It’s tough to gather much conviction in markets this week. 10-year yields in the US are up 3.1 bps to 4.123% in European morning trade today. And that comes after a drop yesterday, which followed a rise on Monday. The push and pull sees yields continue to move around its 200-day moving average of around 4.103% currently:

In the bigger picture, the ceiling near 4.20% and floor near 3.80% are key levels to watch on the chart.

But for now, we’re staying in between that with very little conviction to really test those boundaries. The slight nudge higher in yields today is keeping the dollar steadier overall but trading more mixed. Dollar pairs are mostly little changed so far on the session. The only slight movers are GBP/USD, which is up 0.2% to 1.2627, and USD/CHF, which is up 0.4% to 0.8725 currently.

Going back to the bond market, I want to highlight that we do have two upcoming Treasury auctions this week.

The first will be for 10-year notes later today and then another for 30-year notes tomorrow. Considering the lack of key data releases this week, the auctions might end up driving the moves in the bond market in the sessions to come.

This article was written by Justin Low at www.forexlive.com.

USD

• The Fed left interest rates unchanged as
  expected while dropping the tightening bias in the statement but adding a
  slight pushback against a March rate
  cut.
• Fed Chair Powell stressed
  that they want to see more evidence of inflation falling back to target and
  that a rate cut in March is not their base case.
• The latest US GDP beat
  expectations by a big margin.
• The US PCE came
  mostly in line with expectations with the Core 3-month and 6-month annualised
  rates falling below the Fed’s 2% target.
• The US NFP report
  beat expectations across the board by a big margin.
• The ISM Manufacturing
  PMI
  surprised to the upside with the new orders index, which is considered a
  leading indicator, jumping back into expansion. Similarly, the ISM Services PMI beat
  expectations across the board with the employment sub-index erasing the prior
  drop and prices paid jumping above 60.
• The US Consumer
  Confidence report came in line with expectations but
  the labour market details improved considerably.
• The market now expects the first rate cut in May.

NZD

• The RBNZ kept its official cash rate
  unchanged at the
  last meeting stating that demand growth continues to ease and it’s expected to
  decline further with monetary conditions remaining restrictive.
• The New Zealand inflation data printed in line with expectations
  supporting the RBNZ’s patient stance.
• The labour market report beat expectations across the
  board with lower unemployment rate and higher wage growth.
• The Manufacturing PMI fell further into contraction with
  the Services PMI following suit.
• The market expects the RBNZ to start
  cutting rates in Q2.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that NZDUSD bounced
once again on the key support zone
around the 0.6050 level and pulled back into the trendline. This is
where we can expect the sellers to step in again with a defined risk above the
trendline to position for a breakout below the support and target the 0.59
handle next. The buyers, on the other hand, will want to see the price breaking
higher to invalidate the bearish setup and start targeting new highs with the
0.6170 swing level as the first target.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the latest leg
lower diverged with the
MACD right at
the key support. This is generally a sign of weakening momentum often followed
by pullbacks or reversals. In this case, we are still in the pullback territory
as long as the price doesn’t break above the trendline. We can see that we have
also the 61.8% Fibonacci retracement level
around the trendline which adds some extra confluence to the bearish setup.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the recent price action and the resistance zone around the trendline.
What happens here will likely define where the pair will go in the next few
weeks. A strong rejection should see the sellers taking the pair to new lows,
while a break to the upside is likely to trigger a rally into new highs.

Upcoming Events

This week is basically empty on the data front with just
the latest US Jobless Claims figures on Thursday being the only notable
release.

This article was written by FL Contributors at www.forexlive.com.

Given
the prevailing optimism in financial markets, the long-awaited recession is
being postponed again, even though central banks are cautious about tightening
monetary policy.

Moreover,
the Organization for Economic Cooperation and Development revised its 2024
global economic forecast upward by 0.2 percentage points. This contrasts with
forecasts of a hard landing…

The
projections now point to a global GDP of 2.9% for 2024, up from November’s
estimate of 2.7%, and for 2025 it is expected to remain at 3.0% ). India leads
the way over the next two years, followed by Indonesia.

January
also brought positive news from the JP Morgan S&P Global PMI indices, with
Manufacturing at 50 (vs. 49.0 previously), Services at 52.3 (vs. 51.6) and
Composite at 51.8 (vs. 51.0).

Despite
supply chain disruptions due to tensions in the Red Sea, inflationary
pressures are slowly easing.

Overall,
the data seem to suggest that central banks could cut interest rates sooner
than expected, keeping the economy afloat. So is the optimism in the stock
market more than justified?

Not
necessarily.

A closer
look at the US reveals possible triggers for the crisis, such as a public debt of over 34 trillion dollars. The
substantial challenge lies in paying interest to creditors, which exceeds
national defense spending.

While
cutting spending, especially military spending, might be a rational solution,
geopolitical tensions make this unlikely. Cutting social programs poses its
challenges, with the risk of social unrest and protests, particularly ill-timed
in the run-up to presidential elections.

To
complicate matters, the federal government continues to spend more than it
generates through taxes and other revenue sources, leaving no clear way out of
this financial cycle.

As for
the consequences:

• Rising indebtedness could lead credit rating agencies to downgrade
  the country’s creditworthiness, translating into higher interest rates on
  public debt and exacerbating the debt problem.
• An inflationary trap is another risk if the government resorts to
  money printing to meet debt obligations, which would harm savers and
  investors.
• Ultimately, difficulties meeting debt obligations may force
  negotiations with creditors, implementing austerity measures, or even debt
  default.

To avoid
worst-case scenarios, the government can try to reduce debt levels. However,
this also implies a reduced ability to respond to emerging problems. Thus,
if crises in regional banks or in the commercial real estate market intensify,
they may not all be salvageable, with the consequent risk of a new crisis.

Although
current forecasts maintain an optimistic outlook, the repercussions of the
present prosperity may become more evident in the longer term. In
conclusion, allocating part of the portfolio to hedging instruments such as
precious metals and closely monitoring macroeconomic indicators, including the gold
price chart, is advisable.

This article was written by FL Contributors at www.forexlive.com.