Trump tariffs emphasize "resilience", the dollar hits its highest in more than two weeks

On the Asian session on Tuesday, the US dollar index hovered around 104.36, and the US dollar rose 0.2% on Monday to close at 104.31, and it hit a high of 104.44 in the past two weeks. The total number of new home sales in the United States in February and the US Consultative Conference Consumer Confidence Index in March will be released on this trading day, and investors need to pay attention. In addition, it is necessary to pay attention to the speeches of Fed officials.

Analysis of major currencies

U.S. dollar: As of press time, the US dollar index hovered around 104.36. The US dollar index maintained its upward momentum on Monday, achieving a cumulative rebound of four days. The dollar is benefited by a strong S&P Services Purchasing Managers Index and the cautious attitude of Atlanta Federal Reserve Bank President Rafael Bostic. U.S. President Donald Trump once again issued a rippling of tariff threats to investors. Investors seized on the hint that Trump might consider tariff exemptions on his own trade policy "strategy" to enhance market sentiment and keep the dollar within a certain range. Technically, the relative strength index (RSI) continues to gradually rise, while the moving average convergence/divergence (MACD) histogram narrows, indicating that bearish momentum is weaker. Key resistance is at 104.20, other resistances are at 104.80 and 105.20, while support is at 103.40, followed by 102.90. The bearish crossover of the 20-day and 100-day simple moving average (SMA) around 105.00 adds technical caution and may be interpreted as a sell signal. However, the DXY index appears to be expected to recover further from its March lows, supported by strong improvements in the service sector.

Euro: As of press time, the euro/dollar hovered around 1.0757, the euro/dollar fluctuated, and the test fell below the 1.0800 mark. Market sentiment continued to be affected by mixed economic data and ongoing tariff concerns. Investors have found some relief after U.S. President Donald Trump hinted that there might be a tariff exemption scheduled to be implemented on April 2, but the Purchasing Managers Index (PMIhttps://avatradescn.com) findings still warn that more problems may arise. The economic data schedule remains at a moderate level in mid-week market trading, but traders will closely monitor the upcoming inflation data of the U.S. personal consumption expenditure price index on Friday. Technically, the euro/dollar fell for four consecutive trading days, falling from its latest high of 1.0950. The pair is testing the 1.0800 mark, but is still above 1.0675 near the 200-day exponential moving average (EMA). The EUR/USD is still 5.8% higher than January’s last major low of 1.0200, however, the bull market may be about to end as technology oscillators accelerate downward.

GBP: As of press time, GBP/USD hovered around 1.2917. GBP/USD performed poorly on Monday, hovering around the 1.2900 mark when the new week started, and new hesitation appeared. Economic data from the UK and the US were mixed on Monday, with avatradescn.companies surveyed swaying expectations for their PMI. Tuesday's economic calendar data is less, but pound traders will be watching the upcoming UK Consumer Price Index (CPI) inflation data for February, which will be released on Wednesday. The annual rate of CPI inflation in the UK is expected to drop slightly to 2.9%, below 3.0%. Technically, the GBP/USD braked on the technical decline of its recent highs, ending its two consecutive days of decline. However, the pair is still on the wrong side of the 1.3000 mark, and the price movement creates new technical resistance at this critical mark. GBP/USD is still above the 200-day index moving average (EMA) 1.2700, but bullish momentum seems to fade further and buying is gradually weak. The technology vibrator has been in overbought zone since January, and it may be time to make a longer callback.

Summary of news in the foreign exchange market

1. Japanese rice prices have risen for 11 consecutive weeks, and it is difficult for the government to release reserves to suppress the rise

JapanThe Ministry of Agriculture, Forestry and Fisheries announced on March 24th local time that in the week from the 10th to the 16th of this month, the average selling price of a bag of 5 kilograms of ordinary rice in Japanese supermarkets was 4,172 yen (about 200 yuan), which rose for 11 consecutive weeks on the week, setting a new record high. Since the summer of 2024, due to factors such as extreme high temperatures, the price of rice has continued to rise. In August last year, the meteorological department issued a warning that the possibility of a major earthquake in the South China Sea trough in the eastern Pacific Ocean increased, causing people to hoard rice, and a "rice waste" occurred at one point. With the launch of new rice, Japan's "rice shortage" has eased, but the rice prices are still high. The Japanese government has taken measures to release reserve rice to the market. According to Japanese media, it is impossible to predict at this stage how much the listing of government reserve rice will have to suppress the rice price. If the effect is not obvious, the government will consider increasing the amount of investment.

2. ECB Management avatradescn.committee Escriva: The downside risks faced by economic expectations are greater than the upside

ECB Management avatradescn.committee Escriva said that the downside risks faced by economic expectations in the euro zone are greater than the upside. “The more destructive scenarios have not become a reality,” the Spanish central bank governor said. “It doesn’t mean there are no surprises. We need to be more prepared than ever to modify our forecasts, so be cautious.” Escriva said: “There are some upside risks, such as fiscal policy, as long as it can last, but downside risks are more obvious than upside risks.” Escriva said the current environment is “very uncertain” and the U.S. government is the main reason for this.

3. Trump once again stated: He hopes the Federal Reserve will lower interest rates

On the 24th local time, US President Trump said that he hopes the Federal Reserve will lower interest rates. On the 19th of this month, the Federal Reserve ended a two-day monetary policy meeting and announced that it would maintain the target range of the federal funds rate between 4.25% and 4.50%. This decision aroused dissatisfaction with US President Trump. Trump posted on social media that day that the Fed would better cut interest rates because the impact of US tariffs began to gradually penetrate into the economy.

4. Models show that the U.S. debt ceiling may be broken as early as mid-July

The bipartisan policy center said that the model released on Monday showed that if Congress does not take action, the U.S. may break the debt ceiling sometime from mid-July to October. The agency also mentioned that while the possibility is small, the so-called "X-day" could rise in early June if tax revenues are lower than expected this year. The U.S. Treasury Department has not yet predicted what day it will happen by Day X, that is, the federal government has no right to perform payment functions. Wall Street estimates that "X Day" will arrive at the earliest at the end of May (BNP Paribas predicts), and may occur at the latest at the end of August or the third quarter (forecast by Bank of America, Barclays, TD Securities and other institutions).

Institutional View

1. Morgan Stanley: The Federal Reserve is expected to restore positive cash flow

Morgan Stanley analysts said in a note Monday that the Fed appears to be about to end historic consecutive losses and may return to the track of returning cash to the Treasury. This involves the relationship between how the Fed makes money to fund its operations and the cash the Fed pays to maintain control of short-term interest rates. The aggressive rate hike that began three years ago caused severe losses to the Federal Reserve's accounts, and now with the decline in short-term interest rates, Morgan Stanley believes the Federal Reserve is approaching the critical point of returning to profits. Morgan Stanley believes that the Fed's profit and loss balance rate is about 4.8%, "a shrinking balance sheet coupled with lower policy rates has lifted the Fed out of losses. Analysts say the Fed continues to reduce its bond holdings and the prospect of further rate cuts "meaning the Fed will start to make profits again." The Fed's financial position for 2024 last Friday, and the report shows that the Fed's total avatradescn.comprehensive net loss in 2024 was 77.5 billion after a record deficit in 2023 USD, avatradescn.compared to USD 114.6 billion in 2023. The last time the Fed achieved profitability was in 2022.

2. Analysts: The euro may fall further in the short term

Range Bank analyst Jane Foley said in a report that the euro may fall further in the short term because Germany's fiscal stimulus plans may take time to drive economic growth. She said that after a shift in Germany's fiscal policy , Germany's economic growth expectations are expected to be revised upward from 2026, but the German economy may still be "deeply stagnant" in 2025. The euro is also facing the impact of President Trump's implementation of a reciprocal tariff plan on April 2, as well as the impact of rising German borrowing costs and has affected other European bond markets. The euro is expected to fall further in the next one to three months, and then rebound to 1.12 within a year.

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