• Silver hits two-week low of $31.29 before bouncing above $31.50.
• RSI signals bearish momentum, with key support at 100-day SMA of $31.20.
• Upside potential if XAG/USD reclaims $32.00, targeting $32.48 and $33.00.

Silver prices plunged on Tuesday more than 1.80%, which witnessed the grey metal printing a daily peak of $32.48, before sliding below the $32.00 figure due to risk aversion and traders booking profits amidst uncertainty about US trade policies. The XAG/USD trades at $31.73 unchanged as Wednesday’s Asian session commences.

XAG/USD Price Forecast: Technical outlook

Despite printing a two-week low of $31.29, XAG/USD bounced near the 100-day Simple Moving Average (SMA) of $31.20, which if broken, would clear the path for bears to drive Silver prices toward the $30 handle. However, bulls emerged and drove the precious metal above $31.50, keeping them hopeful of re-testing the $32.00 figure.

Momentum shifted bearish as depicted by the Relative Strength Index (RSI) standing below 50, an indication that sellers are in charge. Therefore, further downside is seen.

On the other hand, if Silver climbs above $32.00, bulls can push prices towards February 25 high of $32.48. If cleared, they would remain in charge, poised to challenge $33.00.

XAG/USD Price Chart – Daily

• NZD/USD extends its losing streak to three consecutive sessions, testing critical support levels.
• RSI remains in positive territory but declines sharply, reflecting fading bullish strength.
• The pair approaches the 20-day SMA; a sustained break below could shift the outlook to the downside.

The NZD/USD pair continued its downward trajectory on Tuesday, marking its third consecutive daily decline as it moves closer to the 20-day Simple Moving Average (SMA). Despite last week's bullish push, buyers appear to be losing momentum, and the pair is approaching a key technical threshold that could determine its short-term direction.

From a technical standpoint, the Relative Strength Index (RSI) remains in positive territory but has declined sharply, indicating that bullish momentum is weakening. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram prints flat green bars, suggesting a pause in momentum as traders assess the next move.

Looking ahead, the 20-day SMA near the 0.5700 zone is the key level to watch. A decisive break below this support could confirm a shift in sentiment, potentially opening the door for deeper losses. Conversely, if buyers step in at this threshold, the pair could attempt a rebound, with immediate resistance seen around 0.5770.

NZD/USD daily chart

US President Donald Trump signed another Executive Order late Tuesday, signaling for the US Commerce Department to launch an official "probe" into Copper markets. President Trump, citing "national security concerns", is ordering for an investigation into pricing of Copper in futures and delivery markets. US law provides an ambiguous backdoor for presidents to issue Executive Orders that allow the White House to circumvent normal Congressional avenues of kicking off trade wars, and has been the cornerstone of the Trump adminsitration's hundreds of Executive Orders since Trump took office in January.

President Trump took the opportunity to signal further possible tariff actions, reiterating his intent to designate other country's digital services taxes as a form of pseudo-tariff on US goods. President Trump also repeated his insistence that the US does not "need" Canadian Crude Oil or lumber products, a statement that runs against a hard wall of decades of trade history.

Key highlights

• US Consumer Confidence plunges to an 8-month low, inflation fears rise.
• Markets now price in 58 bps of Fed rate cuts, up from 40 bps last week.
• BoJ watching services inflation as Ueda signals possible rate hikes.

The Japanese Yen (JPY) extended its gains versus the US Dollar (USD) on Tuesday, which was helped by the fall of US Treasury bond yields as consumer confidence deteriorated further, according to the Conference Board. At the time of writing, the USD/JPY trades at 149.02, down 0.46 at the brisk of clearing the 149.00 handle.

USD/JPY nears 149.00 as falling yields, Fed expectations pressure the dollar

Data revealed earlier showed that Consumer Confidence in February plunged to an eight-month low from 104.1 to 98.3. Digging more into the data, inflation expectations rose to 6% from 5.2% over a 12-month period.

Of note is that tariffs were mentioned in the survey at levels not seen in six years. Today’s data and the University of Michigan survey show that Americans are becoming pessimistic about the economic outlook.

As the US economy weakened, expectations that the Fed would cut rates jumped. Money markets had priced in that the Federal Reserve (Fed) would ease policy by 58 basis points (bps), up from 40 bps last week, revealed data from Prime Market Terminal.

Source: Prime Market Terminal

Consequently, the yield of the US 10-year Treasury note is plummeting ten basis points (bps) to 4.294%.

Richmond Fed President Thomas Barkin stated that he is adopting a wait-and-see approach on interest rate adjustments, emphasizing the need for clear evidence that inflation is steadily moving toward the Fed’s 2% target before considering any policy changes.

In Japan, prices paid by producers accelerated to 3.1% YoY as prices for services continued to rise. The Bank of Japan (BoJ) is watching services inflation to gauge prospects of sustained wage gains. BoJ Governor Kazuo Ueda signaled his willingness to continue raising rates if wage growth accelerates and supports consumer spending, reinforcing the central bank’s data-dependent approach to monetary policy.

Ahead, the Japanese economic docket would feature the Coincident Index Final reading for December, alongside the Leading Economic Index.

USD/JPY Price Forecast: Technical outlook

The USD/JPY daily chart depicts the pair as downward biased, though it seems that sellers cannot drive prices on a closing basis below the December 3 low of 148.64. In that outcome, the next support would be the October 4 daily low of 145.92 ahead of the September 30 swing low of 141.64.

Conversely, if USD/JPY climbs past 150.00, look for further upside as buyers could be poised to challenge the Tenkan-sen at 151.62.

• AUD/JPY extends its decline, reaching its lowest level since mid-September.
• RSI continues to fall in negative territory, reflecting increasing bearish pressure.
• MACD histogram shows rising red bars, signaling growing downside momentum.

The AUD/JPY cross deepened its losses on Tuesday, with sellers firmly in control as the pair recorded a fresh low since mid-September near the 94.00 mark. The bearish momentum, which began last week, remains intact, and buyers have yet to show signs of stepping in. The downward trajectory was reinforced after the pair failed to hold above key short-term resistance levels, accelerating its move lower.

Technical indicators suggest that downside pressure is intensifying. The Relative Strength Index (RSI) is steadily declining in negative territory, confirming weakening bullish attempts. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram continues to display rising red bars, reinforcing the bearish sentiment in the market.

Looking ahead, if the pair continues to slide, the next significant support may emerge near the 93.80-94.00 region, where buyers could attempt to stabilize the price. However, if sellers maintain control, further losses could be in store. On the upside, a recovery would require reclaiming levels above the 20-day SMA to signal a potential shift in momentum.

AUD/JPY daily chart

• XAU/USD traders book profits as US Treasury yields decline further.
• Trump’s tariff threats on Mexico and Canada fuel market uncertainty.
• Weak US Consumer Confidence, layoffs raise stagflation fears.

Gold prices plummeted on Tuesday during the North American session as traders booked profits amid falling US Treasury bond yields. The Greenback also extended its losses as traders remained uneasy about United States (US) President Donald Trump's changing trade policies. XAU/USD trades at $2,905 after hitting a daily low of $2,888.

Uncertainty about US President Donald Trump's use of tariffs as a negotiation tool keeps traders risk-averse. On Monday, Trump hinted that tariffs on Mexican and Canadian imports will start next week, despite efforts made by both nations to fight fentanyl and illegal migration.

Data-wise, the Conference Board (CB) revealed that Consumer Confidence deteriorated. The report depicted Americans' pessimism due to the current controversial policies of the Trump administration. Additionally, unprecedented layoffs of federal workers are keeping consumers on the sidelines.

This report and last week’s University of Michigan (UoM) Consumer Sentiment fueled concerns about a stagflationary scenario in the United States.

This week, the US economic docket will feature Federal Reserve (Fed) speakers, Durable Goods Orders, the second reading of Q4 GDP, and the release of the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index.

Daily digest market movers: Gold and US Treasury yields plunge

• The CB Consumer Confidence dropped to an eight-month low from 104.1 to 98.3 in February. It was the sharpest pace of deterioration in three and a half years. Consumers' inflation expectations average over 12 months jumped from 5.2% to 6%, revealed the Conference Board.
• Richmond Fed President Thomas Barkin revealed that he’s taking a wait-and-see approach to adjusting interest rates until it becomes clear that inflation is moving lower to the Fed’s 2% goal.
• Money markets had priced in that the Federal Reserve (Fed) would ease policy by 58 basis points (bps), up from 40 bps last week, revealed data from Prime Market Terminal.
• The US 10-year Treasury note yield plunges ten basis points (bps) to 4.294% capping Bullion prices fall. US real yields, as measured by the yield in the US 10-year Treasury Inflation-Protected Securities (TIPS), edge lower six and a half bps to 1.907%.
• Last week, Goldman Sachs upwardly revised Gold price projections to $3,100 by the end of 2025.
• Money market fed funds futures are pricing in 50 basis points of easing by the Fed in 2025.

XAU/USD technical outlook: Gold price retraces towards $2,900

Gold prices fell on Tuesday, exposing the precious metal to heavy selling pressure, yet bears seem not to have the strength to achieve a daily close of XAU/USD below $2,900. If sellers achieve that outcome, the February 14 daily low of $2,877 will be exposed, followed by the February 12 swing low of $2,864. Despite this, the uptrend remains intact unless Gold falls below $2,800.

Conversely, if Bullion rises past the year-to-date (YTD) high of $2,956, the next resistance would be $3,000.

• The Aussie continues a three-day losing streak, awaiting monthly CPI data.
• Tariff anxieties persist as President Trump threatens new duties on Canadian and Mexican goods.
• RBA’s cautious approach to policy cuts leads traders to question near-term easing prospects.
• Investors brace for US PCE data, which is crucial for Federal Reserve rate guidance.

AUD/USD slides to near 0.6330 before the Australian monthly Consumer Price Index (CPI) figures for January are released. The Reserve Bank of Australia (RBA) cut its Official Cash Rate (OCR) by 25 basis points to 4.10% last week, but persistent inflation concerns loom. Meanwhile, renewed fears of additional United States (US) tariffs by President Donald Trump underpin the US Dollar (USD), limiting the Aussie’s upside.

Daily digest market movers: Aussie under scrutiny amid rate caution and tariff jitters

• The Australian Dollar (AUD) weakens for the third consecutive day, weighed by tariff anxieties and approaching inflation data that may influence RBA policy actions.
• The Australian Bureau of Statistics is expected to show inflation rose from 2.5% in December to 2.6% in January, potentially reducing the likelihood of further immediate interest-rate cuts.
• The RBA signaled a measured approach after trimming the cash rate to 4.10%, warning that high inflation remains a threat and that the bank’s fight against rising prices is far from over.
• The US Dollar (USD) remains steady after Monday’s gains, with President Trump warning that 25% tariffs on Canadian and Mexican imports could still proceed despite earlier signs of delay.
• Markets also focus on upcoming US Personal Consumption Expenditure (PCE) data on Friday, which will clarify the Federal Reserve’s (Fed) rate strategy.
• US Treasury Secretary Scott Bessent reaffirmed tariffs as a revenue measure for the Trump administration, whereas Trade Advisor Peter Navarro hinted at selective exemptions, revealing internal policy inconsistencies.

AUD/USD technical outlook: Bulls lose momentum near 100-day SMA, pair stays above 20-day SMA

The AUD/USD pair declines moderately on Tuesday, while the 100-day Simple Moving Average continues to limit any upside push. Although the Relative Strength Index (RSI) remains in an elevated zone, it appears to be flattening out, implying that the bullish impetus may be diminishing. Simultaneously, the Moving Average Convergence Divergence (MACD) histogram features flat green bars, suggesting reduced upward momentum. Although the Aussie remains above its 20-day Simple Moving Average, the inability to maintain gains past the 100-day SMA does not indicate a structural change; the pair could either trade lower or consolidate between these two moving averages, contingent on near-term data and shifts in trade sentiment.

• The Canadian Dollar shed another quarter of a percent on Tuesday.
• US President Trump has reiterated his plans to impose tariffs on Canadian goods.
• Worsening US economic outlook weighs down investor sentiment.

The Canadian Dollar (CAD) shed one-quarter of one percent against the US Dollar (USD) on Tuesday, bolstering USD/CAD and keeping the pair bid into the 1.4300 handle. The Loonie lost ground as broad-market investor sentiment takes a hit following worse-than-expected consumer sentiment surveys from the US, and renewed threats of steep tariffs on Canadian goods imported into the US is widening up the low side of the Loonie even further.

According to the US Consumer Board, consumer expectations hit a multi-year low in February, sparking renewed fears of an economic slowdown within the US economy. US President Donald Trump reiterated his threats to impose a package of 25% tariffs on all goods imported into the US from Canada and Mexico. Although most investors broadly believe President Trump will find an eleventh-hour excuse to kick his own tariffs down the road again, the prospect of the US embarking on a global trade war against all of its closest trading partners at the same time is knocking trader confidence lower.

Daily digest market movers: Canadian Dollar eases on tariff concerns

• The Canadian Dollar declined around 0.25% against the Greenback on Tuesday, pushing USD/CAD back into the 1.4300 handle.
• US consumer sentiment survey results showed a downside snap in consumer wage and employment expectations according to the Consumer Board.
• On an indexed basis, US consumers’ economic outlook have dipped to a three-year low in the face of tightening job opportunities and low wage growth expectations.
• US President Trump renewed his threats to impose tariffs on Canada, noting that the latest delay was only for ‘30 days’, and are set to come back into effect next week.
• Key US inflation data is also due later this week as investors hope a recent uptick in inflation pressures prove to be the exception and not the new rule.

Canadian Dollar price forecast

The Canadian Dollar has lost ground against the Greenback for a third consecutive session on Tuesday, pushing USD/CAD back above the 50-day Exponential Moving Average (EMA) at 1.4272 and tapping the 1.4300 handle once again. The Loonie is testing back into familiar consolidation territory against the US Dollar, but a notable bullish lean in favor of USD/CAD will likely keep the Loonie under pressure as policy concerns continue to weigh.

USD/CAD daily chart

The US Dollar remained well on the defensive, dropping to the area of multi-week lows as investors’ jitters over the health of the US economy gathered extra steam, while uncertainty around tariffs also contributed to the cautious stance.

Here is what you need to know on Wednesday, February 26:

The US Dollar Index (DXY) left behind two daily gains in a row and slipped back to the area of two-month lows amid diminishing US yields across the curve. The weekly MBA Mortgage Applications are due in the first turn, seconded by New Home Sales and the EIA’s weekly report on US crude oil inventories. In addition, the Fed’s Barkin and Bostic are due to speak.

EUR/USD rose further and tested levels beyond 1.0500 in response to the intense sell-off in the Greenback. Germany’s Gfk Consumer Confidence will be in the spotlight.

GBP/USD set aside part of the recent weakness and revisited the upper end of the range north of 1.2600. The CBI Distributive Trades will be the only data release across the Channel, seconded by the speech by the BoE’s Pill.

USD/JPY accelerated its decline to levels last seen in early December near 148.50. Next on tap on the Japanese calendar will be the final prints of the December Coincident Index and Leading Economic Index.

Tariff concerns weighed on AUD/USD and prompted it to recede for the third straight day and revisit the 0.6320 region. Next of note in Oz will be the RBA’s Monthly CPI Indicator, and Construction Done figures, both expected on February 26.

Prices of WTI tumbled to fresh yearly lows in the sub-$69.00 zone per barrel on the back of concerns over the health of the US economy and further US tariffs.

Gold prices suffered some profit taking and dropped to multi-day lows, breaking below the key $2,900 mark per ounce troy at the same time. Silver prices retreated to two-week lows near the $31.00 mark per ounce.

• The Dow Jones tested fresh lows on Tuesday, but remained stuck near 43,500.
• Investor confidence was dealt a blow after consumer confidence slipped further.
• Signs of a widespread economic slowdown are growing, inflation figures still loom ahead.

The Dow Jones Industrial Average (DJIA) knocked slightly lower on Tuesday, dipping to a fresh multi-week low of 43,285. Investor sentiment recovered enough to push the Dow Jones back into the day’s opening bids near 43,500. Still, confidence remains shaky as signs of a deeper-than-expected economic slowdown encroach around the edges of the data.

US Conference Board consumer confidence survey results came in well below expectations on Tuesday, falling for a third straight month. The CB consumer sentiment index fell to 98.3 in February, far below the median forecast of 102.3, and is the largest single-month decline since Q3 2021. Consumers saw an overall improvement in current business conditions, but consumer expectations for future business conditions, income potential, and employment prospects declined.

Trade policy constraints remain a key concern for markets after US President Donald Trump reiterated his insistence that stiff tariff packages on goods imported from Mexico and Canada will be proceeding next week, as well as a wide swath of reciprocal tariffs on other US trading partners that include additional tariffs to offset other countries’ VAT and digital services taxes on their consumers. Investors still believe President Trump will continue to kick the can down the road and find excuses to pivot away from his tariffs in the eleventh hour. Still, the overarching threat of imposing steep importation taxes on US consumers already grappling with unsteady inflation factors bodes poorly for overall investor confidence.

Dow Jones news

Despite some shaky investor sentiment on Tuesday, the Dow Jones was tilted into the bullish side overall on the day. More of the index’s listed securities were in the green than not, and the worst-performing stock was Goldman Sachs (GS), which declined around 2% and fell to $613 per share. The Dow Jones’ weighting average means every dollar shed from a security’s headline price contributes to a 6.15-point decline.

On the high side, Home Depot (HD) gained ground on Tuesday, rising around 4% and climbing to about $398 per share despite a gloomy homebuilding outlook.

Dow Jones price forecast

The Dow Jones is at risk of getting caught in another congestion pattern. The major equity index has been stuck below the 50-day Exponential Moving Average (EMA) at 43,908 for three trading sessions in a row, and bidders are running out of time to stage a fresh recovery to record highs above 45,000. As technical pressure gather on the Dow Jones chart, a fresh backslide to the 200-day EMA rising into the 42,000 handle is looking more likely.

Dow Jones daily chart

• The US Dollar Index edges lower around 106.30, with markets awaiting fresh catalysts.
• Trump administration signals tighter tariffs on China and potential third-party restrictions.
• US consumer confidence dips to 98.3, its lowest since June 2024.
• Tariff negotiations with Canada and Mexico remain unresolved.

The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against a basket of six major currencies, posts small losses and falls to near 106.30 on Tuesday. The US Dollar edges lower amid escalating geopolitical tensions and potential new tariffs targeting China. With the United States (US) President Donald Trump administration signaling possible semiconductor restrictions, traders are cautious and the DXY is hovering just above key support levels, hinting at potential downside risks.

Daily digest market movers: US Dollar steady as tariff tensions rise

• US Dollar Index posts small losses as markets digest potential trade barriers targeting China and third-party nations.
• US Treasury Secretary Scott Bessent reaffirms the role of tariffs as a key funding tool for Trump's economic plans.
• Bessent suggests potential monetary easing alongside fiscal tightening could stabilize Treasury yields.
• US consumer confidence falls to 98.3 in February, its lowest level since June 2024, according to the Conference Board.
• The Present Situation Index drops by 3.4 points to 136.5, indicating declining sentiment toward current economic conditions.
• The Expectations Index slumps by 9.3 points to 72.9, highlighting growing pessimism about income and job prospects.
• Trump Trade Advisor Peter Navarro hints at possible tariff exemptions, softening recent protectionist rhetoric.
• Tariff talks with Canada and Mexico continue, with Trump signaling potential actions if no progress is made.
• A reciprocal tariff on the digital services tax is under consideration, potentially impacting tech-related trade.
• US Q4 GDP data release later this week remains a key focus for market participants.
• December Personal Consumption Expenditures (PCE) data is expected to shed light on inflationary trends.

DXY technical outlook: Bulls struggle as bearish momentum persists

The US Dollar Index remains anchored around 106.35, with attempts to recover the 100-day Simple Moving Average (SMA) at 106.60 falling short. Despite minor recoveries, the technical indicators remain subdued. Both the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) are signaling sustained bearish momentum. Support lies at 106.00, while resistance remains at 107.00. A break below the 106.30 level could confirm a deeper bearish outlook in the short term, with bulls still needing stronger catalysts to regain control.

• Mexican Peso depreciates as market sentiment remains bearish on trade risks.
• Trump confirms tariffs on Mexico are moving forward, pressuring the Peso.
• Banxico signals further 50 bps rate cuts as inflation nears the 3% target.
• US-Mexico trade talks continue, with a potential breakthrough expected Friday.

The Mexican Peso (MXN) extends its losses for the third straight day against the Greenback as market sentiment shifts sour due to United States (US) President Donald Trump's reiterating that tariffs on Mexico are on schedule. At the time of writing, USD/MXN trades at 20.49, up a modest 0.11%.

Geopolitics are hurting the prospects of the Peso, which began Tuesday’s session positively but has lost ground. Late on Monday, US President Trump said that duties on Mexico are moving forward, at a time when US and Mexican officials talks continued.

Mexican President Claudia Sheinbaum said that ongoing negotiations between the US and Mexico could bear fruit this Friday, when she may hold a phone call with President Trump.

Although this could be positive for the Mexican currency, divergence in monetary policy between both countries could weigh on the Peso.

The latest inflation report showed that prices converge towards Banco de Mexico's (Banxico) 3% goal. This, along with Banxico’s last meeting minutes hinting at subsequent 50 bps rate cuts, gives the US Dollar the upper hand.

The Federal Reserve (Fed) has adopted a “slightly hawkish” stance, as officials are in wait-and-see mode, assessing US trade policies proposed by Trump. Therefore, further USD/MXN upside is seen unless the Fed shifts dovish amid renewed fears of a stagflationary scenario.

In the meantime, Mexico’s Current Account in Q4 printed a surplus of 12,601 million US Dollars, up from 11,745 million, revealed Banxico.

Daily digest market movers: Mexican Peso depreciates on US trade policies, Banxico’s dovish stance

• Mexico’s February mid-month core inflation increased from 3.61% to 3.63% YoY. Headline prices rose by 3.74% YoY, as expected by analysts.
• Washington is pushing the Mexican government to levy tariffs on Chinese imports to the country.
• The swaps markets hint that the Federal Reserve might ease policy by 58 basis points, up from last week's 40 bps in 2025, via data from the Chicago Board of Trade (CBOT).
• Trade disputes between the US and Mexico remain front and center. Although the countries found common ground previously, USD/MXN traders should know that the 30-day pause is about to end, and tensions could trigger volatility in the pair during the rest of the week.

USD/MXN technical outlook: Mexican Peso drops as USD/MXN hurdles 50-day SMA

The USD/MXN pair extended its gains above the 50-day Simple Moving Average (SMA) at 20.45, with the exotic pair pushing above 20.50. The Relative Strength Index (RSI) above 50 keeps bulls hopeful of higher prices, though they must clear the January 17 high of 20.93, followed by 21.00 and the year-to-date (YTD) high of 21.28.

Conversely, if USD/MXN struggles at the 50-day SMA, it could drop to the 100-day SMA at 20.24. On further weakness, the pair might surpass that dynamic support and head towards the 20.00 figure.

Federal Reserve (Fed) Bank of Richmond President Thomas Barkin cast his bets on another decline in Personal Consumption Expenditure (PCE) inflation later this week, noting that the Fed has made singificant progress on inflation. Despite the overall upbeat tone from the Fed policymaker, Barkin was quick to note that a "wait and see" approach is still necessary in the face of policy uncertainty.

Key highlights

Trump Trade Advisor Peter Navarro hinted at the possibility of yet more tariff exemptions during an interview on CNBC on Tuesday. Trade Advisor Navarro's comments, while welcome by markets, contradict statements from other Trump administration policymakers who have already earmarked planned tariffs as a potential funding source to plug the upcoming holes in team Trump's budget goals.

Key highlights

US Treasury Secretary Scott Bessent reiterated some of President Donald Trump's policy goals during a hosted event in Australia on Tuesday. Treasury Secretary Bessent reiterated that tariffs remain a key funding source for the Trump administration's plans moving forward, and that Bessent fully believes that the Trump administration will find a way to reduce spending, ease monetary policy (which is typically done through increased spending), and lower Treasury yields all at the same time.

Key highlights

• US CB Consumer Confidence Index declined in February.
•  The US Dollar Index trades on the degfensive near recent lows.

Consumer confidence in the US took a hit in February, with the Consumer Confidence Index slipping to 98.3 (from 105.3) according to the Conference Board.

Furthermore, the index eased to the lowest level since June 2024.

Consumers' views of current business and job market conditions slipped, with the Present Situation Index dropping by 3.4 points to 136.5. Meanwhile, their short-term outlook for income, business, and employment weakened even more, as the Expectations Index fell by 9.3 points to 72.9.

Stephanie Guichard, Senior Economist, Global Indicators at The Conference Board, explained that in February, consumer confidence registered the largest monthly decline since August 2021. She noted that it marked the third consecutive month-on-month drop, bringing the Index to the lowest level seen since 2022. Guichard pointed out that among the five components of the Index, only consumers’ view of present business conditions showed a slight improvement, while their assessment of current labor market conditions had weakened. She added that consumers had grown pessimistic about future business conditions and less optimistic about future income, and she remarked that pessimism regarding future employment prospects had deteriorated, reaching a ten-month high.

Market reaction

The Greenback faces renewed bearish pressure and prompts the US Dollar Index (DXY) to reverse part of the recent advance and refocus on the lower end of the range and close to recent multi-week lows arund 106.30.

• EUR/USD posts moderate gains, nearing a key resistance zone.
• RSI climbs in positive territory, signaling to strengthen bullish momentum.
• Bulls appear poised for another retest of the 100-day SMA after failing to break through.

The EUR/USD pair extended its upward momentum on Tuesday, inching closer to the crucial 100-day Simple Moving Average (SMA). After a solid advance in recent sessions, the pair now finds itself testing familiar resistance levels. Although buyers haven’t yet conquered this barrier, recent price action suggests that bulls may be gearing up for another attempt.

Technical indicators highlight growing bullish momentum. The Relative Strength Index (RSI) has advanced deeper into positive territory, suggesting that buying interest remains firm. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram prints flat green bars, reflecting a pause in momentum but hinting at a potential bullish continuation if resistance breaks.

In the near term, a decisive break above the 100-day SMA could open the door for further gains, with the next resistance potentially around the 1.0550 region. However, if the pair faces another rejection at this level, the bullish narrative may begin to fade, possibly sending the pair back toward support around the 20-day SMA. The next few sessions will be crucial to determine whether buyers can maintain their hold or if the bears will regain control.

EUR/USD daily chart

• Trump reiterates tariffs on Canada and Mexico, fueling trade concerns.
• UK retailers slash investment as consumer spending weakens.
• Markets expect BoE to hold rates at 4.50% in March, cut by Q2.

The Pound Sterling (GBP) advanced early in the North American session, bouncing off a two-day low of 1.2605, as the Greenback weakened due to falling US Treasury yields. The GBP/USD pair trades at 1.2669, gaining 0.37%.

Sterling bounces off 1.2605, gaining 0.37% amid sour market mood

The market mood shifted sour amid US President Donald Trump's threats of tariffs. On Monday, he reiterated that duties on Canadian and Mexican products would be enacted as planned. In the meantime, weaker-than-expected data from the United States (US) has begun to take its toll on the US Dollar (USD) and is also sending US Treasury bond yields plunging. The US 10-year Treasury note plummets 10 basis points (bps) to 4.30% at the time of writing.

Data in the US revealed the S&P/Case-Shiller Home Prices for December rose by 4.5% YoY, up from November 4.3%. Ahead in the day, Fed Governor Michael Barr and Richmond Fed President Thomas Barkin would cross the wires.

In the United Kingdom (UK), the Confederation of British Industry (CBI) revealed that British retailers plan to cut investment by the most in more than five years due to weak consumer spending and elevated prices.

Recently, a Reuters poll revealed that 65 economists estimate the Bank of England (BoE) would keep rates unchanged at 4.50% in March and expect a cut to 4.25% in Q2.

A day ago, Swati Dhingra, a BoE external member, said that the policy would still be restrictive even if the bank cut rates by 0.25% quarterly. Meanwhile, traders await BoE chief economist Huw Pill, who sits in the hawkish aisle of the BoE.

Ahead of the day, traders will watch the Conference Board (CB) 's announcement of US Consumer Confidence.

GBP/USD Price Forecast: Technical outlook

GBP/USD is neutral to upward biased, exchanging hands above the 100-day Simple Moving Average (SMA) at 1.2648. A daily close above the latter could open the door to clear 1.2700, followed by the 200-day SMA at 1.2786. On the other hand, if GBP/USD struggles at 100-day SMA and drops below 1.2600, sellers could drive prices toward the February 5 peak turned support at 1.2549.

• USD/JPY slides to near 149.30 as the US Dollar underperforms its peers.
• The US Dollar weakens as US bond yields plunge sharply.
• Hot Japan’s National CPI data for January boosts BoJ hawkish bets.

The USD/JPY pair gives up its intraday gains and turns negative in Tuesday’s North American after failing to hold above the psychological figure of 150.00 earlier in the day. The asset declines to near 149.30 as the US Dollar (USD) falls sharply due to a significant decline in bond yields.

10-year US Treasury yields are down 1.7% to near 4.32% at the press time. The demand for US bond yields rose significantly due to an increase in market expectations that the Federal Reserve (Fed) will resume the policy-easing cycle in the June policy meeting.

According to the CME FedWatch tool, the likelihood for the Fed to cut interest rates in the June meeting has increased to 76% from 56% a week ago. The tool also shows that the Fed will keep interest rates steady in the current range of 4.25%-4.50% in the March and May meetings.

Fed dovish bets have accelerated after the release of the United States (US) flash S&P Global PMI data for February, which showed that the service sector activity declined for the first time after 25 months.

Meanwhile, the Japanese Yen (JPY) has been outperforming for the past few weeks amid firm expectations that the Bank of Japan (BoJ) will raise interest rates again this year. BoJ hawkish bets are based on accelerating inflationary pressures. Japan’s headline National Consumer Price Index (CPI) accelerated to 4% in January, the highest level seen in two years.

European Central Bank board member Isabel Schnabel argued on Tuesday that the fact that growth remains subdued cannot and should not be taken as evidence that policy is restrictive, as reported by Reuters.

Key takeaways

"We are transitioning from a global savings glut towards a global bond glut."

"There is still ample excess liquidity."

"The natural rate of interest in the Euro area has increased appreciably over the past two years."

"The nature of the inflation process is likely to have changed lastingly."

"If QT leads to a scarcity of reserves, it may cause the overall convenience yield to rise and hence equilibrium rates to fall."

"It is becoming increasingly unlikely that current financing conditions are materially holding back consumption and investment."

Market reaction

EUR/USD continues to edge higher after these comments and was last seen rising 0.38% on the day at 1.0507.

Pound Sterling (GBP) is trading modestly higher, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

PM Starmer to announce defence spending boost

"It’s a day of important speeches in the UK. PM Starmer is addressing parliament and he is expected to announce increased defence spending, just before he jets off to visit President Trump. BoE Economist Pill is also speaking (9.00ET). Pill commented earlier this month that lower rates are to be expected but the pace of declines would be slow."

"Cable continues to range trade around the 100-day MA (1.2641) but the sideways movement in price may be a consolidation ahead of another push higher towards 1.28. Support is 1.2600/10."

The EUR is flat on the session, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

Narrower spreads are supportive

"Narrower spreads are providing some backing for the EUR as investors focus on the potential for European spending to ramp up amid pressure to lift defense outlays. Short-term EZ/US spreads have narrowed to around –200bps, about 25bps narrower since the start of the month." 

"Slimmer spreads plus solid European stock market returns (versus US markets) suggest there is some moderate upside potential in the EUR in the short run towards 1.06 (fair value is estimated at 1.0626 today)." 

"The EUR’s failure to push on through 1.0530 resistance keeps the near-term focus on range trading around the 1.05 area. Support is 1.0430 and—firmer—at 1.0385. A break above 1.0530 targets 1.0650/1.0750."

With a week to go before the 1-month reprieve for President Trump’s border tariff threat expires (March 4th), short-term vols are ticking up again. 1-week implied vol touched 7.5% yesterday and are higher again today at 8.95% after Trump commented that tariffs on Canada and Mexico are moving forward, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

Choppy range trade around 1.42 may persist

"It was not, however, exactly clear which specific tariff threat the president was talking about in his remarks yesterday—which the rather limited reaction in spot reflects. The president was questioned on Canadian and Mexican border tariffs specifically but appeared to respond in more general terms, mentioning reciprocal tariffs in his remarks." 

"Indeed, one US official commented later that the fate of border tariffs on Canada and Mexico is still to be determined but reciprocal tariffs were likely in April, Bloomberg reported. The CAD is steady on the session so far, after slipping modestly on yesterday’s headlines. Broader, choppy range trade around 1.42 may persist in the short run—until there is more clarity on tariffs." 

"USD gains extended through resistance at 1.4250/60 in trading yesterday but the lack of follow through demand leaves the USD trading back—just about— below the 1.4250 point this morning. The move up in the USD is not especially convincing but the chop around the 1.42 point is liable to extend a little longer and the USD’s nudge higher tilts risks – if only slightly – more towards a push to the 1.4335/40 area (40-day MA). Support is 1.4150/75."

The US Dollar (USD) is trading mixed against the major currencies in a session where risk appetite appears to be faltering, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

Renewed tariff focus pushes bond yields lower

"After a period of tariff calm, and amid a relatively quiet period for data releases, comments yesterday from President Trump appearing to confirm that tariffs on Canada and Mexico were still on track have unsettled markets again. Bonds are bid, with 10Y US Treasury yields easing 6bps on the session and the VIX has advanced to near the 20 level." 

"Global stocks are narrowly mixed but are clearly finding it hard to advance. After nudging higher form Friday’s low, the DXY may advance a little further in the short run. But the broader pattern of trade in the USD continues to track closely that of the initial period after Trump’s first term win, something that more sell-side strategists are taking note of. That might still help moderate expectations for broader USD strength to persist or extend." 

"While tariff uncertainty persists, the USD does appear to be somewhat overvalued at least relative to what tariff action has been applied so far (just the additional tariffs on China) and, perhaps what might eventually emerge. The US releases housing data, Conference Board Consumer Confidence and the Richmond Fed’s Manufacturing Index this morning. The Fed’s Barr (voter) and Barkin (non-voter) speak today."

• The US Dollar trades flat and unfazed by overnight events.  
• The Trump administration is trying to corner China further with third-party tariffs and semiconductor restrictions. 
• The US Dollar Index (DXY) resides just above important support ahead of more downside. 

The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, trades almost flat around 106.70 at the time of writing on Tuesday while other asset classes are facing big moves. Investors are piling into safe-haven bonds, with US yields dropping lower. Meanwhile, equities are going down with negative performances in all major indices across Asia and Europe, also including US futures. 

The rout comes after the US President Donald Trump administration gave more details on its plan to toughen semiconductor restrictions over China. In addition, the United States (US) is asking allied countries to impose tariffs as well on China in order to corner the country. Trump wants to slow down Chinese technological development, Bloomberg reports.  

The US economic calendar is starting to bear some interesting data points. The Consumer Confidence for February and the Richmond and Dallas Fed Manufacturing indexes are all leading sentiment indicators that could give some insights about the current US activity. Later in the day, Fed Vice Chair for Supervision Michael Barr, Richmond Fed President Tom Barkin and Dallas Fed President Lorie Logan are set to speak.

Daily digest market movers: As if it is not there

• The Trump administration plans to expand its limitations on China's technological developments, including tougher semiconductor restrictions and pressuring allies to install restrictions on China's chip industry. Trump’s goal is to prevent China from developing a domestic semiconductor industry that could boost its AI and military capabilities, Bloomberg reports.
• At 14:00 GMT, the S&P Case Shiller Home Price Index for December is due. Expectations are for a small rise of 4.5%, from 4.3% in November.
• At 15:00 GMT, some February data is due:
• The US Richmond Fed Manufacturing Index is expected to come in at -2, from -4 previously.
• The US Consumer Confidence will be released, though no forecast is available.
• The US Dallas Fed Manufacturing Business Index has no forecast and printed 14.1 in January. 
• At 16:45 GMT, Federal Reserve Vice Chair for Supervision Michael Barr will give a speech on key financial stability issues in New Haven, Connecticut, United States.
• Richmond Fed President Tom Barkin will give a speech called "Inflation Then and Now",  followed by a Q&A at an event hosted by the Rotary Club of Richmond, expected around 18:00 GMT.
• At 21:15 GMT, President of the Federal Reserve Bank of Dallas Lorie Logan will close off this Tuesday by speaking on the future of the central bank balance sheet at Bank of England's annual BEAR research conference in London, United Kingdom.
• Equities are in red across the board with Asian markets overall closed down by more than 1%. European equities are struggling and US futures are in the red as well. 
• The CME FedWatch tool shows an uptick in chances for an interest rate cut by the Federal Reserve (Fed) in June by 25 basis points (bps), growing to 50.0%, while odds for a rate pause have diminished to only 32.6%, backed by the drop in US yields this Tuesday
• The US 10-year yield trades around 4.34%, further down from last week’s high at 4.574%.

US Dollar Index Technical Analysis: Wind still

The US Dollar Index (DXY) is clearly not included in traders' decisions on the back of comments from US President Donald Trump or his administration. Moves are seen in equities, Gold, and Bonds, while the DXY has become too much of a risk and has been left aside by traders for now.

On the upside, the 100-day Simple Moving Average (SMA) could limit bulls buying the Greenback near 106.68. From there, the next leg could go up to 107.35, a pivotal support from December 2024 and January 2025. In case US yields recover and head higher again, even 107.97 (55-day SMA) could be tested. 

On the downside, the 106.52 (April 16, 2024, high) level has seen a false break for now. However, that does mean quite a few stops might have been triggered in the markets, with a few bulls having been washed out of their long US Dollar positions. Another leg lower might be needed to entice those Dollar bulls to reenter at lower levels, near 105.89 or even 105.33.

US Dollar Index: Daily Chart

• AUD/USD slides to near 0.6330 ahead of the Australian monthly CPI data for January.
• The RBA reduced its OCR by 25 bps to 4.1% last week.
• Renewed fears of Trump tariffs support the US Dollar.

The AUD/USD pair falls to near 0.6330 in late European trading hours on Tuesday. The Aussie pair extends its downside move for the straight third trading day ahead of the Australian monthly Consumer Price Index (CPI) data for January, which will be released on Wednesday.

Australian Bureau of Statistics is expected to show that inflationary pressures accelerated to 2.6% from 2.5% in December. Such a scenario would boost expectations that the Reserve Bank of Australia (RBA) won’t cut interest rates sooner.

The RBA reduced its Official Cash Rate (OCR) by 25 basis points (bps) to 4.10% in its policy meeting last week. This was the first interest rate cut decision by the RBA since November 2020. The RBA guided a cautious stance on interest rates as the battle against inflation is not over yet.

Meanwhile, the US Dollar (USD) drops slightly on Tuesday but is still holding a majority of Monday’s recovery move. The USD steadies amid renewed fears of tariffs by United States (US) President Donald Trump. On Monday, Trump said that his plans of imposing 25% tariffs on Canada and Mexico on March 4, which were delayed by a month after both nations agreed for tightening border activities, are still on. “The tariffs are going forward on time, on schedule,” Trump said from the White House.

This week, investors will pay close attention to the US Personal Consumption Expenditure Price Index (PCE) data for January, which will be released on Friday. Investors will pay close attention to the US PCE inflation data, which is the Federal Reserve’s (Fed) preferred inflation gauge, as it will influence market speculation for the Fed’s monetary policy outlook.

• USD/CAD holds onto gains near 1.4260 amid renewed fears of Trump tariffs on Canada and Mexico.
• Canada’s inflation has remained below BoC’s mandate in the last three months.
•  BoC’s Macklem warned that the impact of Trump tariffs could be severe on Canada.

The USD/CAD clings to gains near 1.4260 in European trading hours on Tuesday. The Loonie pair holds on Monday’s recovery move as the US Dollar (USD) steadies after the United States (US) President confirmed that his plans of imposing 25% levies on imports from Canada and Mexico on March 4 are intact.

The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, is slightly down but remains around Monday’s recovery move to near 106.70.

President Trump postponed his plans of slapping 25% tariffs on Canada and Mexico on February 4 after both nations agreed to send forces at borders to restrict the flow of fentanyl and undocumented immigrants to the US.

Trump’s tariffs on Canada would weaken its already vulnerable economic outlook. Inflation in the Canadian economy has been undershooting the Bank of Canada’s (BoC) target of 2% for the past three months, suggesting a weak demand environment.

On Friday, BoC Governor Tiff Macklem warned in a speech in Ontario on Friday that the economic impact would be severe if Trump slaps tariffs on all imports from Canada.

USD/CAD breaks out of the Descending Triangle chart pattern formed on an hourly timeframe. The downward-sloping border of the above-mentioned chart pattern was plotted from the February 9 high of 1.4380 and the flat border was placed from the February 14 low of 1.4151.

The 50-period Exponential Moving Average (EMA) slopes higher to near 1.4230, suggesting a bullish near-term trend.

The 14-period Relative Strength Index (RSI) trades above 50.00, which indicates that a bullish momentum is on.

Going forward, an upside move above the February 24 high of 1.4280 will open the door toward the round-level resistance of 1.4300 and the February 9 high of 1.4380.

On the contrary, if the pair breaks below its February 14 low of 1.4151, it will fall to its December 9 low of 1.4094, followed by its December 6 low of 1.4020.

USD/CAD hourly chart

The USD may be the worst performing G10 currency in the year to date, but the EUR is struggling to leverage significantly from the greenback’s softer tone. Measured since the start of February, the single currency is the second worst performing G10 currency after the USD, Rabobank's FX analyst Jane Foley notes.

EUR/USD struggles to hold on to breaks above the 1.05 level

"Although EUR/USD is trading comfortably off this year’s lows, it has struggled to hold on to breaks above the 1.05 level. A soft EUR is likely to be welcomed by European exporters. We continue to expect the EUR to be a poor performer this year."

"Although the USD’s weakness can be explained by a change in the market’s focus regarding the inflation and growth risks that face the US economy, the outlook for the EUR continues to be clouded by structural issues within the Eurozone that are hampering growth combined with fresh concerns about defence."

"The shift by US Presidential Trump on Ukraine and on European defence guarantees highlights Europe’s vulnerability on this front. We continue to see risk of EUR/USD moving lower into the middle of the year. That said, we favour selling EUR/JPY and look for a break of the EUR/JPY 155 level on a 1-to-3-month view."

Rebound has gained some momentum; chance for US Dollar (USD) to test the strong resistance at 7.2705 vs Chinese Yuan (CNH). In the longer run, failure to hold below 7.2300 has diminished the likelihood of further USD decline, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Rebound has gained some momentum

24-HOUR VIEW: "We expected USD to 'trade sideways between 7.2350 and 7.2650” yesterday. However, USD briefly fell to 7.2264, rebounding to close unchanged at 7.2543. The rebound gained some momentum, and today, there is a chance for USD to test the strong resistance at 7.2705. On the downside, support levels are at 7.2430 and 7.2350."

1-3 WEEKS VIEW: "We have expected USD to decline since early last week. After USD fell and almost reached our technical target of 7.2300 last Thursday (low has been 7.2314), we highlighted on Friday (21 Feb, spot at 7.2400) that “to continue to decline, USD must break and remain below 7.2300.' Yesterday, USD fell below 7.2300 but rebounded strongly from 7.2264. The failure to hold below 7.2300 has diminished the likelihood of further decline. On the upside, a breach of 7.2705 (no change in ‘strong resistance’ level) would indicate that the weakness in USD has stabilised."

• EUR/USD remains on its toes around 1.0450 as investors expect the new German coalition government won’t be able to revive economic growth.
• The leader of CDU Frederich Merz is unlikely to join hands with Far-Right.
• US President Trump confirms that the plan of imposing 25% tariffs on Canada and Mexico is still on.

EUR/USD trades cautiously above the key support of 1.0450 in European trading hours on Tuesday. The major currency pair wobbles as investors await the outcome of the victorious Frederich Merz-led-conservatives’ negotiations with other parties to form a coalition government. 

The leader of the Christian Democratic Union of Germany (CDU) Frederich Merz – likely the next German Chancellor – is expected to face heated negotiations to fulfill his economic agenda of loosening the ‘debt brake’ rule to increase the limit of the budget deficit, which is currently 0.35% of the Gross Domestic Product (GDP). The most likely scenario is Conservatives forming a coalition government with the Social Democratic Party (SPD) of current Chancellor Olaf Scholz. Merz is unlikely to invite Alice Weidel’s Alliance for Germany (AFD), also known as Far-Right, to form a government.

Market participants doubt that Frederich Merz will uplift the fractured German economy as a coalition government historically results in an obstructive parliament across the globe. This led to investors liquidating their longs on the Euro (EUR) in the North American session on Monday after strong initial gains. The German economy has been contracting for the last two years, and its outlook is weak due to fears of potential tariffs by United States (US) President Donald Trump.

ECB policymaker and Bundesbank President Joachim Nagel said last week that our “strong export orientation” makes us “particularly vulnerable” to potential Trump tariffs.

On the economic front, Eurozone Q4 Negotiated Wage Rates data came in at 4.12%, down from 5.43% in the previous quarter. Investors now await Isabel Schnabel, member of the European Central Bank (ECB) Executive Board, who delivers a keynote speech at Bank of England's Annual Research Conference, "The Future of the Central Bank Balance Sheet," in London, United Kingdom, at 13:00 GMT.

Daily digest market movers: EUR/USD faces pressure as US Dollar steadies

• EUR/USD is also facing pressure from renewed fears of a global trade war. On Monday, US President Donald Trump said that his plans of imposing 25% tariffs on Canada and Mexico on March 4, which were delayed by a month after both nations agreed to tighten border activities, are still on. “The tariffs are going forward on time, on schedule,” Trump said from the White House.
• Renewed fears of tariffs by Donald Trump on his North American partners have resulted in some stability in the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks lower on Tuesday but had a strong reversal move to near 106.75 on Monday after posting a fresh 11-week low near 106.10 the same day.
• On the economic front, US Durable Goods Orders and the Personal Consumption Expenditures Price Index (PCE) data for January will be the next major trigger for the US Dollar, which will be released on Thursday and Friday, respectively. Investors will pay close attention to the PCE inflation data, which is the Federal Reserve’s (Fed) preferred inflation gauge, as some officials have shown concerns over the stalling disinflation trend lately.
• In Tuesday’s session, investors will focus on the US Consumer Confidence data for February, which will be released at 15:00 GMT.

Technical Analysis: EUR/USD holds above 1.0450

EUR/USD trades with caution above Monday’s low of 1.0450 in Tuesday’s European session. The major currency pair continues to struggle to have a decisive breakout above the psychological resistance of 1.0500. The 50-day Exponential Moving Average (EMA) continues to support the major currency pair around 1.0440.

The 14-day Relative Strength Index (RSI) wobbles just below 60.00. A bullish momentum would activate if the RSI (14) manages to sustain above that level.

Looking down, the February 10 low of 1.0285 will act as the major support zone for the pair. Conversely, the December 6 high of 1.0630 will be the key barrier for the Euro bulls.

US Dollar (USD) could rebound further vs the Japanese Yen (JPY); any advance is unlikely to break above 150.55. In the longer run, momentum has slowed; as long as 151.05 is not breached, there is still a slim chance for USD to drop to 148.63, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Any advance is unlikely to break above 150.55

24-HOUR VIEW: "USD fell sharply to a low of 148.90 last Friday. Yesterday, we highlighted that 'there is room for USD to retest the 148.90 before stabilisation is likely.' We added, 'the significant support level at 148.63 is unlikely to come into view.' Our expectations were not wrong, as USD dropped to 148.84, rebounding strongly to close higher by 0.28% at 149.71. Today, USD could rebound further, but any advance is unlikely to break above 150.55. The strong resistance at 151.05 is unlikely to come under threat. Support is at 148.50, followed by 149.20."

1-3 WEEKS VIEW: "In our latest narrative from last Friday (21 Feb, spot at 149.60), we indicated that 'while USD is likely to decline further, short-term conditions are deeply oversold, and the significant support at 148.63 may not come into view so soon.' USD fell and eked out a fresh low 148.84 yesterday and then rebounded strongly. Downward momentum has slowed with the rebound, but as long as 151.05 (no change in ‘strong resistance’ level) is not breached, there is still a slim chance for USD to drop to 148.63."

As was widely expected, the People’s Bank of China (PBOC) left its 1-year medium-term lending facility (MLF) rate steady at 2.0%, BBH's FX analysts report.

China’s economy is still struggling to escape a deflationary spiral

"More easing is in the pipeline as China’s economy is still struggling to escape a deflationary spiral. However, the growth outlook will remain unimpressive as long as policymakers fail to address the root cause of weak consumption spending activity: low household income levels, high precautionary savings, and high levels of household debt."

"China’s annual 'Two Sessions' National People's Congress meeting begins March 5. While detailed policy announcements are not expected, the sessions provide a valuable insight into the government’s fiscal and growth objectives."

New Zealand Dollar (NZD) is under mild downward pressure vs the US Dollar (USD); it could edge lower but is unlikely to break clearly below 0.5715. In the longer run, a breach of the strong support at 0.5715 would indicate that 0.5790 is out of reach, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

NZD/USD can edge lower

24-HOUR VIEW: "We expected NZD to 'trade sideways between 0.5735 and 0.5770' yesterday. NZD then rose to 0.5770, dropped to 0.5730, before closing at 0.5733 (-0.17%). Downward momentum has increased slightly. Today, NZD is likely to edge lower, but given the mild momentum, any decline is unlikely to break clearly below 0.5715. The mild downward pressure would remain intact provided that NZD remains below 0.5760 (minor resistance is at 0.5745)."

1-3 WEEKS VIEW: "NZD rose sharply last Thursday. In our update from last Friday (21 Feb, spot at 0.5760), we indicated, 'the boost in upward momentum suggests the major resistance level is back in sight.' Yesterday (Monday), NZD rose to 0.5770 but fell from the high. From here, a breach of 0.5715 (no change in ‘strong support’ level) would indicate that 0.5790 is out of reach."

USD/JPY rebounded overnight, tracking USD rebound.  Pair was last seen at 149.77 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Rebound risks not ruled out in the interim

"US administration’s memorandum to limit Chinese investments, toughen Biden’s chip controls over China and Trump’s comments that the tariffs scheduled to hit Canada and Mexico next month were 'on time' and 'moving along very rapidly' saw the bounce in USD."

"Daily momentum is bearish though while there are signs of it waning while RSI rose. Rebound risks not ruled out in the interim but bias to sell rallies. Support at 149.20 (50% fibo), 148.80 before 147 (61.8% fibo). Resistance at 150.50, 151.50 (38.2% fibo retracement of Sep low to Jan high)."

"Narrowing of UST-JGB yield differentials should continue to underpin the broader direction of travel to the downside. Last Fri, Governor Ueda said that yields reflect economic recovery and rising price trend – consistent with BoJ Takata’s earlier comments. Ueda also reiterated that BoJ will raise rate if economic conditions improve as expected."

• Silver price declines to near $32.00 even though US President Trump has confirmed that the 25% tariff plan on Canada and Mexico is intact.
• The US Dollar steadies as investors digest weak US flash S&P Global Services PMI for February.
• Investors seek fresh developments on peace talks for calling off war in Ukraine.

Silver price (XAG/USD) falls for a straight third trading day and declines to near $32.00 in European trading hours on Tuesday. The white metal weakens even though United States (US) President Donald Trump has confirmed that his plans of imposing 25% tariffs on Canada and Mexico on March 4, which were delayed by a month, are on.

“The tariffs are going forward on time, on schedule,” Trump said during a press conference on Monday.

President Trump postponed his tariffs plans after his North American peers agreed to criminal enforcement at borders to restrict the flow of fentanyl and illegal immigrants. Tariffs by the US on its close peers are expected to heighten political risks and weigh on the global economic outlook. Such a scenario remains favorable for precious metals, such as Silver.

Meanwhile, steadiness in the US Dollar (USD) after a recovery move from its fresh 11-week low has weighed on the Silver price to some extent. The US Dollar rebounds as investors digest weak flash US S&P Global PMI data for February, which was released on Friday. The PMI report showed that the Services PMI, which gauges activities in the services sector, contracted for the first time after expanding for 25 straight months.

Going forward, investors will focus on Russia-US peace talks to end the war in Ukraine, which has entered its fourth year. Geopolitical tensions increase the safe-haven demand of the Silver price.

On Monday, French President Emmanuel Macron met Donald Trump to avoid a quick ceasefire deal and discussed military guarantees to Ukraine, Reuters report.

Silver technical analysis

Silver price retraces after failing to extend its upside above the February 14 high of $33.40 on Thursday. The outlook of the white metal remains bullish as the 50-day Exponential Moving Average (EMA) has been sloping higher, which trades around $31.40.

The 14-day Relative Strength Index (RSI) falls inside the 40.00-60.00 range, suggesting that the bullish momentum has faded. However, the bullish bias remains intact.

Looking down, the upward-sloping trendline from the August 8 low of $26.45 will act as key support for the Silver price around $30.00. While, the October 22 high of $34.87 will be the key barrier.

Silver daily chart

European Central Bank (ECB) policymaker Martins Kazaks commented on the Bank’s path forward on interest rate cuts.

Key quotes

There has been a slight increase in downward momentum; Australian Dollars (AUD) is expected to edge lower but is unlikely to reach 0.6315 vs the US Dollar (USD). In the longer run, upward momentum has largely faded; AUD is likely to consolidate between 0.6280 and 0.6410 for now, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Upward momentum has largely faded for AUD

24-HOUR VIEW: "Last Friday, AUD rose to 0.6409 and then pulled back. Yesterday (Monday), we highlighted that 'the pullback appears corrective, and AUD is unlikely to weaken much further.' We expected AUD to 'trade in a 0.6355/0.6400 range.' AUD then traded in a lower range than expected (0.6345/0.6392), closing slightly lower by 0.16% at 0.6350. There has been a slight increase in downward momentum. Today, we expect AUD to edge lower, but any decline is unlikely to reach 0.6315. Resistance is at 0.6365, followed by 0.6380."

1-3 WEEKS VIEW: "We have held a positive AUD view since early this month. In our latest narrative from last Friday (21 Feb, spot at 0.6400), we indicated that AUD 'could advance further, potentially reaching 0.6455.' We added, 'only a breach of 0.6345 (‘strong support’ level) would suggest that AUD is not ready to advance to 0.6455.' Yesterday, AUD fell to a low of 0.6345. While our ‘strong support’ level has not been clearly breached, upward momentum has largely faded. AUD has entered a consolidation phase, and it is likely to trade between 0.6280 and 0.6410 for now."

Pound Sterling (GBP) slipped overnight in reaction to broad USD rebound. There is no tier-1 data for UK this week, putting more focus on BoE-speaks. GBP was last seen trading at 1.2635, OCBC's FX analysts Frances Cheung and Christopher Wong note.  

GBP/USD may see consolidation intraday

"Huw Pill will speak tonight, followed by Dhingra (Wed), Ramsden (Thu). Last week, BoE’s Pill told Reuters that he is cautious about further rate cuts. He said that BoE had more work to do to bring down inflation and that policymakers 'can’t just remove all restriction overnight, cut rates aggressively, etc'."

"Bullish momentum on daily chart shows signs of fading while RSI is flat. May see consolidation intraday. Support at 1.2610 (38.2% fibo retracement of Sep high to Jan low), 1.2510 (21 DMA). Resistance at 1.2680, 1.2770/90 levels (50% fibo, 200 DMA)."

European Central Bank (ECB) policymaker and Bundesbank President Joachim Nagel said on Tuesday, “we should take one step at a time and not rush rate cuts.”

Additional comments

Market reaction

These comments have little to no impact on the Euro, as the EUR/USD pair keeps its range near 1.0470 at the press time.

On Tuesday, the European Central Bank (ECB) released its indicator of the Euro area’s negotiated wages data for the fourth quarter (Q4) of 2024.

Data showed that the Euro area negotiated wages grew 4.12% year-on-year (YoY) in Q4 2024 after increasing by a revised 5.43% in the previous quarter.

Market reaction to the EU negotiated wages data

The cooldown in the EU negotiated wage growth fails to move the needle around the Euro, as EUR/USD trades modestly flat on the day near 1.0470 as of writing.

About ECB indicator of negotiated wage growth

The ECB indicator of negotiated wage growth is computed for a subset of countries only. The euro area aggregate is based on nine countries: Germany, France, Italy, Spain, the Netherlands, Belgium, Finland, Austria and Portugal. The indicator relies on data for negotiated monthly earnings. The euro area indicator is based on a mixture of monthly and quarterly time series and is based on non-harmonised country data.

USD bears were stopped in its tracks as risk sentiment suffered a knock. Trump administration rolled out a memorandum telling a key government committee (Committee on Foreign Investment in the United States) to limit Chinese investment on tech, energy and other strategic American sectors. DXY was last seen at 106.65, OCBC's FX analysts Frances Cheung and Christopher Wong note.

A softer PCE print may weigh on the USD

"It also called for Mexican officials to place their own levies on Chinese imports. Additionally, US also proposed fees on Chinese-built ships entering US ports. It further proposed that the US government should review a 1984 tax deal with China that frees individuals and companies from double taxation. Re-escalation in US-China tensions can undermine sentiments, resulting in a slowdown of USD’s recent decline."

"The 25% tariff on Mexico and Canada comes into effect on 4 Mar while tariffs on all steel and aluminium imports comes into effect on 12 Mar. The imposition of tariffs on those dates can undermine sentiments and lead to spikes in the USD, unless these dates are pushed back again."

"Daily momentum is bearish while RSI rose from near oversold conditions. Next support at 105.50, 105.20 levels (50% fibo). Resistance at 107.50/80 levels (23.6% fibo, 21 DMA). Support at 106.30/40 levels (100 DMA, 38.2% fibo retracement of Oct low to Jan high). This week’s focus is on US core PCE price index (Fri). A softer print may weigh on the USD. That said, potential tariffs on Mexico and Canada with a 4 Mar deadline and risks of re- escalating US-China tensions may warrant some caution."

• Gold price edges lower on Tuesday along with yields and equities.
• The Trump administration seeks to toughen its semiconductor restrictions on China. 
• Gold heads back to $2,930 and looks heavy with an overall market rout. 

Gold’s price (XAU/USD)  hit a new all-time high on Monday at $2,956, though traders were unable to enjoy it for long. The precious metal trades at around $2,940 at the time of writing on Tuesday, while US President Donald Trump’s administration plans to impose more limitations on China’s technological developments. A tougher stance on semiconductor restrictions and pressuring other allies to corner China is part of that strategy.  

The news creates a negative tone in markets this Tuesday. Traders are fleeing into bonds as a safe haven, which is pressuring yields for more downside (inverse correlation bond price to yield). Equities are also being slaughtered, with red numbers across the board from Asia to Europe, including  US equity futures. Except for three Federal Reserve (Fed) members who are set to speak, not much is expected on Tuesday ahead of the Personal Consumption Expenditures (PCE) due on Friday. 

Daily digest market movers: On the table

• The Trump administration plans to expand its limitations on China's technological developments, including tougher semiconductor curbs and pressuring allies to install restrictions on China's chip industry. Trump’s goal is to prevent China from developing a domestic semiconductor industry that could boost its AI and military capabilities, Bloomberg reports.
• The CME FedWatch tool shows an uptick in chances for an interest rate cut by the Federal Reserve (Fed) in June by 25 basis points (bps), growing to 50.0%, while odds for a rate pause have diminished to only 32.6%, backed by the drop in US yields this Tuesday.
• Investors are looking ahead to January’s Personal Consumption Expenditures Price Index, the Fed preferred inflation gauge, set to release on Friday, for clues on monetary policy, with the indicator expected to cool to its slowest since June, Reuters reports. 
• Fed Vice Chair for Supervision Michael Barr will give a speech on financial stability and answer questions at an event hosted by Yale School of Management at 16:45 GMT.
• Richmond Fed President Tom Barkin will give a speech called "Inflation Then and Now",  followed by a Q&A at an event hosted by the Rotary Club of Richmond, expected around 18:00 GMT. 
• At 21:15 GMT, President of the Federal Reserve Bank of Dallas Lorie Logan will speak on the future of the central bank balance sheet at the Bank of England's annual BEAR research conference in London, United Kingdom.

Technical Analysis: Technical below pivot

A quick drop below the daily Pivot Point near $2,943 is signalling a bit of an issue for Gold on Tuesday. Selling pressure is present, and it looks like buyers already tried to get Gold back above the daily Pivot in early Asian trading but failed. The S1 support at $2,930 has held for now, though once that level breaks, the S2 support only comes in at $2,908. 

On the upside, the all-time high at $2,956 remains the main level to watch. On the way up, the daily R1 resistance at $2,964 comes in after that. Further up, the R2 resistance stands at $2,977 before considering the $3,000 mark.

On the downside, the S1 support comes in at $2,930, which roughly coincides with Monday’s low in the US session. In case that level does not hold, the $2,900 big figure comes into play with the S2 support at $2,908.

XAU/USD: Daily Chart

Australia releases January inflation data tonight, and expectations are for a rebound in headline CPI from 2.5% to 2.6%. Markets will look closely at the trimmed mean to gauge whether the sharp decline to 2.7% in December was the start of a broader trend, ING’s FX analysts Francesco Pesole notes.

AUD/USD to return below 0.620 in the coming months

"We see risks of a relatively hot print tonight which can further endorse the RBA’s cautious stance on future rate cuts after kickstarting its easing cycle last week. Alongside inflation, the jobs market provided strong signals in the January report released after last week's rate cut. Employment increased by 44,000, doubling expectations and notably driven entirely by full-time hiring."

"Risks to growth related to the impact of US protectionism can still lead to three more cuts by the RBA this year, but we think tonight’s CPI print can prompt a hawkish repricing in the AUD curve, which currently embeds 50bp by year-end. We expect some support coming the Aussie dollar’s way, but like for EUR/USD, we remain bearish on AUD/USD on the back of tariff risk, and target a return below 0.620 in the coming months."

Sharp drop could extend; any decline is likely to remain within a lower range of 1.2600/1.2670. In the longer run, momentum is slowing; a breach of 1.2580 would indicate that 1.2730 is out of reach this time around, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Momentum is slowing

24-HOUR VIEW: "We expected GBP to trade in a range between 1.2625 and 1.2680 yesterday. The subsequent price turned out differently than we expected. GBP rose sharply to 1.2690, plummeted to 1.2613, and then closed little changed (1.2626, -0.08%). While the sharp drop could extend, any decline is likely to remain within a lower range of 1.2600/1.2670. To look at it another way, a sustained break below 1.2600 is unlikely."

1-3 WEEKS VIEW: "We have held a positive GBP view since the middle of the month. Following GBP sharp rise last. Thursday, we indicated on Friday that 'the boost in momentum indicates further GBP strength to 1.2730.' Yesterday, GBP rose and eked out a fresh two-month high of 1.2690. It fell sharply from the high, closing largely unchanged. Upward momentum is beginning to slow, and a breach of 1.2580 (no change in ‘strong support’ level) would indicate that 1.2730 is out of reach this time around."

Silver prices (XAG/USD) fell on Tuesday, according to FXStreet data. Silver trades at $32.24 per troy ounce, down 0.33% from the $32.34 it cost on Monday.

Silver prices have increased by 11.57% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 91.23 on Tuesday, broadly unchanged from 91.23 on Monday.

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The US Dollar (USD) found firmer terrain at the start of the week and received some help in late European hours from President Trump’s claim that tariffs on Canada and Mexico are moving ahead. The 25% duties were delayed by one month at the start of February, and Monday 3 March is the new deadline to avert a USMCA trade war, ING’s FX analysts Francesco Pesole notes.

USD can edge back lower today

"We’d not be surprised to see Trump raise the tariff threat until the last minute to gain negotiating leverage, like in February. Our working assumption remains that 25% tariffs on Mexico and Canada won’t materialise, and markets are also pricing in only a modest risk of that happening. We could see FX taking the threat more seriously along the week, so USD/CAD and USD/MXN face near-term upside risks."

"On the data side, expect quite a lot of scrutiny on today’s Conference Board consumer confidence. The index jumped in November after the US election but declined in December and January. Consensus is looking at another slowdown to 102.5 from 104.1, with 100 potentially being the pain level for a market reaction. We’ll also see the Richmond Fed indices today after regional Fed activity measures (from Chicago and Dallas) came in soft yesterday."

"We outlined yesterday how we did not expect this week to have one-way traffic in the dollar. The upside risks for USD today primarily stem from other hawkish comments on tariffs by Trump or other US officials. Barring that, and considering the market’s tendency to call the bluff on tariffs, we think the dollar can edge back lower today as consumer confidence risks disappointing. That would feed into a growing narrative of softening consumption, and favour some dovish repricing of Fed expectations."

• EUR/GBP holds its gains following Germany’s Gross Domestic Product data released on Tuesday.
• Germany’s economy shrank by 0.2% QoQ in Q4 of 2024, compared to a 0.1% expansion in the third quarter.
• BoE Monetary Policy Committee member Swati Dhingra advocates for a swift easing of policy restrictiveness to stimulate consumption.

EUR/GBP continues its upward momentum for the second consecutive day, hovering around 0.8290 during European trading hours. The currency cross remains stable following the release of Germany’s Gross Domestic Product (GDP) data on Tuesday.

Germany’s economy contracted by 0.2% quarter-on-quarter in the fourth quarter of 2024, aligning with preliminary estimates and following a 0.1% expansion in the previous quarter. This downturn was largely driven by a negative contribution from net trade, with exports falling 2.2% while imports rose by 0.5%. On an annual basis, the economy shrank by 0.2% in Q4, confirming initial projections and marking the sixth straight quarter of decline.

The EUR/GBP cross remains under pressure due to the Euro’s (EUR) weakness following Germany’s federal election, where no single party secured a clear majority — a situation that could further complicate growth prospects in the already struggling economy.

Friedrich Merz, leader of the Christian Democratic Union of Germany (CDU), is poised to become Germany’s Chancellor after winning the largest share of votes. However, forming a coalition government is expected to be challenging and could delay policy implementation.

Investors are now looking for fresh signals on the Bank of England’s (BoE) monetary policy direction for the year ahead. Earlier this month, the BoE lowered its key borrowing rate by 25 basis points (bps) to 4.5%, indicating a gradual approach to policy easing.

However, BoE Monetary Policy Committee (MPC) member Swati Dhingra has advocated for a more aggressive monetary expansion, citing weak demand. In her speech at Birkbeck on Monday, Dhingra expressed concern that the current pace of rate cuts—interpreted as 25 bps per quarter—could still leave monetary policy overly restrictive by the end of 2025.

• WTI price rose as the US imposed sanctions on brokers, tanker operators, and shipping companies involved in Iranian petroleum.
• Oil price gains were capped as Trump announced to proceed with import tariffs on Canada and Mexico.
• French President Emmanuel Macron suggested a truce between Ukraine and Russia could be reached in the coming weeks.

West Texas Intermediate (WTI) Oil price continues its upward momentum for the second consecutive day, trading around $70.90 per barrel during European hours on Tuesday. Crude Oil prices are rising as fresh United States (US) sanctions on Iran’s Oil trade heighten concerns about tighter global supply.

On Monday, the US imposed sanctions on more than 30 brokers, tanker operators, and shipping companies involved in the sale and transportation of Iranian petroleum. This represents the second wave of sanctions as US President Donald Trump seeks to drive Iran's crude exports to zero in an effort to prevent the country from developing nuclear weapons, per Reuters.

However, Oil price gains were limited by an uncertain demand outlook after President Trump stated late Monday that sweeping US tariffs on imports from Canada and Mexico “will go forward” when the current one-month delay expires next week. Trump reiterated his belief that the US has been “taken advantage of” by foreign nations and affirmed his plan to enforce so-called reciprocal tariffs.

Market participants also assessed the possibility of a peace deal in the Ukraine conflict, which could ease sanctions on Russia and potentially increase its Oil exports. French President Emmanuel Macron told Fox News late Monday that a truce between Ukraine and Russia could be reached in the coming weeks following discussions with Donald Trump at the White House on the third anniversary of Russia's invasion.

Meanwhile, the potential resumption of Oil shipments from Iraq’s Kurdistan region could help mitigate the impact of reduced Iranian exports. Iraq is awaiting Turkey's approval to restart Oil flows from the Kurdistan region, with the Iraqi Oil minister expressing hope on Monday that Kurdish Oil exports could resume within two days.

Bank of England policymaker Swati Dhingra reiterated her dovish position yesterday by stressing that gradual rate cuts will still leave monetary policy in restrictive territory and weigh on the economy. She was one of the two members, alongside Catherine Mann (a hawk turned dove) voting for a 50bp cut on 6 February, ING's FX analyst Francesco Pesole notes. 

EUR/GBP upside as relatively limited

"Today, we’ll hear some remarks by Chief Economist Huw Pill. He sits on the hawkish side of the spectrum and any dovish comments can have a tangible impact on rate expectations. Last week, Governor Andrew Bailey characterised the uptick in inflation as temporary, but market rate expectations remain rather cautious, with 50bp priced in by year-end." 

"We expect three more cuts this year, also due to the worsening fiscal picture. Anyway, we see EUR/GBP upside as relatively limited due to the euro’s own negative, and think Cable is a much cleaner way to play GBP downside."

The German election rally in the euro did not last long, as markets were not pricing in a political risk premium before the vote and the key downside risks to the euro remain intact, ING's FX analyst Francesco Pesole notes.

EUR/USD can retest 1.050 on the back of USD weakness today

"Chancellor-in-waiting Friedrich Merz is reportedly discussing a quick agreement on EUR 200bn defence spending with its likely coalition partner SPD, following his remarks about Europe’s need to gain independence from the US. Our view is that defence spending will not be seen by markets as a channel to revamp stagnant growth in the eurozone and should therefore have limited positive impact on the euro."

"The ECB publishes its indicator of the euro area negotiated wages for 4Q24. In 3Q24, the index jumped to 5.4% YoY, although that was primarily due to one-off payments, and ultimately not particularly taken into consideration by the ECB. The Bank’s target is around 3%, and while it may take longer for such a slowdown to show in the negotiated wage series, the ECB is seemingly welcoming the slower wage growth in other higher-frequency indicators."

"We think the bar is relatively high for the ECB to change its stance on the back of today’s negotiated wage data, and any positive reaction from the euro may be unwound once the ECB reiterates its dovish commitment. EUR/USD could retest 1.050 on the back of some USD weakness today. Still, our view remains bearish on the pair and we target a return to 1.030 in the near term."

Euro (EUR) turned lower following USD’s rebound and mixed German election results. EUR was last seen trading at 1.0472 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.   

Sideways trade likely intra-day

"While there were no major surprises with CDU/CSU winning and the leader of CDU/CSU wanting to form a coalition government fast, the formation of a coalition government may take up to months. Also, the second place AfD party and left-wing party Die Linke won enough seats to potentially block debt brake reforms. The government formation (will take time) and mixed election results may complicate policy making with regards to budget and fiscal spending." 

"EUR’s recovery may have run its course for now. Looming risks of US tariffs on Europe and Ukraine peace uncertainty leading to EU fiscal burden may constrain the room for EUR upside. Markets may also be cautious of dovish ECB outcome at the next Governing Council meeting (6 Mar) and prefer to lighten position." 

"Bullish momentum on daily chart shows signs of fading though still intact while RSI was flat. Sideways trade likely intra-day. Support at 1.0420 (21 DMA, 23.6% fibo), 1.0390 (50 DMA). Resistance at 1.0540/70 levels(100 DMA, 38.2% fibo retracement of Sep high to Jan low)."

Euro (EUR) is expected to trade in a sideways range of 1.0440/1.0495 vs US Dollar (USD). In the longer run, upward momentum has slowed somewhat; but only a breach of 1.0425 would indicate that EUR is not ready to rise above 1.0530, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.  

Upward momentum has slowed somewhat

24-HOUR VIEW: "Yesterday, we expected EUR to trade in a 1.0450/1.0505 range. However, EUR rose briefly to 1.0528, pulling back sharply to a low of 1.0452. EUR closed largely unchanged at 1.0466 (+0.08%). The price movements did not result in any increase in either downward or upward momentum. Today, we expect EUR to trade in a sideways range of 1.0440/1.0495." 

1-3 WEEKS VIEW: "In our latest narrative from last Friday (21 Feb, spot at 1.0500), we highlighted that 'the rejuvenated upward momentum suggests EUR could continue to advance.' We pointed out, 'there are a pair of major resistance levels at 1.0530 and 1.0560.' Yesterday, EUR rose to 1.0528, a couple of pips below 1.0530. It then pulled back sharply to close at 1.0466. Although upward momentum has slowed somewhat, only a breach of 1.0425 (no change in ‘strong support’ level) would indicate that EUR is not ready to rise above 1.0530."
 

• The US Dollar Index may find primary support around the falling wedge’s lower boundary at 105.90.
• The 14-day RSI remains below 50, reinforcing bearish bias.
• The nine-day EMA of 106.89 appears as the immediate resistance.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, edges lower after registering gains in the previous two successive sessions, trading around 106.70 during the early European hours on Friday. However, the analysis of the daily chart indicates a potential bullish reversal, with the index moving within a falling wedge pattern.

The 14-day Relative Strength Index (RSI) remains below the 50 level, signaling a strengthening bearish momentum. Additionally, the US Dollar Index is trading below the nine- and 14-day Exponential Moving Averages (EMAs), reinforcing a weakening short-term price trend.

On the downside, the US Dollar Index may navigate the region around the lower boundary of the falling wedge at 105.90. A break below this critical support zone could strengthen the bearish bias, potentially driving the index toward the three-month low of 105.41, last seen on December 6.

The DXY’s key resistance is at the nine-day EMA of 106.89, followed by the 14-day EMA at 107.11, aligning with the lower boundary of the falling wedge pattern. A clear breakout above this crucial resistance zone could drive the index toward the six-week high of 109.80, last reached on February 3.

US Dollar Index: Daily Chart

• The Pound Sterling steadies against the US Dollar, with investors remaining cautious on US President Trump’s tariff agenda.
• President Trump is poised to impose 25% tariffs on all imports from Canada and Mexico.
• BoE’s Dhingra favors a swift unwinding of policy restrictiveness to boost consumption.

The Pound Sterling (GBP) ticks slightly higher to near 1.2635 against the US Dollar (USD) in Tuesday’s European session. The GBP/USD pair edges higher as the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades subduedly and ticks lower to near 106.60 after a strong recovery from the 10-week low it posted on Monday.

The Greenback rebounded strongly in the second half of Monday, fueled by renewed fears of a global trade war after United States (US) President Donald Trump said that tariffs on its North American peers would proceed as planned.

“The tariffs are going forward on time, on schedule,” Trump said from the White House during a joint press conference with French President Emmanuel Macron.

On February 5, President Trump postponed his plans to impose 25% tariffs on Canada and Mexico for a month after they agreed for criminal enforcement at borders to restrict the flow of fentanyl and undocumented individuals into the US. 

Going forward, investors will focus on the US Durable Goods Orders and the Personal Consumption Expenditures Price Index (PCE) data for January, which will be released on Thursday and Friday, respectively. Investors will pay close attention to the US PCE inflation data as it will influence market speculation about the Federal Reserve’s (Fed) monetary policy outlook.

Until now, Fed officials have supported keeping interest rates in their current range of 4.25%-4.50% until they gauge the impact of Trump’s economic agenda on inflation and the economic outlook.

On Monday, Chicago Fed Bank President Austan Goolsbee said in an interview with Chicago public TV station WTTW that the central bank needs ‘more clarity’ on the total impact of Trump’s policies before going back to cutting interest rates.

Daily digest market movers: Pound Sterling flattens as investors look for fresh cues on BoE’s policy outlook

• The Pound Sterling trades sideways against its major peers on Tuesday as investors look for fresh cues about the likely monetary policy action by the Bank of England (BoE) this year. In the policy meeting earlier this month, the BoE reduced its key borrowing rates by 25 basis points (bps) to 4.5% and guided a gradual policy easing stance.
• However, BoE Monetary Policy Committee (MPC) member Swati Dhingra favored a quick monetary expansion cycle due to the weak demand environment in her speech at Birkbeck on Monday. "I know 'gradual' has been interpreted in the media as 25 basis points (bps) per quarter, but cutting interest rates at this pace for the remainder of 2025 would still leave monetary policy in an undesirable restrictive position at the end of the year,” Dhingra said. She also warned that “consumption weakness is just not going away”, which is why she is favoring to “reduce the level of monetary policy restriction”.
• It is worth noting that Dhingra voted for a 50 bps interest rate reduction in the last monetary policy, along with policymaker Catherine Mann. Other MPC members were in favor of a quarter-to-a-percent cut in interest rates.
• Meanwhile, market participants have priced in two more interest rate cuts of 25 bps by the BoE this year, which are expected to come after March’s policy meeting.

Technical Analysis: Pound Sterling holds above 1.2600

The Pound Sterling wobbles above the key support of 1.2600 against the US Dollar in Tuesday’s European session while the 200-day Exponential Moving Average (EMA) continues to be a major hurdle around 1.2680. The GBP/USD pair holds around the 38.2% Fibonacci retracement from the end-September high to the mid-January low downtrend around 1.2620.

The 14-day Relative Strength Index (RSI) oscillates above 60.00. The bullish momentum remains intact if the RSI (14) holds above that level.

Looking down, the February 11 low of 1.2333 will act as a key support zone for the pair. On the upside, the 50% and 61.8% Fibonacci retracement at 1.2767 and 1.2927, respectively, will act as key resistance zones.

West Texas Intermediate (WTI) Oil price advances on Tuesday, according to FXStreet data. WTI trades at $70.87 per barrel, up from Monday’s close at $70.72. Brent Oil Exchange Rate (Brent crude) is also up, advancing from the $74.32 price posted on Monday, and trading at $74.48.

(An automation tool was used in creating this post.)

 Huang Yiping, an advisor to the People’s Bank of China (PBOC) said on Tuesday that “Chinese Consumer Price Index (CPI) will decline moderately in February.”

Additional quotes

Here is what you need to know on Tuesday, February 25:

Major currency pairs failed to make a decisive move in either direction on Monday amid a lack of high-tier data releases. On Tuesday, the European Central Bank (ECB) will publish Negotiated Wage Rates data for the fourth quarter. In the second half of the day, the US economic calendar will feature regional manufacturing surveys and the Conference Board's Consumer Confidence Index data for February. Additionally, several Federal Reserve policymakers will be delivering speeches and US President Donald Trump will be signing more executive orders.

The US Dollar (USD) Index started the week under modest selling pressure and touched its lowest level since early December below 106.20. The index benefited from the cautious market mood in the second half of the day on Monday and erased its daily losses. Early Tuesday, the index fluctuates in a tight range above 106.50. Trump said on Monday that tariffs on imports from Canada and Mexico will go forward on schedule. 

EUR/USD opened on a bullish note on Monday and climbed above 1.0500 as markets reacted to German election results. After retracing its daily climb to close the day flat, the pair seems to have entered a consolidation phase above 1.0450 in the European morning on Tuesday. Isabel Schnabel, Member of the European Central Bank's Executive Board, will deliver a keynote speech at Bank of England's Annual Research Conference.

GBP/USD lost its traction after rising toward 1.2700 early Monday and ended the day marginally lower. The pair holds steady above 1.2600 in the early European session on Tuesday.

USD/JPY posted small gains on Monday and continued to edge higher in the Asian session on Tuesday. The pair, however, lost its traction after rising above 150.00 and retreated toward 149.60 by the European morning. The data from Japan showed earlier in the day that the Corporate Service Price Index rose by 3.1% on a yearly basis in January, up slightly from the 3% increase recorded in December.

Gold capitalized on falling US Treasury bond yields and touched a new all-time high above $2,955 on Monday. XAU/USD corrects lower early Tuesday and was last seen trading below $2,940.

• NZD/USD drifts higher to near 0.5735 in Tuesday’s early European session. 
• China’s stimulus plans and stronger New Zealand’s Retail Sales support the Kiwi. 
• Trump’s tariff threats might cap the upside for the pair. 

The NZD/USD pair trades in positive territory around 0.5735 during the early European session on Tuesday. The New Zealand Dollar (NZD) strengthens after China’s latest action plan showed it’s trying to boost foreign investment. 

Last week, Chinese authorities published an action plan to make it easier for foreign capital to invest in domestic telecommunication and biotechnology industries. The Commerce Ministry emphasized that the action plan would be implemented by the end of 2025 and that details on subsequent supportive measures would come soon. The positive developments surrounding China’s stimulus plans underpin the China-proxy Kiwi as China is a major trading partner to New Zealand.

The stronger-than-expected New Zealand’s Retail Sales might lift the Kiwi. The country’s Retail Sales, a measure of the country’s consumer spending, rose 0.9% QoQ in the fourth quarter (Q4), the strongest gain in three years, compared to the previous reading of 0% (revised from -0.1%), according to Statistics New Zealand on Monday. This reading came in stronger than the 0.6% expected. 

On the other hand, the uncertainty and concerns over US President Donald Trump's tariff plans might boost the safe-have flows, benefitting the Greenback. US President Donald Trump said tariffs on Mexico and Canada would proceed as planned.  

• EUR/JPY softens to near 156.65 in Tuesday’s early European session. 
• Rising bets on the BoJ rate hike support the JPY. 
•  Investors will closely monitor how soon the conservative Christian Democrats could form a coalition government.

The EUR/JPY cross loses ground to around 156.65 during the early European session on Tuesday. The rising speculation that the Bank of Japan (BoJ) will hike interest rates further supports the Japanese Yen (JPY). Later on Tuesday, the German Gross Domestic Product (GDP) for the fourth quarter (Q4) will be released. 

Japan's Services Producer Pricing Index (PPI) released earlier on Tuesday, supports the case of BoJ rate hike. This comes on top of Japan's robust consumer inflation numbers, reaffirming the prospect that the BoJ would raise interest rates further, which continues to support the JPY.

On the Euro front, the conservative alliance made up of the Christian Democratic Union (CDU) and its allies the Christian Social Union (CSU) is set to lead Germany again following the federal election on Sunday. Investors will closely monitor how soon the conservative Christian Democrats could form a coalition government to offer much-needed reform to a struggling economy.

Meanwhile, the dovish stance of the European Central Bank (ECB) could drag the Euro (EUR) lower.  The ECB policymaker Francois Villeroy de Galhau suggested the ECB could lower its deposit rate to 2% by summer, per Reuters.

• USD/CHF struggles as the US Dollar loses ground following disappointing US economic data.
• Traders anticipate the Fed will keep its current stance for an extended period due to ongoing uncertainty.
• The Swiss Franc strengthened as the yield on the 10-year Swiss government bond rose.

USD/CHF remains under pressure for the fourth consecutive session, hovering around 0.8970 during Asian trading hours on Tuesday. The pair’s decline is driven by a weaker US Dollar (USD), weighed down by disappointing US economic data, including last week’s Jobless Claims and the S&P Global Purchasing Managers' Index (PMI).

Traders continued evaluating the interest rate outlook, with the Federal Reserve (Fed) expected to maintain its current stance for an extended period, amid ongoing uncertainty about President Trump’s economic policies.

Adding to market uncertainty, Federal Reserve Bank of Chicago President Austan Goolsbee stated on Monday that the US central bank requires more clarity before considering interest rate cuts. Goolsbee noted that if government policies lead to rising prices, the Fed is legally obligated to address them.

The US Dollar Index (DXY), which tracks the USD against six major currencies, has slipped to around 106.50, while yields on US Treasury bonds have also declined — with the 2-year yield falling to 4.14% and the 10-year yield to 4.37% at the time of writing.

Meanwhile, the Swiss Franc (CHF) found support as the yield on the 10-year Swiss government bond climbed amid anticipation around the outcome of the German federal election last week. Friedrich Merz, leader of the Christian Democratic Union of Germany (CDU), is poised to become the next German Chancellor after securing a majority of votes. However, Merz is expected to face significant challenges, including complex coalition negotiations.

On the domestic front, softer Swiss Consumer Price Index (CPI) data for January has heightened expectations of further easing by the Swiss National Bank (SNB) in March. Inflation has dropped to 0.4%, its lowest level in nearly four years. In December, the SNB cut interest rates by 50 basis points and signaled the possibility of additional rate cuts ahead.

• USD/CAD attracts fresh sellers on Tuesday and is pressured by a combination of factors. 
• Recovering Oil prices underpin the Loonie and weigh on the major amid a weaker USD.
• The divergent Fed-BoC policy expectations further contribute to the intraday decline.

The USD/CAD pair drifts lower following an Asian session uptick to the 1.4275-1.4280 region, or a one-and-half-week top and for now, seems to have snapped a two-day winning streak. Spot prices currently trade around the 1.4245-1.4240 region, down nearly 0.15% for the day amid the emergence of fresh US Dollar (USD) selling.

The recent weaker US macro data, including the flash PMIs released last Friday showing that business activity in the private sector fell to a 17-month low in February, lifted bets for further interest rate cuts by the Federal Reserve (Fed) this year. This, in turn, fails to assist the USD Index (DXY), which tracks the Greenback against a basket of currencies, to capitalize on the overnight bounce from its lowest level since December 10. Apart from this, a further recovery in Crude Oil prices, from a fresh year-to-date touched on Monday, underpins the commodity-linked Loonie and exerts some downward pressure on the USD/CAD pair. 

Moreover, a slight acceleration in Canadian consumer inflation forced investors to scale back their bets that the Bank of Canada (BoC) will cut the policy rate again at its next monetary policy meeting on March 12. This turns out to be another factor that lends additional support to the Canadian Dollar (CAD) and contributes to the offered tone surrounding the USD/CAD pair. That said, worries about the potential economic fallout from US President Donald Trump's trade tariffs might hold back the CAD bulls from placing aggressive bets. This, in turn, warrants some caution before positioning for further losses for the currency pair. 

Trump said on Monday that tariffs on Canadian and Mexican imports are "on time and on schedule" for March 4 and that reciprocal tariffs on other countries will also go ahead as planned. Traders now look forward to the US economic docket – featuring the release of the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index. This, along with speeches from influential FOMC members, will drive the USD and provide some impetus to the USD/CAD pair. Apart from this, Oil price dynamics might further contribute to producing short-term trading opportunities later during the US session.

Gold prices fell in India on Tuesday, according to data compiled by FXStreet.

The price for Gold stood at 8,205.23 Indian Rupees (INR) per gram, down compared with the INR 8,238.38 it cost on Monday.

The price for Gold decreased to INR 95,704.90 per tola from INR 96,090.80 per tola a day earlier.

FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.

(An automation tool was used in creating this post.)

• Gold price retreats from a record high as traders opt to take some profits off the table.
• Worries over Trump’s tariff plans should limit losses for the safe-haven precious metal. 
• Bets that the Fed would cut rates further could also act as a tailwind for the XAU/USD.

Gold price (XAU/USD) ticks lower during the Asian session on Tuesday and erodes a part of the previous day's gains to a fresh all-time peak. The US Dollar (USD) builds on the overnight bounce from its lowest level since December 10 and turns out to be a key factor undermining demand for the commodity. Apart from this, slightly overbought conditions on the daily chart further prompt traders to lighten their bullish bets around the precious metal, though the fundamental backdrop warrants some caution before placing aggressive bearish bets. 

Meanwhile, investors remain worried about the potential economic fallout from US President Donald Trump's tariff plans, which might continue to support the safe-haven Gold price. Apart from this, bets that the Federal Reserve (Fed) would cut interest rates further this year should contribute to limiting the downside for the non-yielding yellow metal. Hence, it will be prudent to wait for strong follow-through selling before confirming that the XAU/USD pair has topped out in the near-term and positioning for any meaningful corrective decline. 

Gold price drifts lower amid some profit-taking; downside seems limited amid rising trade tensions

• The US Dollar moves away from over a two-month low touched on Monday and prompts some profit-taking around the Gold price on Tuesday amid slightly overbought conditions on the daily chart. 
• US President Donald Trump said on Monday that tariffs on Canadian and Mexican imports are "on time and on schedule" and that reciprocal tariffs on other countries will also go ahead as planned.
• This raises the risk of a further escalation of trade tensions and fuels concerns about their impact on the global economy, which might continue to act as a tailwind for the safe-haven precious metal.
• The recent weaker US macro data reaffirmed bets for two quarter-percentage-points rate reduction by the Federal Reserve this year and might contribute to limiting losses for the non-yielding bullion. 
• Meanwhile, Chicago Fed President Austan Goolsbee said late Monday that the US central bank has to take a wait-and-see stance, and needs more clarity before going back to cutting interest rates. 
• According to the latest data released by the World Gold Council (WGC), physically backed gold exchange-traded funds (ETFs) registered the largest weekly inflow since March 2022 last week.
• Traders now look to the US economic docket – featuring the Conference Board's Consumer Confidence Index and Richmond Manufacturing Index. This, along with Fedspeaks, might influence the USD. 
• The focus, however, will remain glued to the release of the US Personal Consumption Expenditure (PCE) Price Index on Friday, which could provide cues about the Fed's rate-cut path.

Gold price technical setup backs prospects for dip-buying at lower levels

The range-bound price action witnessed over the past week or so might still be categorized as a bullish consolidation phase on the back of the recent strong move up to the record high. That said, the daily Relative Strength Index (RSI) remains close to the 70 mark and makes it prudent to wait for some near-term consolidation or a modest pullback before positioning for any further gains. Nevertheless, the bias seems tilted firmly in favor of bulls and suggests that the path of least resistance for the Gold price remains to the upside. 

Meanwhile, any corrective slide might continue to attract some dip-buyers around the $2,920-2,915 region, or the lower end of a multi-day-old trading range. This is followed by the $2,900 mark and support near the $2,880 region, which if broken decisively could drag the Gold price to the $2,860-2,855 area en route to the $2,834 zone. The XAU/USD could extend the downfall and eventually drop to the $2,800 round-figure mark.

• EUR/USD gains traction to around 1.0470 in Tuesday’s Asian session.
• The pair keeps the negative outlook below the 100-period EMA with a bearish RSI indicator. 
• The initial support emerges at 1.0400; the first upside barrier is in the 1.0525-1.0530 zone. 

The EUR/USD pair gathers strength to near 1.0470 during the Asian trading hours on Tuesday. The Euro (EUR) gains ground after the conservative alliance made up by the Christian Democratic Union (CDU) and its allies the Christian Social Union (CSU) is set to lead Germany again following the federal election on Sunday, bringing an end to a period of political instability that has dogged Berlin for months.

Technically, the bearish outlook of EUR/USD remains in play, with the major pair remaining capped below the key 100-period Exponential Moving Average (EMA) on the daily chart. However, further upside cannot be ruled out as the 14-day Relative Strength Index (RSI) stands above the midline around 55.50. 

The first downside target for the major pair emerges at 1.0400, representing the psychological mark and the low of February 19. Extended losses could see a drop to the lower limit of the Bollinger Band at 1.0295. A decisive break below the mentioned level could pave the way to 1.0210, the low of February 3. 

On the bright side, the key resistance level for the major pair is located at 1.0525-1.0530, portraying the 100-day EMA and the upper boundary of the Bollinger Band. Sustained trading above this level could attract some buyers to 1.0630, the high of December 6, 2024. Further north, the next hurdle is seen at 1.0777, the low of August 1, 2024.  

EUR/USD daily chart

• EUR/CAD could continue its winning streak as Trump announced to proceed with tariffs on Canada and Mexico.
• The Euro may face challenges as the absence of a clear majority for any single party threatens to stall growth in the Eurozone economy.
• European Central Bank officials remain supportive of a gradual policy easing approach.

EUR/CAD remains steady after registering gains in the previous four consecutive sessions, trading around 1.4920 during the Asian hours on Tuesday. The currency cross could further gain ground as the Canadian Dollar (CAD) faces challenges amid a downbeat market sentiment following US President Donald Trump’s announcement to proceed with tariffs on Canada and Mexico.

Late Monday, President Trump stated that sweeping US tariffs on imports from Canada and Mexico “will go forward” when the month-long delay on their implementation ends next week. He claimed that the United States (US) has “been taken advantage of” by foreign nations and reiterated his plan to impose so-called reciprocal tariffs.

However, uncertainty remained as Canada and Mexico intensified negotiations to avoid 25% tariffs on exports to the US, striving to persuade President Trump’s administration that their strengthened border security and fentanyl trafficking measures are effective ahead of the March 4 deadline.

The EUR/CAD cross faces downside risks amid weakness in the Euro (EUR) following the German federal election, where the lack of a clear majority by any single party threatens to hinder growth in an already fragile economy.

Friedrich Merz, leader of the Christian Democratic Union of Germany (CDU), is set to become the German Chancellor after securing the majority of votes. However, he is expected to encounter numerous challenges, including complex negotiations to form a coalition government.

The broader outlook for the Euro remains weak as European Central Bank (ECB) officials continue to favor a steady policy easing cycle. ECB policymaker Pierre Wunsch told the Financial Times that while he isn’t pushing for an April pause, rate cuts shouldn’t occur automatically without careful consideration. Additionally, ECB’s Francois Villeroy de Galhau suggested the ECB could lower its deposit rate to 2% by summer, according to Reuters.

FX option expiries for Feb 25 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0390 1.2b
• 1.0400 1.3b
• 1.0450 932m
• 1.0525 1b
• 1.0550 1.4b
• 1.0570 878m

USD/JPY: USD amounts                                 

• 149.00 570m
• 149.55 558m
• 151.50 482m

USD/CAD: USD amounts       

• 1.4550 446m

NZD/USD: NZD amounts

• 0.5665 457m

• The GBP/USD pair remains in an ascending channel pattern.
• The pair may face immediate resistance at the two-month high of 1.2690.
• The primary support appears at the nine-day EMA of 1.2597.

The GBP/USD pair gains ground after registering losses in the previous two successive sessions, trading around 1.2630 during the Asian session on Tuesday. However, technical analysis of the daily chart suggests a persistent bullish bias, with the pair continuing to move within an ascending channel pattern.

The 14-day Relative Strength Index (RSI) sits just above the 50 level, indicating increased bullish momentum. Moreover, the pair remains above the nine- and 14-day Exponential Moving Averages (EMAs), signaling strong short-term price dynamics and reinforcing the upward trend.

The GBP/USD pair may encounter immediate resistance at a two-month high of 1.2690, which was approached on February 24, followed by the three-month high at 1.2811, which was recorded on December 6. A break above the latter could reinforce the bullish bias and support the pair to test the upper boundary of the ascending channel at the 1.2960 level.

On the downside, the GBP/USD pair could find immediate support at the nine-day EMA of 1.2597, followed by the 14-day EMA at 1.2565 level. A break below these levels would weaken the short-term price momentum and lead the pair to approach the ascending channel’s lower boundary at the 1.2490 level.

GBP/USD: Daily Chart

• Silver attracts some buyers on Tuesday and snaps a two-day losing streak. 
• Mixed technical indicators on the daily chart warrant some caution for bulls. 
• Corrective slides could be seen as a buying opportunity and remain limited.

Silver (XAG/USD) builds on the previous day's modest bounce from the vicinity of the $32.00 mark, or a nearly one-week low, and gains some positive traction during the Asian session on Tuesday. The white metal, for now, seems to have snapped a two-day losing streak and currently trades just below mid-$32.00s, up 0.25% for the day. 

From a technical perspective, the recent repeated failures to find acceptance above the $33.00 mark and the subsequent pullback warrant caution for bullish traders amid mixed oscillators on the daily chart. Hence, it will be prudent to wait for sustained strength and acceptance above the said handle before positioning for an extension of a well-established uptrend from sub-$29.00 levels, or the year-to-date low touched in January. 

The XAG/USD might then aim to surpass the monthly swing high, around the $33.40 area touched on February 14, and climb further towards reclaiming the $34.00 mark. The momentum could extend further towards the $34.45 intermediate hurdle en route to the $35.00 neighborhood, or the multi-year peak touched in October. 

On the flip side, the $32.10-$32.00 area now seems to have emerged as an immediate strong support ahead of the $31.75 region. Any further slide could be seen as a buying opportunity and help limit the downside for the XAG/USD near the $31.25 zone. The latter coincides with the 100-day Simple Moving Average (SMA) and should act as a key pivotal point. Hence, a convincing break below might shift the bias in favor of bearish traders. 

The subsequent decline has the potential to drag the XAG/USD below the $31.00 round-figure mark, towards testing the the next relevant support near the $30.25 region, the $30.00 psychological mark, and the $29.55-$29.50 horizontal zone.

Silver daily chart

Bloomberg reported in a gated story carried early Tuesday, US President Donald Trump’s administration seeks to tighten chip controls on China.

Additional takeaways

Market reaction

These headlines add to the bearish undertone around the Asian markets, with Chinese stocks losing near 1% so far. Meanwhile, the Chinese proxy, the Australian Dollar (AUD), is on the defensive against the US Dollar (USD), currently trading near 0.6350.

Bank of Korea (BoK) Governor Rhee Chang-yong explained the reasons behind the interest rate cut decision in his post-policy meeting press conference on Tuesday.

Additional takeaways

The South Korean central bank resumed its interest rate-cutting cycle by lowering the policy rate by 25 basis points (bps) to 2.75% after unexpectedly holding it at 3% in January. The BoK also revised its growth forecasts lower this year to 1.5% from 1.9% while keeping the inflation forecast at 1.9% for this year and next.

developing story ....

• The Japanese Yen attracts sellers for the second straight day amid sliding JGB yields.
• A further USD recovery from over a two-month low further lends support to USD/JPY.
• Bets that the BoJ will hike interest rates further should limit deeper losses for the JPY.

The Japanese Yen (JPY) drifts lower for the second straight day, which, along with a further US Dollar (USD) recovery from over a two-month low, lifts the USD/JPY pair back above the 150.00 psychological mark during the Asian session on Tuesday. Bank of Japan Governor Kazuo Ueda said last week that the central bank stands ready to increase government bond buying if long-term interest rates rise sharply. This triggers a corrective pullback in the Japanese government bond (JGB) yields and prompts some selling around the JPY. However, hawkish Bank of Japan (BoJ) expectations might continue to act as a tailwind for the JPY.

Investors seem convinced that the BoJ will hike interest rates further amid signs of broadening inflation in Japan. The bets were reaffirmed by the Services Producer Price Index (PPI) released from Japan earlier today. This, along with Japan's strong consumer inflation figures, supports prospects for further policy tightening by the BoJ and should help limit deeper JPY losses. Moreover, Friday's disappointing US PMIs, along with worries about the potential economic fallout from US President Donald Trump's import tariffs, might hold back the USD bulls from placing aggressive bets and cap any further gains for the USD/JPY pair. 

Japanese Yen remains depressed as policymakers talk down JGB yields

• Bank of Japan Governor Kazuo Ueda issued a mild warning last Friday and said that the central bank could increase bond buying if abnormal market moves trigger a sharp rise in yields.
• Ueda's remarks dragged the yield on the benchmark Japanese government bond away from its highest level since November 2009 and weighed on the Japanese Yen for the second straight day.
• Some market players, however, expect that the 10-year JGB could rise to 1.5% in the coming weeks, with growing acceptance that the BoJ will hike rates further amid broadening inflation in Japan. 
• The bets were lifted by Japan's strong consumer inflation figures released last week and the Services Producer Price Index (PPI), which rose 3.1% YoY in January and signaled persistent cost pressures.
• The recent downbeat US economic data raised doubts about consumer health and the growth outlook amid worries that US President Donald Trump's tariff plans could undermine domestic demand. 
• The S&P Global's flash US PMIs pointed to a weaker expansion in overall business activity and the University of Michigan's US Consumer Sentiment Index dropped to a 15-month low in February.
• Federal Reserve officials, however, remain wary of future rate cuts. In fact, Chicago Fed President Austan Goolsbee said that the central bank needs more clarity on Trump's policies before going back to cut rates. 
• This assists the US Dollar in building on the previous day's bounce from its lowest level since December 10 and continues to push the USD/JPY pair higher for the second successive day on Tuesday. 
• Traders now look to the US macro data – Conference Board's Consumer Confidence Index and Richmond Manufacturing Index. This, along with Fed speaks, might influence the USD. 
• The focus, however, will remain glued to the release of the US Personal Consumption Expenditure (PCE) Price Index on Friday, which could provide cues about the Fed's rate-cut path.

USD/JPY might struggle to move above the 150.90-151.00 pullback zone

From a technical perspective, any subsequent move-up could attract fresh sellers and remain capped near the 150.90-151.00 horizontal support breakpoint. A sustained strength beyond, however, might trigger a short-covering rally and lift the USD/JPY pair towards the 151.40 intermediate hurdle en route to the 152.00 mark. The momentum could extend further, though it runs the risk of fizzling out rather quickly near the 152.65 area, representing the very important 200-day Simple Moving Average (SMA).

On the flip side, the 149.65-149.60 area, or the Asian session low now seems to protect the immediate downside ahead of the 149.30 region and the 149.00 round figure. Some follow-through selling below the 148.65 zone, or the lowest level since December 2024 touched on Monday, would be seen as a fresh trigger for bearish traders. Given that oscillators on the daily chart are holding deep in negative territory, the USD/JPY pair might then decline further towards the 148.00 mark en route to the 147.45 region before eventually dropping to the 147.00 round figure.

• NZD/USD declines amid sour market sentiment after Trump announces to proceed with tariffs on Canada and Mexico.
• Chicago Fed President Austan Goolsbee stated that the US central bank requires more clarity before contemplating interest rate cuts. 
• The PBOC injected CNY300 billion through the one-year Medium-term Lending Facility (MLF), keeping the rate steady at 2%. 

The NZD/USD pair continues its losing streak for the third consecutive day, trading around 0.5730 during Asian hours on Tuesday. This depreciation comes amid a downbeat market sentiment following US President Donald Trump’s announcement to proceed with tariffs on Canada and Mexico.

Late Monday, President Trump stated that sweeping US tariffs on imports from Canada and Mexico “will go forward” when the month-long delay on their implementation ends next week. He claimed that the United States (US) has “been taken advantage of” by foreign nations and reiterated his plan to impose so-called reciprocal tariffs.

The US Dollar (USD) has faced challenges due to disappointing US economic data, including Jobless Claims and the S&P Global Purchasing Managers' Index (PMI) released last week. Adding to the uncertainty, Federal Reserve Bank of Chicago President Austan Goolsbee remarked on Monday that the US central bank needs greater clarity before considering interest rate cuts.

In China, the People’s Bank of China (PBOC) injected CNY300 billion on Tuesday via the one-year Medium-term Lending Facility (MLF), maintaining the rate at 2%. Additionally, the PBOC injected CNY318.5 billion through seven-day reverse repos at 1.50%, consistent with the prior rate. Given the close trade relationship between China and New Zealand, any shifts in the Chinese economy could impact the New Zealand Dollar (NZD).

However, the downside of the NZD/USD pair could be limited as the New Zealand Dollar may have found support from China’s release of its annual policy statement for 2025 on Sunday. The statement outlines strategies to advance rural reforms and promote comprehensive rural revitalization. Furthermore, China’s state-backed developers are increasing land purchases at premium prices, spurred by the government’s relaxation of home price restrictions to revive the struggling property market.

• The Indian Rupee weakens in Tuesday’s Asian session. 
• Renewed US Dollar demand and persistent foreign outflows continue to weigh on the INR. 
• The Conference Board’s Consumer Confidence is due later on Tuesday. 

The Indian Rupee (INR) edges lower on Tuesday. The local currency remains under pressure amid US Dollar (USD) demand from oil companies and external foreign investor pressures. The concern over Foreign Portfolio Investment (FPI) outflows continues to undermine the INR. 

However, a likely foreign exchange intervention by the Reserve Bank of India (RBI) might help limit the INR’s losses. The Conference Board’s Consumer Confidence will be the highlight later on Tuesday, followed by the FHFA’s House Price Index and the Richmond Fed Manufacturing Index. The Federal Reserve (Fed) officials Michael Barr, Thomas Barkin and Lorie Logan are scheduled to speak on the same day. 

Indian Rupee remains fragile amid global cues and foreign fund outflows

• The RBI will conduct a $10 billion 3-year buy/sell swap on Friday, which would infuse around 870 billion rupees of liquidity in the banking system.
• India's economic growth is estimated to recover in the third quarter of the current financial year 2024-25 (Q3FY25), with Gross Domestic Product (GDP) growth projected at 6.2%, up from 5.4% in Q2FY25, according to the Union Bank of India.
• The HSBC India Manufacturing Purchasing Managers Index (PMI) declined to 57.1 in February from 57.5 in January. The Indian Services PMI climbed to 61.1 in February versus 56.5 prior. The Composite PMI rose to 60.6 in February from 57.7 in January.
• Chicago Fed President Austan Goolsbee said late Monday that the US central bank needs more clarity before considering cutting interest rates again.
• The Chicago Fed National Activity Index came in at -0.03 in January versus 0.18 prior (revised from 0.15). 

USD/INR sticks to a positive bias despite consolidation in the near term

The Indian Rupee trades in negative territory for the day. The constructive outlook of the USD/INR pair remains in play as the price holds above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. Nonetheless, the 14-day Relative Strength Index (RSI) hovers around the midline near 50.0, suggesting that further consolidation or downside is on the cards. 

The immediate resistance level for USD/INR emerges near the 87.00 psychological level. If the pair keeps printing bullish candlesticks, we could see enough buying pressure to push the price to an all-time high near 88.00, en route to 88.50. 

If bullish momentum fizzles and the low of February 12 at 86.35 doesn’t hold as support, the pair might slip under 86.14, the low of January 27. The additional contention level to watch is 85.65, the low of January 7.

The People’s Bank of China (PBOC), China's central bank, injected CNY300 billion on Tuesday via the one-year Medium-term Lending Facility (MLF), maintaining the rate at 2%.

Meanwhile, the PBOC injected CNY318.5 billion via seven-day reverse repos at 1.50% vs prior 1.5%.

Market reaction

As of writing, AUD/USD is holding lower ground below 0.6350, losing 0.17% on the day.

• The Australian Dollar declines due to escalating trade tensions.
• Traders await Australia’s monthly inflation report due on Wednesday seeking key insights into the RBA’s policy outlook.
• President Trump said tariffs on Canada and Mexico ‘will go forward’.

The Australian Dollar (AUD) extends its losses against the US Dollar (USD) for the third consecutive session on Tuesday. Investors eagerly anticipate Australia’s monthly inflation report on Wednesday, as it’s expected to offer crucial insights into the future course of monetary policy after the Reserve Bank of Australia’s (RBA) recent hawkish rate cut.

The risk-sensitive AUD/USD pair faces challenges due to rising risk sentient as US President Donald Trump said late Monday that sweeping US tariffs on imports from Canada and Mexico “will go forward” when a month-long delay on their implementation expires next week. Trump claimed that the US has “been taken advantage of” by foreign nations and reiterated his plan to impose so-called reciprocal tariffs.

The AUD received support as Australia’s close trading partner China released of its annual policy statement for 2025 on Sunday. The statement details strategies to advance rural reforms and promote comprehensive rural revitalization. Additionally, China’s state-supported developers are aggressively increasing land purchases at premium prices, driven by the government’s relaxation of home price restrictions to revitalize the troubled property market.

Australian Dollar remains subdued due to increased risk aversion

• The US Dollar Index (DXY), which measures the USD against six major currencies, depreciates below 106.50 at the time of writing. The DXY faced challenges following the downbeat US economic data including Jobless Claims and S&P Global Purchasing Managers' Index (PMI) released last week.
• President Trump signed a memorandum on Friday instructing the Committee on Foreign Investment in the United States (US) to limit Chinese investments in strategic sectors. Reuters cited a White House official saying that the national security memorandum seeks to encourage foreign investment while safeguarding US national security interests from potential threats posed by foreign adversaries like China.
• The US Composite PMI fell to 50.4 in February, down from 52.7 in the previous month. In contrast, the Manufacturing PMI rose to 51.6 in February from 51.2 in January, surpassing the forecast of 51.5. Meanwhile, the Services PMI declined to 49.7 in February from 52.9 in January, falling short of the expected 53.0.
• US Initial Jobless Claims for the week ending February 14 rose to 219,000, exceeding the expected 215,000. Meanwhile, Continuing Jobless Claims increased to 1.869 million, slightly below the forecast of 1.87 million.
• Federal Reserve Board Governor Adriana Kugler stated on Thursday that US inflation still has "some way to go" before reaching the central bank's 2% target, noting that the path remains uncertain, according to Reuters.
• The latest Federal Open Market Committee (FOMC) Meeting Minutes reaffirmed the decision to keep interest rates unchanged in January. Policymakers emphasized the need for more time to assess economic activity, labor market trends, and inflation before considering any rate adjustments. The committee also agreed that clear signs of declining inflation are necessary before implementing rate cuts.
• Trump has confirmed that a 25% tariff on pharmaceutical and semiconductor imports will take effect in April. Additionally, he reaffirmed that auto tariffs will remain at 25%, further escalating global trade tensions.
• The Reserve Bank of Australia (RBA) lowered its Official Cash Rate (OCR) by 25 basis points to 4.10% last week—the first rate cut in four years. Reserve Bank of Australia (RBA) Governor Michele Bullock acknowledged the impact of high interest rates but cautioned that it was too soon to declare victory over inflation. She also emphasized the labor market's strength and clarified that future rate cuts are not guaranteed, despite market expectations.

Technical Analysis: Australian Dollar tests nine-day EMA barrier near 0.6350

AUD/USD trades near 0.6340 on Tuesday, moving within an ascending channel that reflects bullish market sentiment. The 14-day Relative Strength Index (RSI) stays above 50, supporting the positive outlook.

On the upside, the AUD/USD pair tests the immediate barrier at a nine-day Exponential Moving Average (EMA) of 0.6343. A successful break above this level could improve the bullish bias and support the pair to test the key psychological resistance at 0.6400, with the next hurdle at the ascending channel’s upper boundary around 0.6440.

The AUD/USD pair could find immediate support at the 14-day EMA of 0.6329, aligned with the channel’s lower boundary.

AUD/USD: Daily Chart

The People’s Bank of China (PBOC) set the USD/CNY central rate for the trading session ahead on Tuesday at 7.1726 as compared to the previous day's fix of 7.1717.

French President Emmanuel Macron said late Monday that the European Union is set to announce short-term defense financing.

Key quotes

Market reaction 

At the time of writing, the EUR/USD is trading 0.03% lower on the day to trade at 1.0461.  

French President Emmanuel Macron spoke late Monday in a TV interview after his meeting with US President Donald Trump on Monday. Macron said that the European Union is set to announce short-term defense financing.

Key quotes

Market reaction 

At the time of writing, the EUR/USD is trading 0.03% lower on the day to trade at 1.0461.  

• WTI price trades in positive territory near $70.80 in Tuesday’s early Asian session. 
• The US rolled out new Iran-related sanctions, lifting the WTI price. 
• Trump’s tariff plans and war in Ukraine remain in focus. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $70.80 during the early Asian session on Tuesday. The WTI price extends the recovery amid concerns of near-term supply tightness. 

The United States (US) imposed a fresh round of sanctions, the Treasury and State Departments announced on Monday, targeting companies and individuals, including the head of Iran's national oil company. This might add to concerns of near-term supply tightness, weighing on the WTI price.

On the other hand, traders will closely monitor the developments surrounding further tariff policies from US President Donald Trump. Concerns over a potential global trade war could limit further gains for black gold. US President Donald Trump said Monday that sweeping US tariffs on imports from Canada and Mexico “will go forward” when a month-long delay on their implementation expires next week.

Additionally, the thaw in US-Russian ties as well as possible peace talks on the Russia-Ukraine war might exert some selling pressure on the WTI price. This could eventually lead to reduced sanctions on Russia and the full resumption of Russian oil exports.

• WTI price trades in positive territory near $70.80 in Tuesday’s early Asian session. 
• The US rolled out new Iran-related sanctions, lifting the WTI price. 
• Trump’s tariff plans and war in Ukraine remain in focus. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $70.80 during the early Asian session on Tuesday. The WTI price extends the recovery amid concerns of near-term supply tightness. 

The United States (US) imposed a fresh round of sanctions, the Treasury and State Departments announced on Monday, targeting companies and individuals, including the head of Iran's national oil company. This might add to concerns of near-term supply tightness, weighing on the WTI price.

On the other hand, traders will closely monitor the developments surrounding further tariff policies from US President Donald Trump. Concerns over a potential global trade war could limit further gains for black gold. US President Donald Trump said Monday that sweeping US tariffs on imports from Canada and Mexico “will go forward” when a month-long delay on their implementation expires next week.

Additionally, the thaw in US-Russian ties as well as possible peace talks on the Russia-Ukraine war might exert some selling pressure on the WTI price. This could eventually lead to reduced sanctions on Russia and the full resumption of Russian oil exports.

Bank of England Monetary Policy Committee (MPC) external member Swati Dhingra said late Monday that the monetary policy restrictiveness is at a "high level" already.

Key quotes

Market reaction 

At the time of writing, the GBP/USD is trading 0.03% lower on the day to trade at 1.2620.  

Federal Reserve Bank of Chicago President Austan Goolsbee said late Monday that the US central bank needs more clarity before going back to cut the interest rates. 

Key quotes

Market reaction 

At the time of writing, the US Dollar Index (DXY) is trading 0.08% higher on the day to trade at 106.75. 

• EUR/USD remains hunkered below 1.0500 as bulls run out of steam.
• European data is limited for most of the week, with Fed speakers set to dominate.
• German and US inflation figures will close out the week.

EUR/USD cycled familiar territory on Monday, testing the 1.0500 handle but failing to make any meaningful headway as Fiber continues to churn near the top end of recent consolidation. 

Last week's rise in US inflation figures triggered a new wave of risk aversion among investors. Their attention is now squarely on the upcoming US Personal Consumption Expenditure (PCE) inflation data expected later this week. Traders are hoping that the early-year increase in headline inflation in the US will diminish swiftly and not lead to another prolonged struggle over “transitory” inflation that runs too hot for the Federal Reserve (Fed) to implement rate cuts. Market participants eager for a quicker pace of Fed rate cuts in 2025 are already feeling the pressure as US President Donald Trump attempts to ignite a global trade war. Additionally, another surge in inflation may extinguish any remaining hopes for rate reductions. On Monday, President Trump reiterated threats of high tariffs on Canada and Mexico, cautioning that tariffs are still expected to take effect “next month,” following his recent concession on tariff pressures and granting delays to nearly every country he has targeted with import taxes on his own citizens.

German Consumer Price Index (CPI) inflation is also due on Friday, as well as German Retail Sales activity figures. As a bellwether for pan-EU data, Germany’s data prints on Friday will likely draw some Fiber traders’ eyes, but the key market-moving print will still be US PCE inflation.

EUR/USD price forecast

EUR/USD continues to churn near the 50-day Exponential Moving Average (EMA) near 1.0435, with price action hobbled just south of 1.0500. Daily candles continue to close inside of a near-term rough wedge, albeit with some uninspired tests in either direction.

The pair’s last major swing low dipped below 1.0200 in mid-January, but bullish momentum remains limited with the pair still trading well below the 200-day EMA at 1.0650.

EUR/USD daily chart

US President Donald Trump said Monday that sweeping US tariffs on imports from Canada and Mexico “will go forward” when a month-long delay on their implementation expires next week.

“The tariffs are going forward on time, on schedule,” Trump said Monday from the White House during a joint press conference with French President Emmanuel Macron.

Market reaction 

 At the time of writing, the USD/CAD is trading 0.01% lower on the day to trade at 1.4270. 

• USD/CAD gains ground to around 1.4260 in Monday’s late American session. 
• The downbeat US PMI weighs on the US Dollar, but escalating trade tension might cap its downside. 
• Trump said tariffs on Canada and Mexico ‘will go forward’. 

The USD/CAD pair trades with mild gains near 1.4265 during the late American session on Monday. The Consumer Confidence gauged by the Conference Board will take center stage on Tuesday. Also, the Federal Reserve (Fed) Michael Barr, Thomas Barkin and Lorie Logan are set to speak on the same day. 

US President Donald Trump said late Monday that sweeping US tariffs on imports from Canada and Mexico “will go forward” when a month-long delay on their implementation expires next week. Trump claimed that the US has “been taken advantage of” by foreign nations and reiterated his plan to impose so-called reciprocal tariffs. His policy pronouncements could weigh on riskier assets like the CAD and create a tailwind for USD/CAD.

The disappointing US economic data, including S&P Global Purchasing Managers' Index (PMI) released last week, kept the prospect of interest rate cuts by the Fed intact this year, even though the US central bank will remain on hold for the next several months. This, in turn, could weigh on the Greenback.

Investors will take more cues from Friday's US Personal Consumption Expenditures (PCE) report. At least speeches from at least nine Fed officials this week will be in the spotlight. The hawkish comment from policymakers could lift the USD against the Canadian Dollar (CAD) in the near term. 

• GBP/USD rose early on Monday, but failed to capture 1.2700 and fell back.
• A raft of speeches are due from both BoE and Fed speakers this week.
• Key US growth and inflation figures are due this week as inflation fears return.

GBP/USD churned on Monday, jumping to a fresh 10-week high before slumping back to the day’s opening bids near 1.2630. Cable failed to recapture the 1.270 handle, and price action has fallen back beneath the 200-day Exponential Moving Average (EMA) near 1.2660.

A resurgence in US inflation figures late last week kicked off a fresh round of risk aversion. Investors will be focused squarely on upcoming US Personal Consumption Expenditure (PCE) inflation data due later this week. Traders hope that an early-year uptick in headline inflation data from the US will recede quickly and not solidify into another drawn-out battle with “transitory” inflation that runs too hot for the Federal Reserve (Fed) to deliver rate cuts.

Market participants hoping for an upswing in the pace of Fed rate cuts in 2025 have already been pushed to the ropes as US President Donald Trump tries to spark a global trade war, and a new surge in inflation will be the final nail in the coffin for rate cut hopes. President Trump reiterated his own threats of high tariffs on Canada and Mexico on Monday, warning that tariffs are still due to be enacted “next month” after caving on his own tariff pressures in recent weeks and granting a delay to nearly every country he’s taunted with import taxes on his own citizens.

Not to be left in the dust, the Bank of England (BoE) has its own policymakers slated to make regular appearances this week, though their impact on global markets is likely to remain muted. The BoE has, thus far, largely matched market expectations on the rate cut front. The BoE’s Huw Pill makes an appearance on Tuesday, followed by Swati Dinghra on Wednesday and Dave Ramsden on Friday.

GBP/USD price forecast

With price action backing into the 200-day EMA at 1.2660, middling performance poses a significant risk to any technical trend. GBP/USD has risen around 4.4% from its last major swing low to 1.2100 in mid-January, but bidding appears to have run out of gas.

The next immediate barrier to a fresh leg down will be the 50-day EMA at 1.2520, but bidders will no doubt be waiting in the wings to kick off a new push into the high side from the 1.2500 handle.

GBP/USD daily chart