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A collection of good and bad news affecting the foreign exchange market
Wonderful introduction:
The moon waxes and wanes, people have joys and sorrows, life changes, and the year has four seasons. If you survive the long night, you can see the dawn, if you endure the pain, you can have happiness, if you endure the cold winter, you no longer need to hibernate, and after the cold plums have fallen, you can look forward to the new year.
Hello everyone, today XM Forex will bring you "[XM Official Website]: A collection of good and bad news affecting the foreign exchange market". Hope this helps you! The original content is as follows:
On April 1, the global foreign exchange market ushered in a critical window period of geopolitical easing, data intensity, and central bank expected repricing. The main line of the market has shifted from "Middle East risk aversion + stagflation concerns" to "risk preference restoration + policy rhythm game". The US dollar has fallen back from its highs, non-US currencies have rebounded in differentiation, www.xmtraders.commodity currencies and European currencies have led the gains, and the Japanese yen has been relatively weak. The following will www.xmtraders.comprehensively sort out today's core driving factors from two dimensions: good and bad, and provide decision-making reference for foreign exchange transactions.
1. Major positives: Risk appetite has rebounded, and non-US currencies have collectively rebounded
1. The situation in the Middle East has eased significantly, and the geo-risk premium has subsided
Core positives: The Iranian president has stated that he is "willing to end the war after receiving security guarantees", the US president has released a signal to withdraw troops, saying that "actions against Iraq will be ended within 2-3 weeks", and expectations for peace talks between the two sides have increased. The geopolitical hedging premium that previously supported the US dollar shrank rapidly, risk assets rebounded across the board, the US dollar index fell below the 100.2 mark under pressure, and non-US currencies such as the euro, pound, and Australian dollar gained room for recovery.
2. China’s economy recovered more than expected, boosting global risk sentiment
Core positive news: China’s official manufacturing PMI in March recorded 50.4%, returning to the expansion range (previous value 49.0%), up 1.4 percentage points month-on-month. The manufacturing industry picked up and the new orders index strengthened, confirming the resilience of the economic recovery. As the world's largest www.xmtraders.commodity importer and manufacturing center, China's positive data directly benefits www.xmtraders.commodity currencies such as the Australian dollar, New Zealand dollar, and Canadian dollar, and increases global risk appetite, suppressing safe-haven buying of the U.S. dollar.
3. The Federal Reserve releases a dovish signal and expectations of interest rate cuts increase
Core positive: Federal Reserve officials spoke overnightIt is dovish, mentioning that "inflation is showing signs of cooling, and it does not rule out an interest rate cut in June." The market's expectations for the number of interest rate cuts during the year have been raised from 1 to 1-2. The fall in U.S. bond yields and the weakening of the U.S. dollar index have provided upward support for the euro, gold, and emerging market currencies, and bullish sentiment in Africa and the United States has significantly improved.
4. The resilience of inflation in the Eurozone exceeded expectations, and the hawkish expectations of the European Central Bank strengthened
Core positive: the initial annual CPI rate in the Eurozone was 2.5% in March (2.2% expected), the largest increase since 2022. Although core inflation has slowed slightly, energy price transmission pressure still exists. ECB officials have repeatedly hinted that "an interest rate hike in April is not impossible," and the market's interest rate cut expectations have turned to interest rate hike expectations. The EUR/USD has stabilized and rebounded in the short term, breaking through the resistance of 1.1480.
2. Main negatives: stagflation concerns, data pressure and policy uncertainty
1. The risk of global stagflation is rising, suppressing economically sensitive currencies
Core negatives: The conflict in the Middle East has pushed up oil prices, and Brent crude oil soared by more than 60% in March. Although it fell by 3.4% on April 1, the previous increase has pushed up inflation expectations in Europe and the United States. Consumer inflation expectations in the United States rose to 5.2% in March, and inflation rebounded in the Eurozone and the United Kingdom. The stagflation pattern of high inflation + economic slowdown suppressed the rebound space of economically sensitive currencies such as the pound and the euro.
2. The intensive release of US data will intensify the risk of dollar fluctuations
Core negative: Today evening, major US data such as ADP employment in March, retail sales in February, and ISM manufacturing PMI in March will be released. If employment exceeds expectations and retail sales strengthen, it will strengthen the Fed's "suspension of interest rate cuts" stance, and the U.S. dollar may rebound in the short term, suppressing non-U.S. currencies; if the data is weak, it will further solidify the economic cooling and the U.S. dollar will continue its decline. Before and after the data is released, the volatility of EUR/USD and USD/JPY will be significantly magnified.
3. The Bank of Japan’s policy lags behind, and the Japanese yen continues to be under pressure
Core negatives: Japan’s economic recovery is weak, inflation has fallen moderately, the Bank of Japan maintains an ultra-loose policy, and there is no clear timetable for raising interest rates. The interest rate differential between the United States and Japan remains high, with USD/JPY firmly above 159. The easing in the Middle East has not significantly benefited the Japanese yen, and its safe-haven properties have weakened. If the Japanese authorities do not intervene, the yen's weakness will be difficult to change, and USD/JPY is still at risk of rising to 160.5.
4. Fund positions are adjusted at the beginning of the quarter, and market volatility intensifies
Core negative: April is the beginning of the quarter, and global institutions are rebalancing assets. This is coupled with April Fool’s Day market sentiment fluctuations, and capital flows are changeable. The U.S. dollar has risen too much in the early stage, and the pressure for profit-taking has increased; the rebound of non-U.S. currencies lacks sustained fundamental support, and is prone to highs and lows, and wide fluctuations in the market, and trading risks increase.
3. Core conclusions and key points of today’s trading
The dominant positive directions are: Euro, Australian dollar, RMB (China PMI + risk appetite); the dominant negative directions are: Japanese yen, British pound (stagflation concerns); US dollar: The fluctuation is weak, pay attention to data guidance.
Key points:
USD Index: Support 99.8, resistance 100.5
EUR/USD: Support 1.1420, resistance 1.1520
USD/JPY: Support 159.0, resistance Strength 160.5
AUD/USD: support 0.6950, resistance 0.7050
Operational strategy: During the day, non-U.S. fluctuations are mainly bullish, participate in light positions before the data is released, and set stop losses strictly. Focus on the US ADP and ISM data in the evening. If it is good for the US dollar, adjust long positions in time.
Disclaimer: This content is based on public market information on April 1 and does not constitute investment advice.
The above content is all about "[XM official website]: Collection of good and bad news affecting the foreign exchange market". It is carefully www.xmtraders.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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