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 CPI beat
  expectations for the second consecutive month with the disinflationary trend
  reversing.
• 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 June.

EUR

• The ECB left interest rates unchanged as
  expected maintaining the usual data dependent language.
• The recent Eurozone CPI came
  in line with expectations with the disinflationary process continuing steady.
• The labour market remains historically
  tight with the unemployment rate hovering at record lows.
• The Eurozone PMIs beat
  expectations on the Manufacturing side but missed on the Services one with both
  measures remaining in contraction.
• The ECB members recently have been pushing back
  against the aggressive rate cuts expectations placing more weight on wage
  growth and data dependency.
• The market expects the ECB to cut rates in April.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that EURUSD dropped
back into the key support around
the 1.07 handle following the hot US CPI report. The price bounced as the
buyers stepped in again to position for a rally into the trendline
targeting a break above it. The sellers, on the other hand, will want to see
the price breaking lower to increase the bearish bets into the 1.05 handle
next.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the latest leg
lower diverged with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, it might signal a correction all the way back to the
trendline where we have the confluence with the
1.08 handle. That’s where the sellers will likely step in more aggressively
with a defined risk above the trendline to position for a breakout below the
1.07 support.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price has been consolidating inside the 1.0723 and 1.0736 range. Today we have
some key economic releases and a break on either side supported by the data
should trigger a more sustained move in the direction of the breakout, so watch
out for that.

Upcoming Events

Today we will see the latest US Jobless Claims
figures and the US Retail Sales data, while tomorrow we conclude the week with
the US PPI and the University of Michigan Consumer Sentiment survey.

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

The concept of „letting losses grow“ is a common
pitfall in both investing and personal finance management. It refers to the
tendency of individuals to hold onto losing investments or poorly performing assets with the hope that they will
rebound, rather than cutting their losses and moving on. This behavior is often
driven by emotional factors such as pride, fear, and the aversion to admitting
a mistake. Unfortunately, this mindset can lead to even greater losses and
missed opportunities for capitalizing on more profitable investments.

Understanding Emotional Attachment

A key factor in letting losses grow is emotional attachment.
Investors may
become attached to their initial analysis or the story behind the investment,
which makes it difficult to accept when things go wrong. The idea of selling at
a loss can be seen as an admission of failure, which is why many people end up
holding onto deteriorating investments, hoping for a turnaround that may never
come.

Tips to Overcome Emotional Attachment:

• Set Clear Investment Goals: Establish what you want to achieve with your
  investment and stick to these objectives.
• Use Stop-Loss Orders: Implementing stop-loss orders can help automate the
  process of cutting losses before they escalate.
• Practice Detachment: Remind yourself that investments are not reflections
  of your self-worth or intelligence.

The Role of Confirmation Bias

Confirmation bias plays a significant role in letting losses
grow. It occurs when investors seek out information that confirms their
existing beliefs or decisions, while ignoring contradictory evidence. This bias
can cause one to overlook negative aspects of an investment, reinforcing the
decision to hold onto it despite poor performance.

Tips to Avoid Confirmation Bias:

• Seek Diverse Opinions: Actively search for a range of perspectives,
  especially those that challenge your own.
• Regularly Review Investments: Periodically reassess your holdings objectively to
  ensure they still align with your goals.
• Be Open to Change: Be prepared to pivot your strategy if reliable data
  suggests that your current approach is flawed.

Sunk Cost Fallacy

The sunk cost fallacy is another cognitive bias that
contributes to letting losses grow. It’s the idea that one should continue a
venture because of previously invested resources (time, money, effort), even if
future costs outweigh the benefits. This leads to throwing good money after bad
in an attempt to recover the original investment.

Tips to Avoid the Sunk Cost Fallacy:

• Focus on Future Costs and
  Benefits: Evaluate the potential future
  of the investment independently of past costs.
• Acknowledge Past Mistakes: Recognize that sunk costs are irrecoverable and should
  not factor into new investment decisions.
• Keep Emotions in Check: Make decisions based on rational analysis rather than
  emotional ties to past investments.

Fear of Missing Out (FOMO)

The fear of missing out on a potential recovery can also
cause investors to let losses grow. FOMO can make one hold onto a failing asset
due to the worry that as soon as it’s sold, its value will increase.

Tips to Combat FOMO:

• Adopt a Long-Term Perspective: Focus on the long-term growth potential of investments
  rather than short-term fluctuations.
• Diversify Your Portfolio: A well-diversified portfolio can reduce the pressure
  of any single investment’s performance.
• Stay Informed: Keep apprised of market trends and economic
  indicators, but don’t act impulsively based on this information alone.

In conclusion, letting losses grow is a common behavioral
finance issue rooted in psychological biases and emotional responses. By
recognizing and actively working to overcome these tendencies, investors can
make more disciplined and objective financial decisions, ultimately leading to
better investment outcomes.

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

Ichimoku Kinko Hyo, or Ichimoku for short, is a technical
analysis method that builds on candlestick
charting to improve the accuracy of forecast price movements. It was developed
by Goichi Hosoda, a Japanese journalist, and published in the late 1960s after
30 years of working on it. The term Ichimoku Kinko Hyo translates to „one
look equilibrium chart,“ which underscores the system’s ability to provide
a quick understanding of market sentiment, momentum, and strength at a glance.

Core Components

The Ichimoku chart is composed of five main lines, each
providing its insights into market trends:

1. Tenkan-sen
   (Conversion Line): This line is calculated as the
   average of the highest high and the lowest low over the last 9 periods. It
   signals the market trend and is faster moving than the Kijun-sen.
2. Kijun-sen
   (Base Line): Determined by averaging the
   highest high and the lowest low over the past 26 periods, this line also
   indicates trend direction but reacts slower than Tenkan-sen.
3. Senkou
   Span A (Leading Span A): This is the
   midpoint between the Tenkan-sen and Kijun-sen, plotted 26 periods ahead.
4. Senkou
   Span B (Leading Span B): Calculated
   as the average of the highest high and the lowest low over the past 52
   periods, then plotted 26 periods ahead.
5. Chikou
   Span (Lagging Span): This line represents the
   closing price plotted 26 periods behind.

These components combine to form what is known as the
„cloud,“ made up of Senkou Span A and B, which provides support and
resistance levels and can indicate potential trend reversals.

Reading the Ichimoku Chart

To interpret an Ichimoku chart, traders consider the
interaction between these elements:

• When the price is above the
  cloud, formed by Senkou Span A and Senkou Span B, it suggests an uptrend.
• Conversely, if the price is
  below the cloud, it indicates a downtrend.
• If the Tenkan-sen crosses above
  the Kijun-sen, it can be considered a bullish signal.
• A bearish signal is given when
  the Tenkan-sen crosses below the Kijun-sen.
• The Chikou Span’s position
  relative to the price can indicate bullishness if above the price, or
  bearishness if below.

Tips for Using Ichimoku Charts

1. Wait
   for Confirmation: Before acting on signals, wait
   for the price to move above or below the cloud for confirmation, as the
   cloud itself acts as a support or resistance zone.
2. Use
   Multiple Timeframes: Analyzing charts with
   different time frames can provide a more comprehensive view since signals
   might vary across short-term and long-term charts.
3. Consider
   the Cloud Thickness: A thicker cloud could mean
   stronger support or resistance, suggesting a potent trend when the price
   breaks through it.
4. Chikou
   Span Confirmation: Always check where the Chikou
   Span lies in relation to the price action for additional signs of the
   market’s direction.
5. Combine
   with Other Indicators: While the
   Ichimoku chart provides extensive information, corroborating its signals
   with other indicators can enhance decision-making.

By integrating all these aspects, the Ichimoku system offers
a dynamic tool for traders seeking to analyze markets with a holistic approach.
Its multifaceted nature allows for both rapid assessment and deeper analysis,
making it an indispensable instrument in the arsenal of many technical traders.

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

• 2024 GDP growth forecast seen at 0.8% (previously 1.2%)
• 2025 GDP growth forecast seen at 1.5%
• 2024 inflation forecast seen at 2.7%
• 2025 inflation forecast seen at 2.2%

In short, they are viewing softer growth and a further easing of inflation pressures. That being said, the 2025 forecast for inflation is still reflecting a projection above the ECB’s 2% target. On the growth projections, the main drag remains the German economy. The commission sees Europe’s largest economy only growing by 0.3% now compared to its previous 0.8% forecast in November last year.

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

The sharp move higher in Treasury yields and the dollar yesterday resulted in a steep drop in gold. Of note, the fall took out the January low as well as the $2,000 mark. But at least for the time being, buyers are able to hang on as the 100-day moving average (red line) at $1,989.90 is not firmly broken just yet.

As mentioned earlier, the next leg higher in the dollar might be tougher to come by. And gold is part of that consideration as well, amid its correlation with bond yields for the most part. As such, it might require 10-year Treasury yields breaking its own 100-day moving average of 4.342% to really move the needle lower in gold.

That said, there are still some critical support layers that buyers can rely on even if we do see a continued drop this week. The December lows around $1,973-75 will be the first before the 200-day moving average (blue line) at around $1,965.54. Thereafter, the November low of $1,949 will come into play.

Gold is stuttering so far to start the new year. However, I still retain a more bullish conviction on the precious metal in the long-term. The structural view remains that gold is likely to shine once central bank rate cuts start being realised. It is a bet on the disinflation narrative essentially and I’d argue that right now, we’re just in a pit stop.

But for trading this week, the downside might not be done just yet. There is still US retail sales and PPI figures still to come later in the week. Those might be catalysts for traders to react further following the CPI yesterday.

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

Yesterday,
the Nasdaq Composite sold off following a hot US CPI report
that sent Treasury yields and the US Dollar higher as the market priced out
rate cuts further. The most frightening part was that the Fed Chair Powell’s
preferred measure, the Core Services ex-Housing, jumped by 0.85% M/M which was
the biggest increase since April 2022. The market might even look past this
report as the Fed is not expected to restart hiking rates anyway, but it should
start getting harder and harder for the bulls to keep the conviction at these
levels.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq Composite
yesterday fell into the key trendline where we
have also the red 21 moving average for confluence. This is
where we can expect the buyers to step in with a defined risk below the
trendline to position for another rally into the all-time high. The sellers, on
the other hand, will want to see the price breaking lower to invalidate the
bullish setup and position for a drop into the 15150 support.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that besides the
trendline and the moving average, we have also the 50% Fibonacci retracement level
standing around the 15635 support. This gives the buyers another layer of
confluence. What happens here will likely decide where the market will go in
the next few weeks as a strong bounce should lead to a rally into the all-time
high, while a break lower will likely trigger a selloff into the 15150 level.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
buyers will need to break above the most recent swing high at 15765 to confirm
the rally into the all-time high. If the price fails and falls back into the
trendline, the chances of a downside breakout will increase.

Upcoming
Events

Tomorrow we will see latest US Jobless Claims figures
and the US Retail Sales. On Friday, we conclude the week with the US PPI data
and the University of Michigan Consumer Sentiment survey.

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

• Prior -0.3%; revised to +0.4%

That’s a big jump in industrial output on the month but it comes with a bit of a caveat. Of note, Ireland saw a 23.5% jump in industrial output on the month so that is skewing the overall data slightly. Looking at the breakdown, the outlier there sees a 20.5% increase in capital goods on the month. Meanwhile, durable consumer goods (+0.5%), energy (+0.3%) and non-durable consumer goods (+0.2%) also saw increases. The production for intermediate goods (-1.2%) was the only one to see a decline.

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

No changes to the initial estimate as the euro area economy grounded to a standstill in Q4 last year.

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

With the
US presidential election drawing closer, the question of which outcome would be
better for the global economy is gaining urgency. Both sides have their sound
strategies, but let’s focus on the impact on the dollar by taking a
closer look at the dollar index chart.

Analysts
suggest that a Trump victory would be a more bullish scenario for the dollar,
while a Biden re-election is seen as more neutral. Overall, the dollar is
expected to continue strengthening against major currencies ahead of the US
presidential election and depreciate afterward.

Why is
the former president beneficial to the dollar?

Donald
Trump reportedly considers imposing new trade restrictions with the EU if he
returns to the White House, essentially reigniting the trade wars.

This
includes the introduction of a minimum 10% tariff and countermeasures against
European taxes on digital services. In addition, he promises substantial
tariffs that could significantly affect trade with China.

Biden,
for his part, has already prepared new restrictions against China, which the
administration is ready to implement before the elections. Overall, the trend
towards protectionism has only just begun.

But what
about the Federal Reserve’s possible interest rate cut?

Amid continuing tensions in the Middle East and the
reluctance of the parties to agree on a peace plan, businesses face rising
logistics costs.

This
increase in transport costs is likely to be reflected in the prices of consumer
goods in the future. In this context, the regulator seems hesitant to address
the issue with an early rate cut.

For
instance, Atlanta Fed President Raphael Bostic, who is voting on the Federal
Open Market Committee’s policy decisions this year, suggests that the first
move might come sometime in the summertime.

However,
two factors could force the regulator to reconsider its stance. First, as has
been repeatedly pointed out, keeping rates at a high level affects not only the
population but also the commercial real estate market and regional banks.

As a
result, the latter’s paper losses have soared again to record levels. If
investors start withdrawing money, as they did last year, a banking crisis
could resume.

To avoid
this scenario, the regulator is likely to initially resort to printing more
money and may have to consider a sudden rate cut if that is not enough.

The
second potential pressure factor is the labor market. Officially, January’s
monthly employment report surprised economists with creating 353,000 new jobs, well above expectations.

However,
every month, there are reports of massive layoffs in various companies. Perhaps
some of the newly unemployed are not being considered, and not everything is as
rosy as it seems.

What
should traders do?

Frankly
speaking, it is impossible to be ready for every scenario, so it is more
reasonable to act depending on the developments, keeping an eye on
macroeconomic indicators and pre-election polls.

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

The laggard on the day is the Swiss franc, following the softer-than-expected inflation report here. USD/CHF is up 0.6% to 0.8806 now, running into a test of its 100-day moving average at 0.8807:

Besides that, the only other mover on the session has been the pound. GBP/USD is up 0.3% to 1.2660 after the UK jobs report earlier here. That said, the pair remains rangebound in the bigger picture as it settles back into the range between 1.2600 and 1.2800.

Elsewhere, EUR/USD and USD/JPY are both flattish at around 1.0774 and 149.38 respectively currently. The former continues to rest in and around the technical channels outlined here while the latter is waiting to see if there is any spark to ignite a test of the 150.00 mark.

It all comes down to the US CPI data later in the day now. That will be the key driver for trading sentiment in the sessions to come.

In other markets, stocks are down as traders heed some caution ahead of the main event. S&P 500 futures are lower by 20 points, or 0.4%, currently. Meanwhile, the bond market is rather lethargic with 10-year Treasury yields flat at 4.167%. Despite the slow mood there, things should pick up after the data release with eyes on the ceiling at the 4.20% mark potentially.

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