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• DeepSeek, a Chinese AI startup, has launched a new open-source AI model that is reportedly as good as top chatbots but significantly cheaper.
• This news triggered a selloff in US tech stocks, with Nvidia and other chipmakers experiencing significant drops.
• Despite the market reaction, it’s too early to determine if DeepSeek will be the new AI leader.
• Nasdaq 100 has rebounded, maintaining its bullish structure.

Global markets have started a busy week with a lot of volatility as the little-known Chinese artificial intelligence model called ‘DeepSeek’ sparked a selloff in AI-related shares, with megacap stocks including Nvidia the worst hit.

Chinese startup DeepSeek has launched a free assistant that uses cheaper chips and less data. This move seems to challenge the common belief in financial markets that AI will boost demand for everything from chipmakers to data centers. A bubble waiting to burst or is that a premature assumption? Let us take a look.

What is DeepSeek?

DeepSeek Artificial Intelligence Co., Ltd., started in 2023, is quickly becoming important in the world of AI. Based in China, DeepSeek focuses on pushing AI research forward. Their big goal is to create Artificial General Intelligence (AGI), which is AI that can understand, learn, and do tasks like a human in many different areas. Even though they’re just starting out, DeepSeek’s fast progress shows they’re serious about influencing the future of smart systems.

Origins and Mission

DeepSeek was founded during a pivotal time for AI, as breakthroughs in generative AI models like ChatGPT sparked global interest in advanced machine learning. Although the founders are not widely named, they reportedly include experienced professionals from China’s tech industry and academia, bringing together skills in AI research, software engineering, and strategic innovation. Their goal for DeepSeek is to move beyond the limits of narrow AI systems, which are great at specific tasks, by creating AGI that can generalize knowledge and adapt to new challenges.

The name “DeepSeek” means “deep exploration” or “in-depth pursuit,” highlighting its focus on foundational research and innovative applications. This mission aligns with China’s national strategy to lead in AI innovation, as outlined in initiatives like the Next Generation Artificial Intelligence Development Plan.

Technological Focus and Early Developments

DeepSeek focuses on several key areas in AI development:

AGI Research: DeepSeek works on technologies like large language models, reinforcement learning, and multimodal AI to create models that can think, be creative, and understand context.

Industry Applications: Besides AGI, DeepSeek makes useful AI tools for healthcare, finance, education, and self-driving systems. Their tools are being tested for things like medical diagnosis and personalized learning.

Ethical AI: DeepSeek focuses on ethical rules and safety measures to make sure AI is developed responsibly, following global standards.

Leadership and Shareholders

DeepSeek’s leadership team includes AI researchers, engineers, and executives with backgrounds in top Chinese tech companies and universities. The company hasn’t revealed its shareholders, but it’s probably supported by private investors, venture capital, and partners who share China’s AI goals. It’s possible, though not confirmed, that state-affiliated groups are involved, given the importance of AGI.

DeepSeek and its Open Source Model

Like its Western competitors Chat-GPT, Meta’s Llama, and Claude, DeepSeek uses a large-language model, which means it trains on huge amounts of text to understand everyday language.

However, unlike Silicon Valley companies that keep their models private, DeepSeek is open source. This means anyone can access its code, see how it works, and even change it.

Jim Fan, a senior research manager at Nvidia, said on X that DeepSeek is keeping the original mission of OpenAI alive by being truly open and empowering everyone.

DeepSeek claims it is the best among open-source models and competes with the most advanced closed-source models worldwide.

What Impact has DeepSeek Had on US Equities and Indices?

Over the weekend, DeepSeek created a buzz as tech analysts said the company’s AI model is better than the world’s top chatbots and costs only a tenth as much.

This saw the app surpass ChatGPT to become the No.1 app on the US app store. Released on January 20, 2025, DeepSeek gained popularity quickly thanks to countless threads on social media as well as its quality and price point.

All of these factors set DeepSeek apart from its peers.

Big Tech Rattled by DeepSeek as the Nasdaq fell 5% pre-market trading. Markets are concerned that a cheaper Chinese model could have a massive impact on US tech dominance.

According to DeepSeek, the company only spent around $5.6 million in developing their model, which is a pittance when compared to what US tech giants have poured into AI development and infrastructure.

This was reflected in companies such as NVIDIA which was down as much as 12% in pre-market trading stretching to 17% at the time of writing (four-month low). Other chipmakers such as Broadcom were down as much as 11%.

Source: TradingView (click to enlarge)

Another company that felt the sting was Japanese firm SoftBank, which is part of President Donald Trump’s AI investment drive. It was also down around 8% on Monday.

As much as we are seeing blood in the water today, this may be a knee-jerk reaction. It is still too early to declare DeepSeek as the new leader in the AI race but as one analyst put it, it certainly is a wake up call to America.

Technical Analysis – Nasdaq 100

From a technical standpoint, the Nasdaq 100 has recovered some of its pre-market losses having traded at a low of around 20660.

The Index also gapped down, so if you are taking the gap into account from Friday’s close, The Nasdaq 100 was down by as much as +- 7.5% at its lowest point.

The index appears to have found support of the 100-day MA and up about 500 points since. The bullish structure still remains intact without a daily candle close below the 20756 handle.

This does not mean that a daily candle close above this level means bulls will take charge once more but does leave the door open for a more sustained recovery and a push on toward fresh highs.

This week will bring US earnings as well, with Microsoft, Meta, Tesla and Apple due to announce their fourth-quarter earnings this week. Could this prove to be the catalyst to arrest this early week slump?

Nasdaq 100 Daily Chart, January 27, 2025

Source: TradingView (click to enlarge) 

Support

• 21000
• 20795
• 20664 (100-day MA)

Resistance

• 21255
• 21637
• 22000

USDJPY edged higher after fresh acceleration lower in European session on Monday, hit new multi-week low.

Bears found footstep at 50% retracement of 148.64/158.87 upleg, but upside is likely to be limited, as broken supports at 154.96/76 (Fibo 38.2% / 55DMA) and 154.80 (bull-trendline) reverted to strong resistances.

Daily close below these levels to verify fresh bearish signal (also generated on break of the base of multi-day range.

Weaker technical picture on daily chart (14-d momentum falling deeper into negative territory / Tenkan/Kijun-sen bear cross) support bearish near-term outlook.

Close below trendline is seen as minimum requirement to keep bears in play for renewed attack at 151.71 (session low / Fibo 50%), violation of which to expose targets at 152.81/55 (200DMA / Fibo 61.8%).

Alternatively, bounce and close above 155.00 zone would sideline immediate bears and signal possible false break lower (formation of bear-trap).

Res: 154.96; 155.98; 156.46; 156.79
Sup: 153.71; 153.16; 152.81; 152.55

EUR/USD regained traction after overnight’s drop and rose above 1.05 handle, penetrating falling daily cloud (spanned between 1.0490 and 1.0664), after better than expected German January Ifo report boosted the sentiment.

Bulls look to resume recovery from Jan 13 low (1.0177) after reversal pattern has been completed on weekly chart (the pair was up 2.1% last week, in the biggest weekly advance since the second week of July 2023).

The action is underpinned by positive daily studies (daily Tenkan/Kijun-sen are converging after formation of bull-cross / strong positive momentum) with extension above Fibo barrier at 1.0573 (38.2% of 1.1214/1.0177) needed to verify signal and open way towards upper triggers at 1.0629/56 (Dec 6 lower top / cloud top).

However, recovery may face increased headwinds and risk of stall due to divergence of Fed and ECB monetary policies, as the US central bank is widely expected to stay on hold on policy meeting on Wednesday, while the ECB’s rate cut on Thursday is fully priced.

Also, dynamics of policy easing remains in favor on the ECB which is expected to cut by 75 basis points until June while Fed is seen easing policy by 50 basis points in 2025, although the first cut might be delayed and occur after June.

Res: 1.0534; 1.0573; 1.0629; 1.0656.
Sup: 1.0490; 1.0454; 1.0422; 1.0396.

Markets

Not the start and the first measures from the Trump 2.0 administration nor a big eco data surprise and the anticipated central bank reaction, but a Chinese artificial intelligence start-up (DeepSeek) triggered the first big volatility moment of 2025. The AI language learning model of the Chinese company is said to provide high profile results comparable to its American competitors at a much lower price. It also questions the viability of massive capital investments in high-end chips and extensive computing power. This also questions elevated valuations for multiple companies working in the IT supply chain. European equities and US equity futures nosedived this morning.

The Nasdaq future at some point lost > 5.0%, but pressure eased slightly as US investors entered the fray. Even so, volatility remains elevated. The Nasdaq and the S&P 500 currently lose 3.0% and 1.75% respectively. The EuroStoxx 50 currently declines 0.75 %. For indices of several EU member states, declines remain limited (e.g. MIB +/- unchanged). The (predominantly US driven) equity sell-off also spilled over the other markets. US Treasuries serve as a preferred safe haven. US yields are off the intraday lows, but are still ceding between 7.0 bps (2-y) and 9 bps (5-y) in volatile trading. Declines in EMU yields are less pronounced with German yields ceding about 3-4 bps across the curve. German IFO business climate showed a mixed picture. The headline index improved (85.1 from 84.7) on an improvement in the current assessment, but German companies even gain turn more pessimistic on future expectations. The tone of the report after feels a bit disappointing after Friday’s PMIs. Despite the overall market turmoil, oil hardly declines further after a substantial correction since mid this month. Brent holds near $78 p/b).

On FX markets, the risk-off narrative is a bit less straightforward as is the case in equity and FI markets. With potential impact of the DeepSeek developments mainly questioning US AI/tech dominance, the dollar isn’t able to take up its traditional safe haven function. The yen outperforms among the majors with USD/JPY falling from an 156 close on Friday to currently trade near 154.2. In Europe, the Swiss franc stages a comeback after last week’s setback (EUR/CHF 0.945 from 0.951). Even the single currency reversed earlier intraday losses with EUR/USD rebounding from the 1.046 area to currently trade near 1.052 on broader USD selling. The impact of the US-instigated risk-off on smaller currencies also remains rather modest. EUR/GBP trades little changed in the 0.841 area. The Aussie dollar underperforms, both against the dollar (0.63) and the euro (EUR/AUD 1.672). The likes of the NOK and the SEK also incur modest losses against the euro, but are holding with recent ranges. A similar pattern also develops from CE currencies even as the damage remains fairly limited (EUR/CZK 25.10, EUR/HUF 409.0, EUR/PLN 4.22).

News & Views

More members of the National Bank of Poland’s monetary committee break with governor Glapinski’s (solo?) view that rate cuts will only be something for 2026. MPC Duda referred to room to cut the policy rate by the end of the year with Janczyk putting the option on the table as well. That makes at least 5 out of 9 members not ruling out a H2 2025 move. The July inflation report, coming after presidential elections and by that time presenting a more precise impact on fiscal policy (energy subsidies) on the path of inflation, seems to be the one to start readying a discussion on the topic. Rate cuts, if any, should remain small in size according to Duda (25 bps steps). EUR/PLN rebounds in today’s tough risk climate but preserves last week’s technical break below EUR/PLN 4.25 support.

EU foreign ministers agreed to extend again the sanctions on Russia. They have to do so every six months. EU foreign policy chief Kallas said that this way it will continue to deprive Moscow from revenues to finance its war. The deal came after Hungarian prime minister Orban lifted his opposition in place since December. He wanted to wait the inauguration (and reaction function) of Donald Trump together with getting several energy assurances. The EC will continue discussions with Ukraine on the supply to Europe through the gas pipeline system and is willing to associate Hungary and Slovakia in the process.

Daily Pivots: (S1) 0.9030; (P) 0.9058; (R1) 0.9087; More…

Intraday bias in USD/CHF remains on the downside as fall from 0.9200 short term top is in progress. Sustained break of 55 D EMA (now at 0.8959) will target 38.2% retracement of 0.8374 to 0.9200 at 0.8884 next. Firm break of 0.8884 will indicate bearish reversal. Nevertheless, break of 0.9107 will retain near term bullishness, and turn bias back to the upside for retesting 0.9200 high.

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.

Daily Pivots: (S1) 1.0431; (P) 1.0476; (R1) 1.0541; More...

EUR/USD's rebound from 1.0176 short term bottom is in progress and intraday bias stays on the upside for 38.2% retracement of 1.1213 to 1.0176 at 1.0572. Decisive break there will raise the chance of bullish reversal, and target 61.8% retracement at 1.0817. Nevertheless, rejection by 1.0572 will maintain near term bearishness. Break of 1.0371 minor support will bring retest of 1.0176 low.

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) 1.2383; (P) 1.2442; (R1) 1.2543; More...

Intraday bias in GBP/USD remains on the upside as rebound from 1.2099 short term bottom is in progress. Strong resistance could be seen 38.2% retracement of 1.3433 to 1.2099 at 1.2609 to limit upside. On the downside, below 1.2375 minor support will turn intraday bias neutral first. 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) 155.03; (P) 155.81; (R1) 156.77; More...

Intraday bias in USD/JPY stays on the downside this point. Fall from 154.77 is in progress for 38.2% retracement of 139.57 to 158.86 at 151.49. Sustained break there will suggest that whole rally from 138.57 has completed already. For now, risk will stay on the downside as long as 156.74 resistance holds, in case of recovery.

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 opened the week with a dramatic shift in risk sentiment as last week’s record-breaking highs in US equities gave way to sharp declines, driven by tech sector rout. Concerns over US dominance in artificial intelligence surfaced after Chinese startup DeepSeek unveiled a competing AI assistant, leading to fears of heightened competition. Nvidia saw its stock plummet over -12%, dragging NASDAQ down more than -3%. It should be emphasized that the long-term implications of this development remain unclear. Yet, some investors are treating it as an opportunity to take profits in the overheated tech sector, and wait for a sizeable correction, if any, to reenter the market.

Despite the tech selloff, it’s far too early to suggest that equity markets have peaked. The broader macroeconomic backdrop continues to support risk assets, with expectations for continued monetary easing from major global central banks still intact. In the US, President Donald Trump’s lack of action on tariffs, particularly toward allies, has helped contain inflation risks. These factors should help cushion market sentiment even as tech stocks experience turbulence.

Technically, DOW's retreat today is so far rather shallow. As long as 55 H EMA (now at 43907) holds, DOW's rally from 41884.98 should still be in progress. A serious test 45703.63 key near term resistance should at least be seen before any more sustained correction can be considered.

10-year yield's correction 4.809 resumed earlier than expected by gapping through last week's low of 4.552. But that's not so much a surprised and was inline with the outlook mentioned in our weekly report. Deeper correction looks more likely than not for now, but downside should still be contained by 38.2% retracement of 3.603 to 4.809 at 4.348. That's supported by expectations inflation in the US would remain sticky that keep Fed's easing much shallower than its global peers.

Overall in the currency markets, Yen and Swiss Franc are the strongest ones today, supported both by risk aversion in the stock markets and fall in US and European benchmark yields. Commodity currencies are all in red with Aussie being the worst, followed by Kiwi and then Loonie. Euro and Sterling are trading mixed in the middle with Dollar. The greenback is at a disadvantage with the deeper decline in US yields.

German Ifo rises to 85.1, slightly improvement but still pessimistic

German Ifo Business Climate ticked up from 84.7 to 85.1 in January. Current Situation Index also rose form 85.1 to 86.1. But Expectations Index fell from 84.4 to 84.2.

By sector, manufacturing fell from -24.9 to -25.3. Services rose from -5.6 to -2.2. Trade was unchanged at -29.5. Construction dropped notably from -26.2 to -28.2.

Ifo said that despite the slight improvement, "companies continue to be pessimistic".

China’s PMI manufacturing falls to 49.1, weak start to 2025

China's manufacturing activity slipped into contraction in January, with NBS Manufacturing PMI falling from 50.1 to 49.1, missing expectations of 50.1. This marks the first contraction since October and the lowest reading since August.

The decline was attributed to Lunar New Year holiday, as workers left early, according to NBS senior statistician Zhao Qinghe. Analysts also noted potential effects from slowing export demand after earlier front-loading tied to trade concerns.

The services sector showed similar weakness, with the Non-Manufacturing PMI dropping from 52.2 to 50.2, below the expected 52.0. Composite PMI, combining manufacturing and services, slipped to 50.1 from 52.2, reflecting a broad deceleration.

While some of this is likely seasonal, the magnitude of the slowdown raises concerns about underlying economic momentum, especially with external pressures like trade tensions still in play.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 155.03; (P) 155.81; (R1) 156.77; More...

Intraday bias in USD/JPY stays on the downside this point. Fall from 154.77 is in progress for 38.2% retracement of 139.57 to 158.86 at 151.49. Sustained break there will suggest that whole rally from 138.57 has completed already. For now, risk will stay on the downside as long as 156.74 resistance holds, in case of recovery.

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.