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SK Hynix: NAND inventory levels in the fourth quarter were almost equivalent to those of DRAM.SK Hynix: DRAM inventory levels are expected to decline further.On January 29th, Elon Musk stated that Tesla needs to build and operate a factory called "TeraFab" to produce semiconductors. This massive project, costing billions of dollars, marks a further expansion of the companys business beyond its core electric vehicle operations. "To eliminate potential production bottlenecks over the next three to four years, we must build a Tesla TeraFab," Musk said. "A large-scale factory covering multiple stages, including logic, memory, and packaging, and it will be manufactured in the United States." Musk stated that existing suppliers, including TSMC, Samsung, and Micron Technology, cannot meet Teslas chip supply needs.On January 29th, a research report from CITIC Securities stated that the Federal Reserves decision to maintain its policy rate unchanged at its January 2026 meeting was in line with market expectations. Both the meeting statement and Powells remarks indicated signs of stabilization in the US unemployment rate, and Powell stated that the policy rate was in a good position. Powell predicted that tariff inflation would peak later than the first quarter, around mid-year, and that it remained uncertain whether Trump would introduce new substantive tariff policies. Therefore, CITIC Securities expects no further rate cuts during Powells remaining two meetings as Fed Chairman. Regarding asset prices, US stocks, bonds, and the dollar saw relatively small fluctuations, while gold prices were largely driven by geopolitical factors and market sentiment.On January 29th, a research report from CICC stated that the Federal Reserves decision to keep interest rates unchanged at its January meeting was in line with market expectations. Governor Wallers dissenting vote may be related to his desire to be nominated as the next Fed Chair. The monetary policy statement indicated that "the unemployment rate has stabilized," and Powell stated that monetary policy is "in the right place," suggesting a higher threshold for another rate cut in the near term. Beyond this, Powell did not provide much guidance and avoided other questions unrelated to interest rate setting. We believe the Fed is still likely to cut rates twice in 2026, but the first cut may be delayed until the second quarter. The core problem of the US economy is not insufficient growth, but rather income inequality and affordability pressures on ordinary families. These structural problems cannot be solved by monetary policy alone; instead, they may prompt the government to adopt more non-market interventionist policies to address voters concerns.

EUR/USD Recovers from 50-Day SMA as US NFP Report Is Released

Drake Hampton

Apr 01, 2022 10:17

Discussion Points Regarding the EUR/USD Rate

The EUR/USD is struggling to hold its gains from earlier this week after testing the 50-Day SMA (1.1173), and new data prints from the US may weigh on the currency, as the US Non-Farm Payrolls (NFP) report is expected to show more improvement in the job market.

 

With the US NFP report on the horizon, the EUR/USD is reversing from its 50-day moving average.

 

EUR/USD falls from a new weekly high (1.1185) as European Central Bank (ECB) Chief Economist Philip Lane calms speculation about a monetary policy shift, stating that "the degree of monetary policy stimulus put in place to address the pre-pandemic challenge of persistent below-target inflation can be gradually normalised towards a more neutral setting."

 

Lane continues, "the calibration of net purchases for the third quarter will be data-dependent and reflect our evolving assessment of the outlook," implying that the Governing Council is not in a hurry to normalize monetary policy, as the board member insists that "any adjustments to our interest rates will be gradual."

 

As a result, diverging monetary policy paths may continue to produce headwinds for EUR/USD as the Federal Reserve plans to implement a series of rate hikes over the coming months, and the NFP report may push the central bank to normalize monetary policy at a faster pace as the economy is expected to add 490K jobs in March.

 

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At the same time, the unemployment rate is expected to fall to 3.7 percent from 3.8 percent during the same period, the lowest reading since February 2020, and this development may force the Federal Open Market Committee (FOMC) to adjust its exit strategy at the next interest rate decision on May 4, as the central bank "expects to begin reducing its holdings of Treasury securities, agency debt, and agency mortgage-backed securities at a coming meeting."

 

Until then, the EUR/USD may struggle to maintain its gain from the yearly low (1.0806) as the FOMC normalizes policy ahead of its European counterpart, while the retail mood tilt appears certain to continue, as traders have been net-long the pair since the middle of February.

 

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The number of traders net-long is 9.25 percent greater than yesterday and 10.55 percent lower than the previous week, while the number of traders net-short is 16.67 percent lower than yesterday and 1.78 percent lower than the previous week. The decrease in net-long interest has reduced crowding behavior, as 63.95 percent of traders were net-long EUR/USD earlier this week, while the decrease in net-short position comes as the currency manages to test the 50-Day SMA (1.1173).

 

Having said that, the EUR/USD may continue to pull back from the moving average as the US NFP report is expected to show further improvement in the labor market, and the advance from the yearly low (1.0806) may turn out to be a correction in the broader trend given the ECB and FOMC's diverging paths.

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