Morning Note: USD Gains on Tariff Plans as NZD and Bitcoin Stir Markets

Trump’s Tariff Plans Boost U.S. Dollar

Trump announced plans to put tariffs on imports of computer chips, pharmaceuticals, steel, aluminium, and copper. The intention is to incentivise manufacturing within the United States and boost domestic manufacturing. Moreover, Trump’s Secretary of Treasury, Scott Bessent, revealed that he wants to propose new universal tariffs on U.S. imports, starting at a minimum of 2.5%. These tariffs could potentially be raised to as much as 20%, in keeping with Trump's maximalist position, which he assumed during last year's campaign.

(U.S. Dollar Index Daily Price Chart, Source: Markets.com)

From a technical analysis perspective, the recent price has broken out of the ascending channel and is beginning to form lower highs and lower lows within a descending channel. Currently, the price is approaching the upper boundary of the channel. If the price fails to break through this channel upwards, it is highly likely that bearish momentum will push the price downward, potentially reaching the rectangular support zone below.

NZ Dollar Falls on Soft Inflation and Weak China Data

The New Zealand dollar weakened from its five-week high as the market reacted to dismal PMI data from China, New Zealand's largest trading partner. Manufacturing in China contracted for the first time since last September, recording a steep fall in five months, and the services sector slowed sharply from a nine-month high.

Additionally, the softer inflation data for New Zealand in Q4 2024 increased expectations for further rate cuts. The swap markets are now offering a 90% chance of a 50-bps cut in the next month and cuts of 100-bps in 2025 by the Reserve Bank of New Zealand.

(NZD/USD Daily Price Chart, Source: Markets.com)

From a technical analysis perspective, the previous price action broke through the downward trendline, retested it, and then pushed upward to form another higher high. However, it was rejected by bearish pressure and is now retesting the previously broken structure, as indicated by the rectangular support zone. If the price fails to find support here, it is highly likely that bearish momentum will continue, driving the price downward.

MicroStrategy’s Growing Bet on Bitcoin

On January 27, MicroStrategy announced that it plans to issue 2.5 million units of perpetual strike preferred stock, each with a liquidation preference of $100 per share. These stocks also pay fixed-rate dividends quarterly starting March 31 and have an option to convert into common stock.

The company, now declaring itself as the "world's first and largest Bitcoin Treasury Company," appears to be distancing itself from its business intelligence software. However, in its fiscal third quarter results, MicroStrategy reported a 10.3% year-over-year revenue drop to $116.1 million, down from 79.4% to 70.4% in its gross profit margin.

(MicroStrategy Daily Price Chart, Source: Markets.com)

From a technical analysis perspective, the overall trend of MSTR's share price remains bullish, as reflected by higher highs and higher lows. Currently, the price has retested and found support, with bullish momentum originating from the channel support zone. This strong bullish price action might lead to the formation of another higher high, potentially reaching the previous rectangular resistance zone.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.