North Korea launched an unidentified projectile from its east coast on Tuesday, according to South Korea's military. The launch comes just days after the United States unveiled a new defense strategy that shifts more responsibility for deterrence onto its allies.

South Korea's Joint Chiefs of Staff confirmed at least one projectile was fired into the waters off the peninsula. In Japan, the Coast Guard reported that an object, likely a ballistic missile, had probably already fallen into the sea. Officials have not yet released further details.

Pyongyang's Second Test of the Year

This marks Pyongyang's second ballistic missile launch in 2022. Following its first test in early January, North Korea claimed it had successfully fired a hypersonic missile.

The latest launch also follows recent accusations from the North that South Korea violated its airspace with drones. The South Korean government has denied any involvement, suggesting the unmanned vehicle may have been sent by civilians and has opened an investigation.

Launch Coincides with New US Defense Strategy

The timing of the test is significant, as it occurred while Undersecretary of Defense for Policy Elbridge Colby was visiting Seoul. During his visit, Colby lauded South Korea as a model ally prepared to assume a greater role in its own defense.

His trip followed the public release of the US National Defense Strategy. The new doctrine urges South Korea to take the lead in deterring North Korean aggression, reflecting the Trump administration's strategic pivot to prioritize the defense of the US homeland.

This move signals a potential reduction in direct American military support for deterring the North's nuclear ambitions, placing more of the burden on regional partners.

Broader Tensions in the US-South Korea Alliance

The military and strategic developments are unfolding alongside economic friction between the two allies. President Donald Trump recently threatened to impose a 25% tariff on goods imported from South Korea. He cited the country's legislature's failure to codify a trade agreement the two nations had reached the previous year.

The Fed's Pivot Toward Looser Money

In December, the Federal Reserve cut its official interest rate to a range of 3.5% to 3.75%, the lowest since 2022. This move came despite persistent inflation and lingering uncertainty about the impact of tariffs and trade conflicts on prices.

Simultaneously, the U.S. central bank paused its quantitative tightening program, which was designed to shrink its balance sheet. It has since launched Treasury bill purchases under a program called Reserve Management Purchases (RMP)—a move widely seen as a form of disguised quantitative easing. Further plans are in motion to have Freddie Mac and Fannie Mae acquire $200 billion in mortgage-backed securities, a strategy intended to lower home loan rates before the mid-term elections.

Growing political influence over the Fed suggests that a period of sustained monetary laxity is likely. More aggressive rate cuts are on the table, with President Donald Trump advocating for rates as low as 1%. Other potential tools include yield curve control to suppress long-term rates and the continued weakening of banking regulations, especially minimum capital requirements.

America's Economic End Game

The primary goal of these policies is to stimulate economic activity, with President Trump even suggesting growth could reach 20% or 25%. Lower interest rates serve another critical function: reducing the federal government's interest payments, now the second-largest budget item after Social Security.

This strategy is also designed to achieve several related objectives:

• Funding Deficits: Looser bank rules and the RMP program help finance large, ongoing government budget deficits.

• Devaluing the Dollar: A weaker currency is intended to boost the competitiveness of American exports.

• Inflating Away Debt: The combination of strong nominal growth, higher prices, and negative real interest rates is a classic strategy to reduce the burden of the nation's high public debt.

As former U.S. President Herbert Hoover once noted, "The first panacea of a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin."

How Asia Becomes Collateral Damage

The "America First" strategy, combining tariffs, sanctions, and aggressive monetary policy, directly threatens the economic sovereignty of other nations, with Asian economies being particularly vulnerable. Their heavy reliance on the U.S. dollar and export-driven growth models makes them susceptible to shocks.

U.S. policies are set to destabilize currency markets and fuel volatility. A forced revaluation of Asian currencies would undermine their exports and reduce local currency revenues from trade denominated in U.S. dollars. This could also import deflationary pressures into their economies.

Furthermore, Asian nations face a structural problem: their individual and state savings often exceed available local investment opportunities due to limited domestic capital markets. This has led to an oversized exposure to the U.S. dollar and American markets. A dollar devaluation would translate directly into significant losses on these investments. Asian central banks and sovereign wealth funds are among the largest holders of U.S. government debt, a problem compounded by recent agreements from Japan and South Korea to invest an additional $550 billion and $350 billion, respectively, in the U.S. to avoid tariffs.

Capital flows present another threat. Money is already moving out of the U.S. and into Asian, South American, and African assets, often through carry trades funded by cheap borrowing. This influx distorts local asset prices and forces central banks to manage currency appreciation rather than focusing on domestic economic priorities.

The Rising Risk of a Global Financial Crisis

Domestically, America's loose monetary conditions are inflating already over-stretched valuations in its equity and property markets, bringing a major financial crisis closer. Given the deep institutional linkages, a crash in U.S. markets would inevitably transmit financial instability directly into Asia.

To mitigate these growing risks, Asian economies must take decisive action.

1. Reduce Reliance on the U.S. Dollar

The first step is to redenominate trade away from the U.S. dollar and reduce dependence on America as a buyer of last resort. This requires structural reforms, such as enhancing welfare safety nets to boost domestic consumption and reduce savings rates. Accelerating bilateral and regional trade agreements is also crucial to diversify trading partners.

2. Diversify Financial Investments

Second, Asian nations must decrease their holdings of dollar-denominated assets. In the short term, this involves hedging currency risk and controlling unhedged retail and institutional investments in U.S. markets. The long-term goal is a strategic shift toward non-U.S. investments. This also means avoiding financial "round-tripping," where Asian capital is routed through U.S.-based asset managers only to be reinvested in non-American ventures. Building up regional money markets and financial institutions is key to keeping funds within the region.

3. Forge a United Economic Bloc

Most importantly, Asia must unite to leverage its combined economic and geopolitical power. Progress toward a functional regional bloc has been hindered by nationalism, ethnic diversity, mutual suspicion, and a reluctance to change. The U.S. has successfully used a "divide and conquer" strategy, but a collective, coordinated approach could shift the balance of power.

A Critical Juncture for Asia

America will continue to pursue radical economic policies to manage its relative decline and protect its global standing. These strategies will likely outlast the current administration, just as many of President Trump's first-term policies were continued by his successor, Joe Biden.

For Asia, the message is clear: act decisively and urgently. The ongoing realignment of global power presents an opportunity to decouple from America's economic trajectory. Failure to do so will mean the region will be forced to bear a disproportionate share of the costs of America's inevitable adjustment.

Natural Gas has once again reminded traders of its explosive potential. After finding buyers at a key Fibonacci extension area, prices catapulted 146% in just 12 trading days—an extraordinary rally that left skeptics behind and rewarded those who trusted the technical confluence. This surge wasn't just about numbers on a chart; it was a vivid demonstration of how market psychology, technical precision, and momentum can align to produce breathtaking moves. For traders and analysts alike, the rally offers a textbook case study in how Fibonacci levels can act as springboards for powerful trends. Charts often speak louder than words, so let's turn to the charts to see how this remarkable move unfolded…

Natural Gas Daily Chart (Jan 14): Price approaches the 3.022 – 1.965 Fibonacci extension zone

Natural Gas 11 Jan Daily Elliott Wave ChartOn the daily chart from January 11, Natural Gas was approaching the 3.022 – 1.965 blue box zone—a critical Fibonacci extension area we had been watching closely. This region carried the potential to attract buyers and set the stage for the next leg of the rally. Going to a smaller time frame, within wave (( C )), we saw wave (3) unfolded shorter than wave (1). This gave us a precise invalidation level for wave (5) of ((C)) at 3.008. A break below that level would have opened the door for a deeper pullback toward the 2.620 – 1.965 area. However, buyers stepped in just before this threshold was tested, defending the structure and reigniting the rally.

Natural Gas Daily Chart (Jan 26): Fibonacci extension zone drives a powerful 146% rally in 12 days

"Daily chart from January 26 above captures the explosive rally that followed. After price respected the Blue box zone, buyers stepped in with conviction, driving Natural Gas sharply higher reaching a high of $7.439. The move unfolded with textbook momentum, surging 146% in less than two weeks and confirming the strength of the technical setup. The Natural Gas rally underscores a simple truth: Blue box zones mark decisive turning points. Recognizing these areas early can sharpen your edge, helping you anticipate momentum shifts and position yourselves in the market with confidence.

Source: Elliott Wave Forecast

Tariff Shock Fails to Derail Risk Appetite

Dip Buying Reflects Confidence in De-escalation

Earnings Optimism Anchors Global Markets

Precious Metals Capture Residual Unease

Markets Adapt to Political Volatility

Source: Reuters

India and the European Union announced on Tuesday they have concluded negotiations on an ambitious trade pact, a move celebrated by both sides as the "mother of all deals" in a global economy shaken by U.S. President Donald Trump's tariff policies.

The agreement solidifies a powerful economic bloc. According to the European Commission, trade in goods and services between the EU and India already exceeds €180 billion ($213 billion) annually and supports nearly 800,000 jobs in the EU.

This new deal is projected to double the EU's goods exports to the nation of 1.4 billion people by 2032. The core mechanism is the elimination or reduction of tariffs on 96.6% of the value of EU shipments to India.

A New Era for Trade and Investment

Prime Minister Narendra Modi, in a video message, emphasized that the agreement unlocks "big opportunities" for both economies. He noted that the partnership represents a combined 25% of global GDP and one-third of all international trade. "Along with trade, this agreement strengthens our shared commitment toward democracy and rule of law," Modi stated.

The Prime Minister highlighted the strategic value of the pact, framing it as a complement to India's existing agreements with Britain and the European Free Trade Association. "This will strengthen both trade and the global supply chain," he said.

Modi also pointed to specific domestic benefits, congratulating key Indian industries. "I congratulate all those attached with sectors such as textiles, gems and jewelry and leather and shoes as this pact will be very helpful to all of you," he remarked. "This trade deal will not only empower manufacturing in India but will also further expand sectors linked to services."

What the Tariff Cuts Mean in Practice

The agreement outlines significant reductions in Indian tariffs on key European products. Specific changes include:

• European Wines: Tariffs will be slashed from 150% to 75% initially, with a further reduction to as low as 20% over time.

• Olive Oil: The current 45% tariff will be phased out completely, dropping to 0% over a five-year period.

A Deeper Strategic and Security Partnership

The summit in New Delhi, attended by European Commission President Ursula von der Leyen and European Council President Antonio Costa, also produced a Security and Defense Partnership. This complementary agreement aims to enhance cooperation beyond economics.

According to an EU handout, the partnership will focus on critical areas including:

• Maritime security

• The defense industry

• Cyber and hybrid threats

• Space

• Counter-terrorism

Geopolitical Tensions with the United States

The historic India-EU deal was finalized against a backdrop of friction with the Trump administration. In August, President Trump imposed steep 50% tariffs on Indian goods, which included a 25% penalty targeting New Delhi’s purchases of Russian oil.

The U.S. administration has openly criticized the EU for pursuing the trade pact. In an interview with ABC News on Sunday, U.S. Treasury Secretary Scott Bessent directly challenged the European position.

"We have put 25% tariffs on India for buying Russian oil. Guess what happened last week? The Europeans signed a trade deal with India," Bessent said.

He argued that the EU's actions indirectly undermine sanctions against Russia. "And just to be clear again, the Russian oil goes into India. The refined products come out, and the Europeans buy the refined products. They are financing the war against themselves," Bessent explained. "So, [under] President Trump's leadership, we will eventually end this Ukraine-Russia war."

Earnings Optimism Overpowers Trade Rhetoric

South Korea Rebounds Despite Tariff Shock

Tech Led Strength Across The Region

Safe Havens Signal Persistent Unease

Dollar Weakness Adds Another Tailwind

Source: Reuters