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market analysis
A collection of good and bad news affecting the foreign exchange market
Wonderful introduction:
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Hello everyone, today XM Forex will bring you "[XM Forex Platform]: A collection of good and bad news affecting the foreign exchange market". Hope this helps you! The original content is as follows:
Core introduction: On April 6, the foreign exchange market focused on the three main themes of the U.S.-Iran deadline, soaring oil prices, and the central bank's hawkish turn. The geopolitical crisis has boosted the demand for safe havens in the U.S. dollar, and the differentiation of non-U.S. currencies has intensified; high oil prices have triggered concerns about global stagflation, and Europe and Japan have been forced to tighten policies; the RMB is relatively strong, supported by the resilience of foreign trade. Today there is a mix of bulls and bears. The U.S. dollar index is strong, xmmarkets.cnmodity currencies are under pressure, and Europe and Japan are volatile. Be wary of the sharp fluctuations caused by the U.S. non-manufacturing PMI in the evening.
1. Global geography: The U.S. and Iran are approaching a dead end, and the U.S. dollar has strengthened as a safe haven (leading factor)
Good for the U.S. dollar
The ultimatum xmmarkets.cnes into effect: Trump set a deadline for Iran to reopen the strait on April 6, but Iran strongly refused, and navigation in the strait was almost at a standstill. The U.S. military's two aircraft carriers are approaching the border and Iran is preparing missiles for war. The risk of war has soared, and funds are pouring into the U.S. dollar as a safe haven.
Supply panic intensifies: Israel airstrikes an important petrochemical town in Iran, damaging energy facilities; OPEC+ only increases production by 206,000 barrels per day, unable to fill a gap of tens of millions. WTI exceeded US$114 and Brent US$111. High oil prices strengthened the anti-inflation properties of the US dollar.
Risk appetite plummeted: Asia-Pacific and European stock futures indexes generally fell, funds were withdrawn from risky assets, and the US dollar liquidity premium increased.
Bad for non-U.S. economies (euro, pound, yen)
Euro zone stagflation: Germany’s GDP growth halved to 0.6%, the energy-dependent economy was hit hard, and the euro’s fundamentals deteriorated.
The yen is under pressure: imported inflation is high, but the economic recovery is fragile, interest rate hike expectations are swinging, and the yen's safe-haven attribute is weakening.
xmmarkets.cnmodity currencies plummeted: The Canadian dollar and the Australian dollar fluctuated with oil prices and xmmarkets.cnmodities, and global demand was suppressed by concerns.
2. Monetary policy: Global hawks turn, interest rate differentials dominate exchange rates
Good for the US dollar
The Federal Reserve is firmly hawkish: Powell stated that fighting inflation is a priority and does not rule out raising interest rates; core PCE exceeded 2% in March, and CME showed that the probability of maintaining interest rates in April was 98.4%, and interest rate cut expectations were significantly postponed.
U.S. bond yields climbed: the Middle East crisis + inflation rebounded, the 10-year U.S. bond exceeded 4.8%, the interest rate gap between China, the United States, Europe and the United States widened, and the attraction of the U.S. dollar increased.
Good for the euro and pound (limited)
The European Central Bank turned hawkish: CPI reached 2.5% in March (exceeding the 2% target), Lagarde warned that energy will push up inflation, and expectations for interest rate hikes in April/July have increased.
The Bank of England suspended interest rate cuts: high oil prices forced a policy shift and abandoned the interest rate cut plan, and the pound gained support.
Bad for the yen and Swiss franc
The Bank of Japan is hesitant to raise interest rates: Although inflation has reached the target, it is worried about an economic slowdown. The probability of raising interest rates in April has dropped to 60%, and the interest rate advantage has narrowed.
The Swiss franc’s safe haven faded: the strength of the U.S. dollar squeezed the Swiss franc’s space, and funds prioritized the U.S. dollar.
3. Chinese market: The resilience of the RMB is highlighted, with two-way fluctuations
Good for the RMB
The economic fundamentals are solid: PMI returned to expansion in March (50.4%), exports increased by 19.2% from January to February, and the trade surplus supported the exchange rate.
Policy neutrality: the risk reserve ratio for forward foreign exchange sales returns to zero, market-oriented adjustment, no strong intervention, and stable confidence.
Return of foreign capital: A-share and bond market valuations are low, Middle East funds seek safe havens, and RMB assets are favored.
Bad for the RMB
The U.S. dollar is strongly suppressed: the U.S. dollar index is approaching 106, non-U.S. countries are generally under pressure, and it is difficult for the RMB to be strong alone.
Peak of dividend payment and foreign exchange purchase: The dividend season of overseas Chinese xmmarkets.cnpanies has started, and the demand for foreign exchange purchase has increased, putting short-term pressure on them.
4. Economic data: today’s key indicators (22:00)
U.S. ISM non-manufacturing PMI in March
Expected 52.2, previous value 52.6
Good for the US dollar: data exceeded expectations→economic resilience is strong→increased Interest rate expectations are rising
Bad for the U.S. dollar: data is worse than expected→service industry cools→interest rate cut expectations pick up
Other important data
German industrial output in February: -0.8% (previous value +1.2%), the euro zone economy is weak, which is negative for the euro.
Japan’s current account in February: The surplus narrowed, energy import costs soared, which was negative for the yen.
5. Trading strategies and risk warnings
Operation suggestions
USD main line: Go long on the US dollar index and USD/JPY on dips, with strict stop loss.
Euro band: 1.0650-1.0720, sell high and buy low, follow the trend after the data.
RMB is stable: trading in the range of 6.88-6.92, follow orders after breakthrough.
Risk Warning
Black Swan: Sudden conflict between the United States and Iran → the U.S. dollar jumped and the non-U.S. dollar plummeted.
Data reversal: US PMI weakened sharply → the US dollar fell sharply and gold rebounded.
Central bank intervention: Japan and the Eurozone verbally intervened in the foreign exchange market, triggering short-term violent fluctuations.
Disclaimer: This report is based on public information and does not constitute investment advice. The foreign exchange market fluctuates violently, so strictly control positions and stop losses.
The above content is all about "[XM Foreign Exchange Platform]: Collection of good and bad news affecting the foreign exchange market". It is carefully xmmarkets.cnpiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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