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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 Decision Analysis】: 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. Geopolitical risks escalate and risk aversion fermentation
The situation in the Middle East is tense
The risk of military confrontation between Israel and Iran has increased significantly. According to zeizao.cnN, Israel is preparing to launch a crackdown on Iran's nuclear facilities, directly impacting the crude oil market and safe-haven assets. The Middle East region undertakes about 30% of the world's crude oil supply. If the conflict breaks out, Iran's crude oil exports may be cut off, aggravating concerns about energy supply. Affected by this, WTI crude oil futures rose 2% at one point on Wednesday, but then suffered a gain due to market concerns about the increase in US shale oil production, and eventually closed down 1.49% to $61.20 per barrel. Geographic tensions boosted safe-haven demand, the US dollar index fell to 99.60 for three consecutive days, gold prices stood firm at $3,313.5 per ounce, and safe-haven currencies such as the Japanese yen and Swiss franc were supported.
Potential impact of G7 conference
The market is highly concerned about whether G7 will adjust its zeizao.cnmitment to "free exchange rate fluctuation". If the meeting releases a signal of "allowing the dollar to weaken", it may trigger a downward trend in the US dollar index beyond expectations. US Treasury Secretary Scott Bessent recently held intensive bilateral talks, and any statement involving "promoting the appreciation of trading partners' currencies" may become the fuse for the US dollar's sell-off. In addition, the Trump administration's $175 billion "Golden Dome" missile defense system plan has sparked concerns about the global arms race, further exacerbating market uncertainty.
2. The game between the central bank's policy path differentiation and interest rate expectations
European Central Bank sent dovish signals
European Central Bank Deputy Governor De Kindos said on Wednesday that the strengthening of the euro and the decline in energy costs are pushing inflation toward the 2% target, suggesting further interest rate cuts. Market expectationsThe ECB will cut interest rates again in June and may be open to loose policies. The eurozone inflation rate remained at 2.2% in April, but analysts expected to fall below 2% in May, further strengthening expectations for interest rate cuts. Affected by this, the euro rose 0.42% against the US dollar on Wednesday, but it still faces downward pressure in the medium and long term.
New Zealand's fiscal budget will make its debut
New Zealand's 2025 fiscal budget will be announced today, with the market focus on debt scale and expenditure reduction efforts. Although the government cuts recurring spending to $1.3 billion, borrowings are expected to reach $40 billion in fiscal 2025/26, and debt pressure continues. If the budget fails to show an effective fiscal rectification plan, it may suppress the New York currency exchange rate. However, the weakness of the US dollar index provides support for the New York dollar, which broke through the 0.5935 resistance yesterday, setting a new high since May 14 to 0.5968. Technical aspects show that if the New York dollar stands above 0.5935, it may further test the resistance of 0.6028.
Federal policy expectations have been repeated
The market has intensified differences on the Fed's path to cut interest rates. Boston Fed Chairman Collins said tariff-driven inflation could delay interest rate cuts, while Dallas Fed Chairman Logan tends to keep interest rates stable. Current futures market pricing shows that there is a 37% chance this year that the Fed will cut interest rates four times, but the 10-year U.S. Treasury yield rose to 4.45%, the largest single-week gain since 2001, suggesting market concerns about the economic outlook. After the US dollar index falls below the 100 mark, we need to pay attention to the support area of 99.50-99.20 in the short term. If the rebound occurs, it may suppress the upward space of non-US currencies.
3. Economic data and trade policy disturbances
Key data in the United States are intensively released
Today we need to focus on the number of people who requested unemployment benefits in the United States that week (20:30) and the initial value of the manufacturing and service industry PMI in May (21:45). If the PMI data exceeds expectations, it may alleviate market concerns about the recession and support the rebound of the US dollar; on the contrary, if the data is weak, it will strengthen the expectation of interest rate cuts and suppress the US dollar. In addition, the annualized total number of existing home sales in the United States in April (22:00) will reflect the health of the real estate market. If the data declines, the market may exacerbate doubts about the economic slowdown.
The international trade situation is uncertain
China-US tariff adjustment: According to the Joint Statement on Economic and Trade Talks between China and the United States, the two sides have suspended 24% of the tariff, retained 10% of the tariff, and canceled other additional tax measures. This move eased market concerns about the escalation of trade frictions and pushed the RMB exchange rate to recover the 7.3 mark. But Trump threatened that if countries cannot reach an agreement, high "reciprocal tariffs" will be restored, and trade policy uncertainty remains.
EU countermeasures: The EU announced that it would impose handling fees on small parcels entering the EU, mainly targeting Chinese e-commerce and may affect China-EU trade. In addition, the UK suspended free trade negotiations with Israel, and the pound was under short-term pressure due to differences in positions on the Gaza conflict.
IV.Key signals of market sentiment and technical aspects
Risk preference cooled significantly
U.S. stocks suffered a "three-killed stock, bond and foreign exchange" on Wednesday, with the Dow Jones Industrial Average falling nearly 2%, and the S&P 500 Index hit its biggest drop in a month. Market concerns about the deficit of the new US budget bill have intensified, US bond sell-off has accelerated, and the 10-year US bond yield has increased by more than 10 basis points in the day. The selling of risky assets drove funds to safe-haven assets such as the US dollar and gold. The US dollar index fell to a two-week low of 99.60, and gold rose 0.88%. During the Asian period, although A-shares rose slightly, the number of individual stocks fell more and the number of rises was lower, and the market sentiment was still cautious.
Technical analysis of key currency pairs
Euro/USD: Daily chart shows that the exchange rate has stabilized at the 1.12 mark, but the red bar of the MACD indicator shortened, the RSI overbought area fell, and it may pull back in the short term. If it falls below the 1.1180 support, it may fall below the 1.1150; the upper resistance is 1.1250.
GBP/USD: Due to the suspension of trade negotiations with Israel, the GBP fell to 1.2650 against the US dollar. If it falls below 1.2600, it may test 1.2550; the upper resistance is 1.2700.
U.S./JPY: The turbulence in the Japanese government bond market drove the yen to appreciate, with the US dollar falling below 143.7270 against the yen, hitting a new two-week low. If it falls below 143.00, it may fall below 142.50; the upper resistance is 144.00.
New Zealand dollar/USD: After the New Zealand dollar breaks through 0.5935, we will pay attention to the 0.5980 resistance in the short term. If you stand firm at this level, you may rise to 0.6028; if you are blocked and fall back, the support level is 0.5900.
5. zeizao.cnprehensive strategies and risk warnings
Conservative investors: wait and see, wait and wait for the US PMI data and G7 meeting signals to be clear before entering the market.
Aggressive investors:
Euro/USD: If rebounding to around 1.1250, you can short it lightly, stop loss 1.1300, and target 1.1180.
New Zealand dollar/USD: After standing firm at 0.5935, you can go long on dips, stop loss 0.5900, and target 0.5980.
U.S./JPY: After falling below 143.00, chase short, stop loss at 143.50, and target at 142.50.
Risk warning: Pay close attention to the G7 meeting’s statement on exchange rate policy, US PMI data and the evolution of the situation in the Middle East. If geopolitical risks escalate further, they may cause severe market fluctuations and positions need to be strictly controlled.
The above content is all about "【XM Foreign Exchange Decision Analysis】: Collection of Positive and Negative News that Influence the Foreign Exchange Market". It was carefully zeizao.cnpiled 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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