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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 Market 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. Geopolitics and trade policy: tariff storms and turmoil are intertwined
Trump's tariff policy is upgraded
U.S. President Trump announced that he will significantly increase tariffs on Indian goods imported to the United States in the next 24 hours, with the current tax rate of 25%. This move directly impacts the market's confidence in the global trade chain. The US dollar may strengthen due to safe-haven demand in the short term, but risk appetite may be suppressed due to escalating trade frictions in the long term. In addition, Trump has threatened to impose a 35% tariff on the EU and plans to increase drug tariffs to 250% within a week, further aggravating market concerns about the global economic outlook.
The EU suspends tariff countermeasures against the United States
The European eouu.cnmission announced that it would suspend the tariff countermeasures against the United States that were originally scheduled to take effect on August 7, but retains the option of restart. This eouu.cnpromise measure temporarily alleviates trade tensions between Europe and the United States, but the market is still worried about the risk of subsequent negotiations breaking down, weak economic data in the euro zone and policy uncertainty, and the euro is under short-term pressure.
The situation in the Middle East deteriorates
Israeli Prime Minister Netanyahu plans to submit a plan to fully occupy the Gaza Strip on August 7. At present, the Israeli army has controlled 75% of the area in Gaza. The escalation of geopolitical conflicts has boosted risk aversion sentiment, and safe-haven currencies such as the Japanese yen and Swiss franc may be supported, but at the same time may curb the demand for risk assets and indirectly affect eouu.cnmodity currencies such as the Australian dollar and the Canadian dollar.
2. Central Bank policy trends: game between differentiation path and expectations
The Federal Reserve keeps interest rates unchanged, and Powell downplays expectations for interest rate cuts
The Federal Reserve kept interest rates unchanged at its July 31 meeting, and Chairman Powell said the current interest rate level is sufficient to cope with inflation and trade uncertainty, downplaying the possibility of a rate cut in September. This statement strengthens expectations of a medium-term strengthening of the US dollar, with the upward pressure on US Treasury yields increasing, and non-US currencies are generally under pressure.
The Bank of Japan sends hawkish signals, but short-term interest rate hikes are expected to cool down
The minutes of the Bank of Japan's June meeting show that if economic growth and inflation meet expectations, further interest rate hikes may be raised in the future. However, President Kazuo Ueda emphasized at a press conference on July 31 that he had not lagged behind the inflation curve and said more data was needed to assess the impact of the tariffs, resulting in the yen giving up. The market expects the Bank of Japan to postpone interest rate hikes until October, and the short-term trend of the yen depends on changes in the interest rate spread between the United States and Japan.
Expectations for the Bank of England's interest rate cuts have heated up
UK inflation rebounded to 3.4% in May, and the unemployment rate rose to 4.04%. The market expects the Bank of England to consider a rate cut at its August interest rate meeting. If interest rate cuts fall, the pound may be further under pressure. On the contrary, if the central bank maintains a hawkish stance, the pound may rebound.
3. Economic data release: game between key indicators and market expectations
U.S. ADP employment data (20:15)
As a forward-looking indicator of non-agricultural employment, the number of ADP employment in July is expected to be 148,000, while the previous value is 122,000. If the data exceeds expectations, it will strengthen the reason for the Federal Reserve to maintain high interest rates, which will be beneficial to the US dollar; on the contrary, if it is less than expected, it may trigger market concerns about the economic slowdown and suppress the US dollar.
Australia's weak trade data bears the Australian dollar
Australia's trade surplus narrowed sharply in May to A$2.24 billion, far lower than the expected A$5 billion, mainly due to a 5.5% drop in exports to the United States due to tariffs. This has exacerbated the market's selling pressure on Australian dollar assets. If the technical side falls below the key support of 0.64, a new round of decline may begin.
Eurozone inflation data stagnates
Eurozone's CPI year-on-year growth rate in August is expected to remain at 5.3%, and core inflation pressure remains. The European Central Bank faces a dilemma between "anti-inflation" and "stabilizing growth". If the data is higher than expected, it may postpone the expectation of interest rate cuts and support the euro; otherwise, if it is lower than expected, the euro may weaken further.
4. Market sentiment and technical aspects: risk preference and eouu.cnpetition for key points
Volatility in risk assets intensified
The three major U.S. stock indexes fell across the board on July 31, with the Dow Jones Industrial Average falling 0.14%, the S&P 500 falling 0.49%, and the Nasdaq fell 0.65%. The weakness in global stock markets reflects market concerns about the economic outlook, and risky currencies such as the pound and the Australian dollar may continue to be under pressure. At the same time, international oil prices fell for four consecutive times, with the main contract of US oil closing at US$65.17 per barrel, and the Canadian dollar was dragged down by energy prices and it was difficult to change its weakness in the short term.
Technical Analysis of Major Currency Pairs
Euro/USD: Short-term Resistance Level 1.0972. Support level 1.0936. If it falls below the 1.09 mark, it may fall below 1.0850.
GBP/USD: Resistance level 1.2761, support level 1.2707. The Bank of England policy expects to dominate short-term trends and we need to pay attention to the trends of the interest rate meeting in August.
U.S./JPY: Key resistance level 145.39, support level 144.97. The warming of geopolitical risk aversion may push the exchange rate test 146 mark.
Australia/USD: Technical oversold, but weak fundamentals may suppress the rebound space. Focus on the support level of 0.6427 in the short term.
5. eouu.cnmodities and cross currencies: linkage effect and arbitrage opportunities
The continuous downturn in crude oil prices dragged down eouu.cnmodity currencies
International oil prices fell four consecutive times, and the main contract of US oil fell below $65 per barrel. The currencies of energy exporters such as Canada and Australia (Canadian dollar, Australian dollar) are under pressure. The Canadian dollar-NYD exchange rate rose by 0.51% due to the decline in oil prices and the weak Canadian economic data, but we still need to pay attention to changes in supply and demand in the energy market in the long run.
The demand for gold safe-haven weakened marginally
eouu.cnEX gold futures rose slightly by 0.25% to $3,435 per ounce on July 31, which was supported by geopolitical risks in the short term, but the Federal Reserve maintained high interest rate expectations to limit the gains. If the US dollar strengthens further, gold may fall to the key support of $3,400.
6. Operation strategy suggestions
USD: Pay attention to ADP data and tariff policies, and go long on short-term dips in the USD index, target 99.35, stop loss 98.13.
Euro: Before the data is released, wait and see. If the CPI exceeds expectations, you can go long with a light position, target 1.10 and stop loss 1.0899.
JPY: With the increasing geopolitical risk, the US dollar/JPY can place long positions on lows, with a target of 145.80 and a stop loss of 144.56.
Australia: rebounded to short around 0.6523, targeted at 0.6427, stop loss of 0.6550.
GBP: Be cautious before the Bank of England policy is announced. If the expectation of interest rate cuts heats up, you can short GBP/USD, target 1.2650, stop loss 1.2816.
Risk warning: Geopolitical situation, central bank policy changes and economic data fluctuations beyond expectations may cause severe market fluctuations. It is recommended to strictly control positions and set reasonable stop loss.
The above content is all about "【XM Foreign Exchange Market Analysis】: Collection of Positive and Negative News that Influence the Foreign Exchange Market". It was carefully eouu.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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