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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 Official Website】: 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. International policy and geopolitical dynamics
The tariff war between the United States and Europe is suspended, and the euro and pound benefit in the short term
U.S. President Trump will extend the period of imposing a 50% tariff on EU goods from June 1 to July 9, to buy more negotiation time for both sides. The decision eased market concerns about escalating trade frictions, with the euro rising to its highest level of 1.1386 against the end of April on Monday, and the pound hit a high of 1.3562 against the dollar against the dollar. However, the EU has prepared two countermeasures (adding 25% tariffs on 18 billion US goods and a "nuclear option" for 95 billion US imports), and if negotiations break down, it may suppress the euro again. The ECB warned that policy uncertainty may increase tail risks in the financial markets and investors need to be wary of potential volatility after July 9.
The conflict between Russia and Ukraine escalates, and safe-haven currencies are supported
Russia has launched the largest joint strike since the war against Ukraine, and sea-based, air-based and land-based missiles have formed a trinity strike system, resulting in a warming market risk aversion sentiment. The yen rose 0.2% against the dollar to 142.84 on Monday, while the Swiss franc rose to a decade-long high of 0.92 against the euro, breaking the 0.95 mark against the dollar. Although the Swiss National Bank may cut interest rates by 25 basis points to zero in June, due to frequent geopolitical risks, the Swiss franc's position as a "financial air raid shelter" will still be difficult to shake in the short term.
2. Economic data and central bank policy
U.S. economic data is weak, and the US dollar is under pressure
U.S. consumer confidence index fell to 50.8 in May, a three-year low, reflecting concerns about rising inflation expectations and economic prospects. Meanwhile, Moody's rating for the US sovereign credit from AAa downgrade to Aa1 has exacerbated market doubts about the long-term credit risk of the US dollar. Although the probability of the Fed's interest rate cut in June was only 5.6%, the probability of a rate cut in July rose to 25.1%, and the US dollar index fell to 99.69 on Monday, the lowest since April 29.
Eurozone inflation resilience and policy differences
Eurozone's core CPI rose 2.7% year-on-year in April, 2.4%, indicating that inflation pressure remains. But the ECB warned in its May 21 report that policy uncertainty could shake the dollar's position as a global reserve currency, while suggesting that interest rates will be kept unchanged in response to economic weakness. The technical aspects of the euro against the US dollar show that the price is supported around 1.1362, but we need to be wary of the previous high resistance of 1.1418.
Japan's high inflation and the central bank wait and see
Japan's core CPI rose 3.5% year-on-year in April, a new high since January 2023, but the Bank of Japan maintained its policy interest rate by 0.5% in May and lowered its GDP growth forecast for 2025 to 0.5%. While inflationary pressures may support the yen, Bank of Japan's concerns over U.S.-EU tariff negotiations could delay its rate hikes. The technical aspects of the US dollar against the Japanese yen show that RSI is close to the oversold area, and if it falls below 142.50, it may fall below 141.65.
RBA cut interest rates, Canadian dollar bulls and bears tug of war
RBA lowered the benchmark interest rate by 25 basis points to 3.85% on May 20, releasing a signal of easing. The Australian dollar rose 1.20% against the dollar to 0.6488 on Monday, but the policy shift may limit its upside potential. The Canadian dollar is under double pressure from falling crude oil prices (Brent crude oil futures fell 0.60% to $64.57 per barrel) and Canadian inflation fell to 1.7% in April, and needs to pay attention to the employment data released this week.
3. Technical analysis and key points
Euro/USD
Support level: 1.1279 (Euro/USD support level)
Resistance level: 1.1418 (high since the end of April)
Technical surface shows that the euro stabilized against the US dollar near 1.1362, but the MACD signal line flattened and needed to break through 1.1418 to open upward space.
GBP/USD
Support: 1.3420 (upper Bollinger band)
Resistance: 1.3562 (high since February 2022)
GBP hits high due to weak US dollar and strong UK economic performance, but RSI has entered the overbought area and may pull back to 1.3245 if it falls below 1.3420.
U.S./JPY
Support level: 142.50 (two-week low)
Resistance level: 144.40 (Thursday high)
The US dollar against the Japanese yen is suppressed by safe-haven demand. If it falls below 142.50, it may fall below 141.65. Otherwise, it needs to stand firm at 144.40 to reverse the decline.
4. xmserving.commodity and market sentiment
Crude oil prices fluctuated, and the Canadian dollar was under pressure
International oil prices fell slightly on Monday, with WTI crude oil futures at $61.33/barrel and Brent crude oil futures at $64.57/barrel. OPEC+ plans to hold a meeting on May 31 to discuss the production policy in July. If the increase in production is decided to be implemented, the focus of oil prices is expected to shift down, further negative for the Canadian dollar.
Demand for gold is heating up
Spot gold rose slightly to $3347.17 per ounce on Monday. The escalation of conflict between Russia and Ukraine and the weakness of the US dollar provide support for gold prices, but the closure of US stocks has led to a decline in liquidity and volatility may intensify.
5. Market sentiment and risk warnings
Geopolitical risks
Russia-Ukrainian conflict, the situation in the Middle East and the progress of US-Europe trade negotiations are still the main risk points, and risk aversion sentiment may push up currencies such as the yen and Swiss franc in stages.
Liquidity fluctuations
U.S. stocks are closed due to Memorial Day, and some contract transactions between CME and Intercontinental Exchange ended early. The decline in market liquidity may amplify exchange rate fluctuations.
Policy uncertainty
The differentiation between the ECB's June interest rate cut expectations (probability exceeds 70%) and the Bank of Japan's wait-and-see attitude may exacerbate the fluctuations in cross-exchange rates such as the euro/yen.
6. Operation suggestions
Euro/USD: If you stand firm at 1.1362, you can go long with a light position, stop loss of 1.1279, and target 1.1418-1.1450.
GBP/USD: Sell lightly in the range of 1.3500-1.3562, stop loss 1.3600, target 1.3420-1.3370.
U.S./JPY: If it falls below 142.50, you can short it, stop loss at 143.00, and target at 141.65-141.00.
Australia dollar/USD: wait and see, waiting for the RBA policy to be further clarified.
Risk warning: Geopolitical events, economic data exceeding expectations and the central bank's policy shift may cause sharp exchange rate fluctuations. It is recommended to strictly control positions and set stop losses.
The above content is all about "【XM Forex Official Website】: Collection of Positive and Negative News that Influence the Foreign Exchange Market". It was carefully xmserving.compiled and edited by the XM Forex editor. I hope it will be helpful to your trading! Thanks for the support!
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