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.

This week won’t feature the sort of hot and heavy data docket that we got last week. That will only continue next week when we get to the US CPI report, which arguably is still the most important data point for markets. As for the remainder of this week, the focus looks set to turn towards what Fed policymakers have to say instead.

It is now time to see what the others have to say after Powell said that a March move isn’t the base case. Will they follow up with a similar view? Or are we going to see a dance between more hawkish and dovish commentary? For today, here is the agenda as outlined by Adam earlier.

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

According to Reuters, a quant hedge fund trader in southern China said that „our line was unplugged“. Adding that orders to sell stocks on the fund’s broking platform were rejected. In a similar case, a Shanghai-based quant fund manager said that they could not go through with sell orders today as the broker’s trading system would „decline orders“.

Adding to the story is a hedge fund manager in northern China claiming that his firm could tweak positions but wasn’t able to reduce holdings by much, due to „guidance“ by regulators. It isn’t clear how widespread this directive by Chinese authorities is and how many hedge funds are directly impacted as a result.

If we’re already reaching this point, it goes without saying how desperate the times are at the moment. I mean, to start targeting private funds? Sheesh.

There is no doubt that the exodus out of Chinese equities is looking really, really ugly. But this isn’t going to inspire much confidence, especially if local authorities are not taking the right steps to actually get to the root of the problem in China.

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.

CAD

• The BoC left interest rates unchanged at
  5.00% as expected and dropped the language about being prepared to hike if
  needed.
• The latest Canadian CPI beat expectations across the board with
  the underlying inflation measures remaining elevated, which should give the BoC
  a reason to wait for more data before considering rate cuts.
• On the labour market side, the latest report missed
  expectations although wage growth spiked to the highest level since 2021.
• The Canadian PMIs improved in
  January although they remain both in contractionary territory.
• The market expects the BoC to start
  cutting rates in May.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD bounced
on the 50% Fibonacci retracement level
and rallied all the way up to the recent high following the strong US NFP
report. The sellers stepped in around the high with a defined risk above it to
position for a drop into new lows. The buyers, on the other hand, will want to
see the price breaking higher to increase the bullish bets into the next resistance at
1.3620.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that from a risk
management perspective, the buyers will have a better risk to reward setup
around the 1.3460 level where we can find the confluence with the
50% Fibonacci retracement level and the 21 moving average. The
sellers, on the other hand, will want to see the price breaking below the
support zone to increase the bearish bets into the 1.3360 level.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is now right at the resistance. It will be interesting to see what
happens here in the US session as a break above the level should see the rally extending
to new highs while a strong rejection is likely to take us back to the 1.3460
level.

Upcoming Events

This week is basically empty on the data front with just
a couple of key economic releases on the agenda. On Thursday, we will see the
latest US Jobless Claims figures while on Friday we get the Canadian labour
market report.

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

The dollar is now trading more mixed but overall little changed against the rest of the major currencies bloc:

There are still a couple of key technical developments to be wary about this week though. So, while the moves today are light, it doesn’t mean that they don’t hold much significance.

1. EUR/USD broke below its 100-day moving average of 1.0783, eyes December low of 1.0723;
2. GBP/USD broke below its 200-day moving average of 1.2560, frees up space towards 1.2500;
3. USD/JPY contests the highs for the year near 148.80 amid post-NFP rebound in yields;
4. USD/CAD tests January high of 1.3541 with 100-day moving average of 1.3555 nearby;
5. AUD/USD hugs 0.6500 again post-RBA but could eye further downside after break of 100-day moving average of 0.6531.

The overall mood in broader markets seems more tentative so far today. US futures are now flattish and that is resulting in European stocks being little changed on the day as well. As for the bond market, the selling is taking a slight breather for now. 10-year yields in the US are down 1.6 bps to 4.148% but off earlier lows of 4.123% at least.

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

• Prior -0.3%; revised to +0.3%

On the year, Eurozone retail sales fell by 0.8% and that arguably owes much to the lackluster performance by Germany. As for the December month, retail food sales were seen down 1.6% on the month while non-food retail sales were down 1.0% on the month.

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

Both the euro and pound are now down 0.3% against the dollar on the day. While EUR/USD is poised for a downside break, GBP/USD looks to be doing the same as it trades below 1.2600 currently:

The pair had been holding in between a range of 1.2600 to 1.2800 since mid-December. That represented a consolidation phase of sorts but finally, sellers appear to be trying to shake it off.

A firm daily close below 1.2600 will keep the downside pressure growing. And that will call into question a test of its 200-day moving average (blue line) next, seen at 1.2560 currently.

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

Last Friday, the Dow Jones rallied into a new
all-time high following a surprisingly strong NFP report.
The headline number was much higher than even the most optimistic estimates
with the unemployment rate ticking lower. There were also some bad things
though like the plunge in Average Weekly Hours which contributed to push higher
Average Hourly Earnings and the Household survey showing job losses for the
second consecutive month.

In fact, even Fed’s Goolsbee
mentioned this detail saying that “despite the brisk hiring numbers, weakness
in overall hours worked suggests that this wasn’t as strong as that headline
number suggested. There are big seasonal adjustments in January and the data
might have been distorted a bit which makes trusting this report a little
harder.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones continues
to print all-time highs as the buyers pile in at every pullback. We can see
that we have a trendline that
will now define the uptrend. In case we get a pullback, we can expect the
buyers to lean on the trendline to position for new highs. The sellers, on the
other hand, will want to see the price breaking lower to position for a bigger
correction into the 37777 level first and upon a further break lower the 37066
level.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more
clearly how the price keeps on breaking the resistances,
retesting them and then continuing higher into new all-time highs. We can also
notice that in case we get another pullback, the buyers will also have the red
21 moving average around
the trendline for confluence.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the recent price action and we can notice that we have another resistance turned
support around the 38550 level where the buyers should lean
onto to position for another rally. The sellers, on the other hand, will want
to see the price breaking lower to position for a drop into the trendline and
upon a further break lower target the 37777 level.

Upcoming Events

This week is basically empty on the data front with just
a couple of key economic releases. Today we have the US ISM Services PMI where
the market will likely focus on the employment index given the big drop last
month. On Thursday, we will see the latest US Jobless Claims figures where the
market will want to see if the resilience in the labour market remains
intact.

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