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• A higher 10-year yield premium of the US Treasuries over Australian sovereign bonds has reduced the attractiveness of the Aussie dollar as a “high-yielding” currency.
• Deflationary risk in China coupled with potential higher trade tariffs policy from the US has reinforced recent languish movements in the Iron Ore CFR China futures.
• Major bearish breakdown in AUD/USD with next medium-term support at 0.6030/5990.

The price movements of the AUD/USD have continued their bearish momentum and staged a major breakdown below 0.6360. In the last four weeks, it has tumbled by 3.50%, and on Monday, 13 January, it had printed a fresh 52-week low of 0.6131 at the time of the writing.

Bond vigilantes are back with a vengeance in the US Treasury market

Fig 1: Major trends of 2-year & 10-year yield spreads of AU sovereign bonds/US Treasuries as of 13 Jan 2025 (Source: TradingView, click to enlarge chart)

The incoming Trump administration’s proposed policies with steep corporate tax cuts and higher trade tariffs targeted toward US key trading partners stoked fears of further widening the US budget deficit and resurgence of inflationary pressures.

The US Treasury market in the long end has responded and reacted to such fears. The US 10-year Treasury yield has continued its relentless climb northwards after a bullish breakout on 18 December last year from almost a year of consolidation from its October 2023 swing high area of 5%.

Also, since the start of the new year in 2025, the rise in the 10-year US Treasury yield has increased at a faster pace than its lower-end two-year Treasury yield; an increase of 22 basis points (bps) over 15 bps respectively.

Hence, the 10-year yield spread between the Australian government sovereign bond and the US Treasury note has continued to narrow since 13 December from -0.05% to -0.15% at this time of the writing, potentially triggering further downside pressure on the AUD/USD currency rate (see Fig 1).

Lacklustre iron ore prices have exerted downside pressure on AUD/USD

Fig 2: AUD/USD & Iron Ore futures correlation movement as of 13 Jan 2025 (Source: TradingView, click to enlarge chart)

Given that iron ore is one of Australia’s key resource exports and a significant portion of it goes to China; if China’s economic growth remains feeble, there will be likely less demand for iron ore, in turn, put downside pressure on Australia’s trade balance that may trigger a negative feedback loop into the AUD/USD.

Since late September 2024, the movement of the Iron Ore CFR China futures contract listed on the Singapore Exchange has resumed its positive correlation with the AUD/USD.

Given that China’s deflationary risk spiral narrative is back on the radar screen again coupled with potential higher trade tariffs from the US that may put a drag on the export growth prospects of China, these double whammy factors have caused the Iron Ore CFR China futures contract (SGX) to languish below its 200-day moving average (see Fig 2).

These negative price action observations on the Iron Ore CFR China futures contract may have negative knock-on effects on the AUD/USD.

Major bearish breakdown in AUD/USD below 0.6360

Fig 3: AUD/USD medium-term trend as of 13 Jan 2025 (Source: TradingView, click to enlarge chart)

In the lens of technical analysis, the bearish breakdown of their former 0.6360 support (also the former ascending trendline from 13 October 2023) on 17 December 2024 is considered a major price movement development where the AUD/USD has consolidated for almost a year before 17 December which suggests the start of a potential medium-term (multi-week) to major (multi-month) downtrend phases.

These bearish downtrend phases are also supported by the current negative reading seen in the daily MACD trend indicator that has steadily inched downwards below its centreline since 15 October 2024.

0.6360 key medium-term pivotal support and a break below 0.6120 exposes the next medium-term support at 0.6030/0.5990 on the AUD/USD (see Fig 3).

On the flip side, a clearance above 0.6360 Invalidates the bearish scenario for a potential mean reversion rebound scenario to unfold for the next medium-term resistances to come in at 0.6470 and 0.6560.

Market picture

The start of the new year has not been easy for the crypto market. Losing over 2% in 24 hours to $3.22 trillion, the market was back at the bottom of the consolidation range since the end of November. The promising start to the year failed to materialise. It is with some trepidation that we now watch the eighth or so attempt to break below $3.20 trillion. Adding to the unease is the fact that last week’s upside momentum failed to develop, only attracting sellers.

A similar return to the lower end of the trading range was seen in Bitcoin, which fell back below $93K on Monday morning. Technically, this is the 61.8% pullback level from the rally since early November. In the past, we have seen a solid bounce. However, this may not be the case this time around due to the decline in risk appetite in global financial markets. The next target for the bears looks to be the $88K area. And in a negative scenario, bitcoin will face a quick pullback to $74K.

News Background

According to SoSoValue, BTC ETFs saw net inflows of $307.2 million for the week, up from $245 million the week before, bringing total inflows to $36.22 billion.

The spot Ethereum ETF saw net outflows of $185.9 million for the week, bringing the total inflows since the launch of these products in July to $2.45 billion.

Glassnode noted that open interest in bitcoin futures is showing ‘downward speculative momentum’. This indicates that traders are closing positions in response to uncertain market conditions.

Glassnode noted that long-term Bitcoin holders continue to sell coins but at a slower pace. The share of supply controlled by ‘new investors’ has also increased.

Fidelity said the trend of declining transaction revenue for bitcoin miners may be long-term but does not pose risks to blockchain security. The main driver of the decline in network fees was the launch of US spot bitcoin ETFs in January.

CleanSpark became the fourth miner with bitcoin reserves above 10,000 BTC. Previously, competitors MARA Holdings, Riot Platforms, and Hut 8 Mining had all breached the threshold.

The Coinbase exchange has warned users that it has received a subpoena from the CFTC for customer information. The request relates to an investigation into the Polymarket betting platform, which opened at the end of 2021.

This is the 16th anniversary of the first Bitcoin transaction. On 12 January 2009, the creator of the first cryptocurrency, using the pseudonym Satoshi Nakamoto, sent developer Hal Finney 10 BTC as a test.

Hello fellow traders. In this technical article we’re going to take a quick look at the Elliott Wave charts of EURUSD , published in members area of the website. As our members know, EURUSD is still trading within the cycle from the September’s peak. Recently, we saw a 3-wave recovery, followed by a decline toward new lows as expected. In the further text, we are going to explain the wave count.

EURUSD H1 New York 01.07.2025

The current view suggests that EURUSD pair completed a 3-wave recovery at 1.0437 peak , labeled as wave ((ii)) black. A sharp drop followed from this high, appearing impulsive . We have labeled this short-term cycle as wave i red. As far as the price stays below 1.0437 high, we believe next leg down can be in progress. We expect EURUSD to continue finding intraday sellers in 3, 7, and 11 swings.

EURUSD H1 Weekend update 01.11.2025

The 1.0437 high held as expected. We got a decent decline when the price broke toward new lows, confirming wave ((iii)) is in progress. We don’t recommend buying the pair yet, and expect to see further weakness in upcoming days.

WTI oil price spiked to new multi-month high ($78.66, the highest since Aug 14) on Monday, as steep bull-leg off $72.83 higher low, extends into third consecutive day.

Growing supply concerns on the newest US sanctions on Russian oil industry strongly inflated oil prices, with expectations that WTI price could rise to $85 per barrel.

The US aims to hurt Russian exports to China and India, world’s first and third oil importers, in continuous attempts to weaken Russian economy, after the military component of the conflict showed unsatisfactory results.

Obviously, the sanctions used as a weapon in conflict, so far did not significantly hit the Russia despite a number of packages of sanctions imposed and will be interesting to watch the reaction from OPEC (where Russia play important role), as well as China and India, which will be directly hit by the newest decision.

It is also important to mention that oil prices were not hit significantly from the war (except a spike above $100 in early stage of war), remaining resilient even during the escalation of the new conflict sparked in the Middle East last year.

So far, all sanctions (particularly those in energy sector, one of Russia’s key sources of income) caused more damage to those that imposed the sanction (except the US) and more important, did not cause any significant disruption in oil production and supply, keeping the oil market in a steady run.

This implies that current rally might not last long and probably without significant impact on the larger picture, as long as oil price stays below $90 per barrel.

Technical picture remains firmly bullish on daily chart, with Friday’s break above 200DMA and formation of 5/200 DMA golden cross, adding to positive outlook, however overbought conditions may boost headwinds that bulls feel at the zone of former top at $78.45 (Oct 8 peak).

Today’s Asian session low ($76.65, also broken Fibo 38.2% of $95.00/$65.26 / 100WMA) marks initial support, with extended dips to ideally hold above broken 200DMA ($75.10) to mark a healthy correction and keep bulls in play for retest of $78.45 and attempts through weekly cloud base ($78.99) towards $80 target (psychological, reinforced by 200WMA).

Res: 78.56; 78.99; 80.00; 81.35.
Sup: 76.65; 75.10; 74.71; 72.83.

Croatian ECB Governing Council member Boris Vujcic emphasized a cautious and deliberate approach to monetary policy adjustments during comments to Econostream Media.

Vujcic stated that any acceleration in the pace of rate cuts would require a "significant departure" from the current economic projections, which he noted were being met by ongoing developments.

"In circumstances where uncertainties are still elevated," Vujcic explained, "it’s better to move gradually, and this is what we’re doing."

Vujcic also highlighted the ECB's independence from other central banks, including the Fed. "We are not dependent on the Fed or any other central bank," he remarked.

His comments lent support to current market expectations for ECB’s policy path, which he described as "justified" in the near term.

Finnish ECB Governing Council member Olli Rehn reaffirmed the central bank's commitment to easing monetary policy as disinflation remains on track and the region faces a weakening growth outlook. Speaking with Bloomberg TV, Rehn stated that it "makes sense to continue rate cuts."

Rehn projected that ECB is likely to exit restrictive monetary territory "sometime in the spring-winter," a timeline he clarified could range from January to June in Finland's seasonal context.

He added, "I would say at the latest by midsummer, we should have left restrictive territory."

Rehn also emphasized ECB's independence in policy decisions, distancing it from the Fed's approach.

"The ECB is not the 13th federal district of the Federal Reserve System," he noted, reinforcing that the bank's decisions are guided solely by its mandate to maintain price stability within the Eurozone.

USDJPY moved slightly to the upside on Friday, but it was mostly just a spike, despite higher US yields which raises the question of whether the pair is starting to lose momentum. The price action clearly shows a potential five-wave move up from the December lows, which could now be ready to complete its recovery. If US yields would also hit some resistance this week, then it would likely have a bearish impact on the US dollar, and in that case, USDJPY could fall sharply, especially considering the Japanese yen is currently stronger compared to other currencies. However, this strength of JPY could also be driven by risk-off flows.

From an Elliott Wave perspective, I see the potential for a wedge formation on the USJDPY hourly chart that could push the pair back toward the 156 area.

https://www.youtube.com/watch?v=rY-bLohZlhE

On Friday, the US unemployment data was released, as reported by ForexFactory:

→ The unemployment rate dropped from 4.2% to 4.1%;

→ The number of new jobs (Non-Farm Employment Change) increased by 256,000 over the month, although analysts had forecast an increase of 164,000 (previous value = 212,000).

According to Reuters, the strong labour market data strengthened the market participants' view that the Federal Reserve will be cautious in cutting interest rates in 2025.

Based on CME Group’s FedWatch tool, traders expect the Fed to reduce borrowing costs for the first time in June and then keep it at that level for the remainder of the year.

Expectations that tight monetary policy will persist longer than usual have led to bearish sentiment. As a result, the S&P 500 index (US SPX 500 mini on FXOpen) dropped below the 5,800 mark this morning, its lowest point since early November.

Technical analysis of the S&P 500 index (US SPX 500 mini on FXOpen) shows:

→ A bearish Head and Shoulders (SHS) pattern is visible on the chart;

→ The price has broken below the median of the ascending channel (marked in blue).

The strengthening bearish sentiment may lead to:

→ The price fluctuating within the descending channel, the boundaries of which are already visible (marked in red);

→ The median of this red channel currently acting as support.

It is possible that the intensification of bearish sentiment will result in the S&P 500 index (US SPX 500 mini on FXOpen) declining towards the 5,700 level, which may be reinforced by the proximity of the lower boundary of the ascending channel.

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Daily Pivots: (S1) 1.0201; (P) 1.0257; (R1) 1.0301; More...

EUR/USD's decline from 1.1213 is extending today and intraday bias is back on the downside. Next near term target is 61.8% projection of 1.1213 to 1.0330 from 1.0629 at 1.0083. For now, outlook will stay bearish as long as 1.0435 resistance holds, in case of recovery.

In the bigger picture, fall from 1.1274 (2023 high) should either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. In both cases, sustained break of 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will pave the way back to 0.9534. For now, outlook will stay bearish as long as 1.0629 resistance holds, even in case of strong rebound.

Daily Pivots: (S1) 156.98; (P) 157.94; (R1) 158.64; More...

Intraday bias in USD/JPY remains neutral for the moment and some consolidations would be seen first. Further rally is in favor as long as 156.0 support holds. ON the upside, decisive break of 61.8% projection of 139.57 to 156.74 from 148.64 at 159.25 will extend the rally from 139.57 to retest 161.94 high. However, considering bearish divergence condition in 4H MACD, firm break of 156.01 support will indicate short term topping. Intraday bias will then be back on the downside for 55 D EMA (now at 154.13) instead.

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.