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A collection of positive and negative news that affects the foreign exchange market
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Hello everyone, today XM Foreign Exchange will bring you "【XM Foreign Exchange Market xm-forex.comment】: Collection of positive and negative news that affects the foreign exchange market". Hope it will be helpful to you! The original content is as follows:
1. Macroeconomic data dynamics
U.S. inflation expectations cool down, the US dollar is under pressure
U.S. consumer inflation expectations fell across the board in May, 10-year U.S. Treasury yields fell, and market expectations for the Federal Reserve to cut interest rates have increased. The core CPI in April was only 1.8% year-on-year, hitting a new low since 2020, indicating that inflationary pressure continues to ease. This strengthens the expectation that the Fed may continue to cut interest rates in 2025. The US dollar index fell under pressure, and the offshore RMB once rose by more than 100 points and broke through 7.18.
Australia's economic growth is weak, and the Australian dollar faces downward risks
Australia's GDP increased by only 0.2% month-on-month in the first quarter of 2025, a sharp slowdown from the previous value. The growth of household consumption and investment is weak, and extreme weather has an impact on the mining and tourism industries. Despite the recovery of the private sector, per capita GDP has fallen into negative growth again, and market expectations for further easing of the RBA have heated up, and the Australian dollar may fall below the 0.65 mark against the US dollar in the short term.
Canada's unemployment rate hit a four-year high, with the Canadian dollar dragging down
Canada's unemployment rate rose to 7.0% in May, the highest since September 2021. The manufacturing industry was significantly impacted by US tariffs, with a net reduction of 12,200 jobs. Although the job market has increased by 8,800 people overall, high unemployment and trade uncertainty have exacerbated pressure on the depreciation of the Canadian dollar, and the dollar against the Canadian dollar may test the 1.38 resistance level.
2. Central Bank policy trends
The ECB cut interest rates by 25 basis points, and the economic outlook of the eurozone was pessimistic. On June 9, the ECB announced a 25 basis points interest rate cut, and the deposit rate dropped to 2%, and hinted that further easing may occur. President Lagarde points out that survey data show economic prospectsWeakened, slowing services, appreciation of the euro and uncertainty in trade policy suppressed exports and investment. The euro may fall below the 1.08 support level in the short term, and if it falls below, it may open up downward space. The Bank of England maintains its interest rate cut path, and the pound fluctuates weakly.
The Bank of England has cut interest rates by a total of 50 basis points in 2024, and is expected to continue to cut interest rates in 2025, but the amplitude is smaller than that of the European Central Bank. Although fiscal stimulus may boost the economy, inflation in the service industry remained stubbornly at around 5%, and the market has a big disagreement over the pace of interest rate cuts. The pound may fluctuate against the US dollar in the range of 1.25-1.27, so we need to pay attention to the inflation data in mid-June.
Expectations of Bank of Japan's interest rate hikes have heated up, and the yen has been supported.
The Bank of Japan ended negative interest rates and raised interest rates twice in 2024, and is expected to raise interest rates twice in 2025 to 0.75%. Although GDP shrank by 0.2% in the first quarter, exports and manufacturing industries are resilient. Coupled with the Fed's expectation of interest rate cuts, the yen may test the 135 mark, and safe-haven demand may drive further appreciation.
3. Geopolitics and international trade
China-US economic and trade consultations sent positive signals, and risky currencies benefited
The first meeting of the China-US economic and trade consultation mechanism was held in London on June 9, and market expectations for easing trade tensions increased. China's imports and exports increased by 2.5% year-on-year in the first five months, and exports to ASEAN and the EU increased by more than 13%, and the RMB cross-border settlement system was further expanded. If the negotiations make substantial progress, risky currencies such as the Australian dollar and New Zealand dollar are expected to strengthen and the US dollar is under pressure.
The situation in the Middle East continues to turmoil, and safe-haven currencies are favored
The risk of conflict between Israel and Iran escalates, Houthi forces frequently attack shipping in the Red Sea, and the US 82nd Airborne Division deployed to the Middle East. Geographic risks have boosted demand for safe-haven, and currencies such as the Japanese yen and Swiss franc have been supported. If transportation in the Strait of Hormuz is blocked, oil prices may soar, which will indirectly benefit the Canadian dollar (crude oil exporter).
Saudi Arabia terminates the US-Saudi agreement, and the dollar hegemony is challenged
Saudi Arabia announced on June 9 that it will not renew the US-Saudi Arabia security agreement and joins the RMB cross-border settlement system, weakening the status of the petrodollar. This move may trigger fluctuations in US dollar liquidity, the US dollar index may fall below the 102 mark in the short term, and the attractiveness of safe-haven assets such as gold has increased.
4. Technical analysis and trading strategies
US dollar index: short-term pressure, pay attention to 102 support
The US dollar index has fallen due to the cooling of inflation expectations and the impact of Sino-US negotiations. The daily-level RSI is oversold. If it falls below the 102 mark, it may fall below 101.5. Resistance level 103.5 and support level 102.0.
Euro/USD: Expectations of interest rate cuts dominate, focus on 1.08 support
The euro/USD falls below 1.09 after the ECB cuts interest rates. If it falls below 1.08, it may fall below 1.075. The resistance level is 1.095, it is recommended to rebound and short and stop loss of 1.100.
Australia dollar against the US dollar: economic weakness suppression, focus on the 0.65 mark
The Australian dollar is dragged down by weak GDP and may accelerate to 0.645 if it falls below 0.65. The resistance is 0.660, and it is recommended to rebound to short around 0.660 and stop loss is 0.665.
United States dollar against yen: expectation of interest rate hikes supports yen, pay attention to the 135 mark
The yen is boosted by the Bank of Japan's interest rate hike expectations. If it breaks through 135, it may test 134.5. The resistance level is 136.0. It is recommended to short when the high is high and stop loss is 136.5.
5. Risk warning
Data and event risks
If the US CPI data on June 12 exceeds expectations, it may reverse the Federal Reserve's expectation of interest rate cuts and boost the US dollar.
The speech of European Central Bank President Lagarde on June 13 may send a signal of further easing to suppress the euro.
The escalation of the situation in the Middle East or the collapse of Sino-US negotiations may trigger a surge in risk aversion in the market.
Central Bank Policy Risks
If the Federal Reserve unexpectedly suspends interest rate cuts, the US dollar may rebound.
If the Bank of Japan postpone interest rate hikes, the yen may fall.
Technical Breakout Risk
If major currency pairs break through key support/resistance levels, they may trigger trend markets and strictly stop losses are required.
Conclusion: The current foreign exchange market is affected by the interweaving of multiple factors. The US dollar is under pressure in the short term but is still supported by economic resilience in the medium term. Non-US currencies such as the euro and the Australian dollar are facing downward pressure, and safe-haven currencies such as the Japanese yen and the Swiss franc are boosted by geopolitical risks. Investors need to pay close attention to the progress of China-US consultations, the policy trends of the ECB and the situation in the Middle East, flexibly adjust their positions, and strictly control risks.
The above content is all about "【XM Foreign Exchange Market Review】: Collection of positive and negative news that affects the foreign exchange market". It was carefully xm-forex.compiled and edited by the XM Foreign Exchange editor. I hope it will be helpful to your trading! Thanks for the support!
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