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The "death pattern" of the US dollar index is confirmed. Will the fall below the last line of defense trigger a collapse-style decline?
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Analysis]: The "death pattern" of the US dollar index is confirmed, will it trigger a collapse-style decline after falling below the last line of defense?". Hope it will be helpful to you! The original content is as follows:
Asian Handicap Market Review
Last Friday, US President Trump once again threatened to escalate the trade war, suggesting that a 50% tariff was imposed on the EU from June 1. The US dollar index continued to decline during the day and fell to around the 99 mark. As of now, the US dollar price is 98.79.
US and Japanese tariffs:
Japanese Prime Minister Shigeru Ishiba held a phone call with Trump for 45 minutes. Trump did not make any eouu.cnments on the tariffs. Shigeru Ishiba reiterated his request for the United States to cancel the tariffs. It is reported that Japan intends to reach a tariff agreement with the United States before the G7 summit in June.
US and European tariffs:
Trump resumes a 90-day trade negotiation window with the EU, and von der Leyen previously took the initiative to contact it. Previously, Trump said there was no progress in the discussion with the EU and suggested that a 50% tariff was directly imposed on the EU from June 1; the European eouu.cnmission refused to eouu.cnment on US trade tariffs until the EU Trade eouu.cnmissioner spoke on the phone with the US Trade Representative.
U.S. Treasury Secretary Becent: The 50% tariff threat is a response to the speed of EU action, and hopes that doing so will inspire the EU to take action. The United States has made significant progress in trade negotiations with India and Asian countries. More agreements will be announced in the next 90 days; the Trump administration has suspended plans to create sovereign wealth funds.
Federal Goulsby: 50% EU tariffs are one difference from the current situationOn the order of magnitude, such a high tariff level will have a serious impact on the supply chain. The Fed needs to wait for the situation to be clear in the short term, and the threshold for action before this is high. Rate cuts are still possible in the next 10 to 16 months.
Russia-Ukraine and Middle East related:
The US-Ukraine mineral agreement has officially started; Trump claims to be dissatisfied with Putin's actions and threatens to consider imposing more sanctions on Russia; Russian officials: The draft peace memorandum will be submitted in the next few days.
Iran and the United States hold the fifth round of indirect negotiations, which is reported to last only three hours, and Omani mediators are responsible for conveying oral and written information between the two delegations. Trump: Some substantial progress has been made in negotiations with Iran.
Israeli Defense Force: All standing infantry brigades and armored brigades of the Israeli Army have been deployed to Gaza.
The Houthi forces said they used hypersonic missiles to strike Israel's Ben-Gurion Airport. The US Treasury Department issued a statement on the 23rd saying that it had issued a Syria General License and announced the immediate lifting of sanctions on Syria.
India-Pakistan related:
Pakistan Airport Authority: Pakistan extends airspace closure measures for all airlines owned or operated by India to 4:59 am on June 24, 2025; Indian Civil Aviation Ministry: India extends airspace closure measures for all airlines owned or operated by Pakistan to 23, 2025.
Summary of institutional views
Facefield: The ECB's easing pace may slow down in the future
We expect the ECB to cut interest rates by 25 basis points at its June meeting and adjust its expectations for the next rate cut to September (or later) so that there is more time to collect data. At present, the decision-makers have not yet formed a majority consensus on implementing eouu.cnprehensive stimulus policies. As energy prices lower and the euro strengthens, we expect newly released staff forecasts to show overall inflation in 2026 below target levels. GDP growth expectations from 2025 to 2026 may also be lowered, and the risk tends to decline.
We judge that overall inflation will hit cyclical lows in the first quarter of next year, which will aggravate the risk of out-of-control inflation expectations, and core inflation may be more sticky. Based on developments and data changes, we do not rule out the possibility of ending the interest rate cut cycle after June or adding another interest rate cut in December. Faced with a single temporary overall inflation deviation, the ECB faces two options: either “temporarily tolerate” this deviation or take more aggressive measures to maintain inflation expectations. Lessons learned over the past decade and memory during the pandemic may have prompted policy makers to lean towards the latter.
The June policy debate will also affect the upcoming strategic assessment, which currently requires "solid operation" to deal with calls for uncertainty, in a subtle contrast to the previous position of proposing "flexible response". Given the uncertainty about the acceptable deviation range, the time frame for eouu.cnpliance, and the target variables (we expect core inflation to remain as a key policy guide), it may not be easy to establish a clear policy response function.
HSBC: New Zealand is expectedThe Fed cuts interest rates by 25 basis points next week
Economists at HSBC Global Research said the New Zealand Fed could cut its official cash rate by 25 basis points on May 28, and then only once this year. Although New Zealand's economic growth is accelerating, real-time data shows that the basis for economic recovery is not extensive and consumers are still cautious. Inflation is close to the median of the 1%-3% target range set by the New Zealand Fed, but inflation expectations have risen slightly. Given the implementation of a large number of loose policies, uncertainty in global economic development, and how long it will take to affect the economy, the Fed is expected to take a more cautious approach to the economic outlook.
Analyst MuhammadUmair
Last week, the U.S. House of Representatives passed a $4 trillion high debt budget to exacerbate market uncertainty, and investors reacted negatively to the upcoming fiscal burden, especially as the bill was filed in the Senate. The move caused the US dollar index to fall below the 99 mark under pressure, providing a strong boost to US dollar-denominated assets. The 10-year U.S. Treasury yields fell slightly, strengthening the bullish outlook for gold.
The daily chart shows that the US dollar index shows a strong bearish chicken head, and the head and shoulders top pattern is still eouu.cnpleted. The previous rebound momentum from 98 to 50-day simple moving average (SMA) 102 failed to continue, and the downward trend was restarted. The short pressure was confirmed at 100.65 last week, and I think the downward trend of the US dollar index will continue in the short term. The 4-hour chart shows that the recent decline of the US dollar index has formed a bearish channel, triggering a new round of decline after failing to try to break through 101.60. Currently, the US dollar index is testing the support of the lower track of the bearish channel. If the loss of 97 may trigger an accelerated downward market, the target will directly point to the 90 integer mark.
Analyst Haresh Menghani
In the Asian session on Monday, the pound continued its strong gains against the dollar last week, reaching its highest level since February 2022.
The strong performance of the pound continues to be supported by optimistic UK retail sales data released last Friday, which shows that consumer spending remains a highlight despite the bleak economic outlook. In addition, the UK's April inflation data exceeded expectations, and the market speculated that the Bank of England may keep interest rates unchanged at its June 18 meeting and postpone further interest rate cuts.
In addition, the US dollar has difficulty obtaining effective buying support, and the market is worried that the tax reform bill will accelerate the deterioration of the US budget deficit. At the same time, market expectations that the Fed will cut further interest rates in 2025 have been strengthening, dragging the dollar to a nearly one-month low, further boosting the pound to a stronger versus the dollar.
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