness, BDI Warns

Germany’s economic challenges were laid bare today as BDI President Peter Leibinger warned of a "deep economic crisis" during the annual press conference.

The country's economic output is expected to shrink slightly this year, with Leibinger emphasizing that the situation reflects more than just short-term shocks like the pandemic or the war in Ukraine.

Instead, he highlighted long-term "structural" weaknesses that have plagued Germany as a business hub, particularly over the past six years.

Leibinger pointed to the "structural break" in industrial growth, with empty order books, idle machinery, and a marked decline in domestic investments.

His remark, "I cannot remember such a bad mood in industrial companies," underscores the deep malaise gripping the sector.

German industry is not only struggling to compete globally against powers like the US and China but is also falling behind within the European Union.

Australia NAB business confidence rises to -2, price pressures persist

Australia's NAB Business Confidence showed slight improvement in December, rising from -3 to -2, but remains below the long-term average since early 2023. Business Conditions, on the other hand, posted a stronger gain, climbing from 3 to 6.

Breaking down the details, trading conditions improved from 6 to 9, profitability rose from 0 to 4, and employment conditions ticked up from 3 to 4.

Price pressures continue to persist, with purchase cost growth rising slightly to 1.5% in quarterly equivalent terms. Labour cost growth edged lower to 1.4%, but output price growth increased by 0.3 percentage points to 0.9%. Retail prices also ticked up to 0.7%.

According to NAB Chief Economist Alan Oster, “The uptick in purchase cost growth and final product prices reminds us that businesses continue to face some price pressures.”

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.8966; (P) 0.9019; (R1) 0.9074; More…

Intraday bias in USD/CHF remains neutral for the moment. Rise from 0.9374 remains intact so far with strong support support seen from near term rising channel. On the upside, break of 0.9107 will target 0.9200 and 0.9223 key resistance. On the downside, however, break of 0.8964 will resume the fall from 0.9200 to 38.2% retracement of 0.8374 to 0.9200 at 0.8884 next.

In the bigger picture, as long as 0.9223 resistance holds, price actions from 0.8332 (2023 low) are seen as a medium term corrective pattern. That is, long term down trend is in favor to resume through 0.8332 at a later stage. However, sustained break of 0.9223 will be an important sign of bullish trend reversal.

US durable goods orders fell -2.2% mom to USD 276.1B, much worse than expectation of 0.8% mom. Transportation equipment, down four of the last five months, drove the decrease, down by -7.4% mom to USD 86.1B.

Ex-transport orders rose 0.3% mom to USD 189.9B, slightly below expectation of 0.4% mom. Ex-defense orders fell -3.1% om to USD 258.2B.

Full US durable goods orders release here.

WTI oil price edged higher from new almost one month low on Tuesday, signaling that steep fall that extends into second week, may take a breather.

The drop was sparked by profit-taking from previous $66.98/$79.35 rally, likely boosted by signals from President Trump about pressuring OPEC to drop oil prices to harm Russian oil exports and unexpectedly weak data from China’s manufacturing sector that raised concerns about demand from world’s biggest oil importer.

Warmer weather in the US also contributed to recent weakness, while turmoil in financial markets from surge in a China’s low-cost AI model provided some headwinds to bears.

Recent fall found a footstep at 50% retracement of $66.98/$79.35 advance ($73.16), with oversold conditions on daily chart, generating initial positive signal.

North-heading 14-d momentum is emerging from negative territory and contributes to recovery signals.

On the other hand, strong barrier lays at $74.62 (200DMA / broken Fibo 38.2%) and reaction here will probably define near term direction.

Recovery stall under this level to keep broader bears in play and offer better selling levels for fresh push lower.

Conversely, firm break above $74.62 to generate reversal signal, which will require lift above $75.00 zone (Fibo 38.2% of $79.35/$72.38 bear-leg / 20DMA) for confirmation.

Res: 73.89; 74.02; 74.62; 75.00.
Sup: 73.07; 73.16; 72.38; 71.71.