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The US dollar is soaring, who will be the next "explosive point" for shorts?
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Hello everyone, today XM Forex will bring you "[XM Forex Platform]: The US dollar is soaring, who will be the next "explosive point" for shorts?". Hope this helps you! The original content is as follows:
The volatility of the global foreign exchange market has increased significantly this week, and the U.S. dollar has performed strongly due to the www.xmtraders.combination of multiple positive factors. Driven by the safe-haven demand brought about by the escalating situation in the Middle East, coupled with the sharp shift in market expectations for the path of U.S. interest rates, the U.S. dollar index recorded its largest monthly gain in the past year. At the same time, the yen fell below the 160 mark, triggering strong market expectations for intervention by relevant overseas departments. Risk assets are generally under pressure as global investor sentiment swings sharply between faint hopes for diplomatic mediation and the real threat of expanded military action. The U.S. dollar index: the dual resonance of safe-haven assets and interest rate differential advantages
This week’s trend review
The U.S. dollar index continued its strong rebound this week since hitting a low of 95.5660 in February. It reached its highest level of 100.5400 during the week, setting a new high in the past half year. Although there was a slight rise and fall in the middle of the week, it quickly recovered its losses in the second half of the week with the intervention of safe-haven buying. Although the MACD kinetic energy column has narrowed technically, the price is running steadily above the middle track of the Bollinger Bands, showing strong trend inertia. Economic Data/Event Summary
The U.S. consumer confidence index fell to a three-month low in March, showing the erosion of domestic demand caused by high inflation expectations and rising energy prices. However, weak macro data did not prevent the dollar from strengthening. The core driving force is the deteriorating situation in the Middle East. Iran's counter-proposal to the ceasefire proposal and the Revolutionary Guards' threat to navigation in the Strait of Hormuz have greatly stimulated the market's demand for safe-haven dollars. In addition, the market's expectations for the Federal Reserve to cut interest rates this year have fundamentally reversed, and have even begun to discuss the possibility of raising interest rates again.
Analyst/institutional opinion summary
Analysts from overseas mainstream institutions believe that the correlation between the US dollar and risks has reached its peak in recent years. A well-known foreign news agency quoted strategists as saying that weekend position holding tendencies reflect investors' fear of geo-risk fluctuations. At the same time, the change in market pricing direction - from interest rate cut expectations to interest rate hike games, has provided medium and long-term interest rate support for the US dollar. This broad change in interest rate expectations is reshaping the pricing logic of the bond and exchange rate markets.
Japanese yen: fell below the intervention red line, energy cost pressure increased sharply
This week's trend review
The trend of the US dollar against the yen this week was extremely passive. The exchange rate broke through the previous high of 159.439 and then accelerated upward, reaching a maximum of 160.407. This is the first time since July 2024 that it has exceeded the 160 mark. Although MACD showed a slight top divergence, suggesting technical overbought, the depreciation pressure on the Japanese yen failed to be substantially relieved in the face of strong US dollar buying. Economic Data/Event Summary
Japan’s high dependence on imported energy puts it at a disadvantage in the current fluctuations in crude oil prices. Although the Bank of Japan announced a new neutral interest rate forecast and released a signal that it was preparing to raise interest rates to hedge against inflation, due to interest rate disadvantages and external geopolitical pressures, the boosting effect of the policy signal was www.xmtraders.completely offset by market risk aversion.
Analyst/Institutional Opinion Summary
Overseas mainstream institutions are generally concerned about Japan’s official intervention. Analysts pointed out that the 160 mark is not only a psychological defense line, but also the starting point for intervention last year. The current strength of the U.S. dollar is sustainable. If the situation in the Middle East does not substantively ease, even if short-term fluctuations are generated through intervention, it will be difficult to reverse the macro background of the Japanese yen being sold off as a financing currency.
European currencies: trapped by the double squeeze of economic prospects and tightening policies
This week’s trend review
The euro and the pound performed weak this week. The EURUSD fell below the middle Bollinger Band track of 1.1619, establishing a mid-term downward trend; the pound fell for four consecutive trading days, recording a weekly decline of 0.9%, becoming one of the worst-performing non-US currencies. The MACD green column continues to enlarge, showing that short kinetic energy is still in the process of being released. Economic data/event summary
Due to the impact of the geopolitical situation on the supply chain, concerns about slowing economic growth in Europe have overwhelmed expectations of interest rate hikes. Although the Bank of England and the European Central Bank may face pressure to further tighten policies to deal with inflation, the market is more worried that the www.xmtraders.combined effect of a high interest rate environment and the energy crisis will lead to an economic recession.
Summary of analysts/institutional views
Well-known overseas institutions believe that European currencies are currently under the shadow of "stagflation" expectations. Analysts mentioned that market speculation expectations have fully shifted. Although the final value of interest rates may move upward, the relative attractiveness of the euro and the pound relative to the US dollar is weakening, and the logic of capital returning to North America has not been shaken.
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