Trump taking a step back again
Global stocks are ending the week at record highs after President Donald Trump appeared to soften his approach toward tariffs on China. The yen strengthened after the Bank of Japan raised interest rates.
The president said in an interview with Fox News that he would “rather not” use tariffs against the world’s second-largest economy. He has also, so far, held back from imposing tariffs on Europe, though he warned of levies against Canada and Mexico.
Signs that Trump is open to negotiation on trade has helped lift assets around the world under the shadow of a trade war, from stocks to currencies. Emerging-markets currencies are on course for their best week since July 2023. Europe’s benchmark Stoxx 600 index is on track for a fifth weekly advance after hitting a record. The dollar slipped to a one-month low as investors switched to higher-yielding assets.
BOJ hikes policy rate
The Bank of Japan raised its key policy rate Friday to the highest level since 2008 and took a more bullish view on the strength of inflation, fueling expectations for more rate hikes and supporting the yen.
Governor Kazuo Ueda and his fellow board members lifted the overnight call rate by a quarter-percentage point to 0.5% at the end of a two-day meeting, according to a statement from the central bank. A hike was almost fully priced into market expectations ahead of the announcement.
The decision to wait until January to hike the rate appeared tied to a need to confirm wage trends, and gauge the initial market reaction to the return of Donald Trump to the White House. The BOJ flagged in its statement the relative stability of current global financial markets as a favorable factor, an indication that it had been monitoring the response to the first days of the new US administration.
The yen gained as much as 0.8% against the dollar to briefly reach 154.85 in Tokyo as Ueda spoke. Yields on 10-year Japanese government debt rose 2 basis points to reach 1.225%. Japanese stocks, many of which benefit from a weak yen, ended the day down 0.1%.
DXY correction confirmed
The US Dollar Index fell sharply today after President Donald J. Trump suggested negotiating with China instead of imposing tariffs. This decline confirms a downward correction that is likely to persist for several weeks. The next significant support level is 107.50, and a breach of this could lead to further declines, potentially down to 106.40. On the upside, key resistance levels are located at 108.0 and 108.50.
USDJPY rally might continue
The Yen strengthened immediately following the BoJ’s decision earlier today, reaching 155.0; however, USDJPY recovered from its earlier losses and was trading around 156 by the time this report was published. Currently, markets do not anticipate any additional rate hikes in the first half of the year, and the BoJ remains data-dependent. This situation could trigger another rally towards 157.0. Therefore, traders should proceed with caution, particularly those speculating that the government will intervene again at some stage.
Gold surpasses $2770
Gold prices rose again today, surpassing $2770 USD/Oz and peaking at $2778. It is currently close to the $2885 – 2890 resistance zone, which warrants close attention. From a Price/Time perspective, the gold rally may pause near its record high, potentially leading to a downward correction before the upward trend continues.
Oil faces critical support
Yesterday, the US President announced his intention to request OPEC to reduce oil prices. This raises the question, “Is it truly that straightforward?” I believe it isn’t. Brent crude fell to the crucial $78 support during yesterday’s trading before rebounding to around $78.70 ahead of the US session. For the upward trend to continue, stabilization above $78.0 on the weekly chart is essential. Otherwise, a deeper downward correction towards $77 and potentially $76 is more probable.
Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.
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