Signal of a US dollar crash? 104 The defensive line may accelerate the decline

Asian Market Review

Last Friday, amid concerns about the US falling into a recession, the market focused more on spending data than inflation data. The US dollar index did not rise but fell under the favorable PCE data. As of now, the US dollar priced at 103.91.

In order to obtain Greenland, the possibility of using military means will never be ruled out.

I was "very angry" and "irritated" by Putin's recent remarks about Zelensky's credibility. Putin knew I was angry, but had a good relationship with him and planned to avatradescn.communicate again this week.

If it is Russia's fault that failure to reach an agreement with Russia, it will impose secondary tariffs on Russian oil, which will range from 25% to 50%.

If Iran does not reach an agreement with the United States on its nuclear issue, the United States will bomb Iran and "impose secondary tariffs" on its related products.

It is no joke to start the third presidential term. Vance is one of the ways to give way to the office.

Iranian government spokesperson: Indirect negotiations between Iran and the United States have been put on the agenda, and the diplomatic process is still continuing.

The Sudanese armed forces said they had full control of the capital Khartoum.

War the United States, Iranian media: Iranian missiles are ready to be launched at any time.

Foreign media: Trump will visit Saudi Arabia for the first time in May.

The US military deployed B2 bombers on the Indian Ocean islands, and also arrived at multiple strategic transport aircraft and tankers.

Foreign media: TrumpWill visit Saudi Arabia in May.

The US military deployed B2 bombers on the Indian Ocean islands, and also arrived at multiple strategic transport aircraft and tankers.

India is considering reducing agricultural product tariffs at U.S. request.

Media: Trump puts pressure on advisers to escalate the intensity of tariff measures.

The British Home Secretary: The possibility of counter-action against US tariffs is not ruled out.

The annual and monthly rates of the core PCE price index in February exceeded market expectations. Traders continued to bet that the Federal Reserve cut interest rates twice this year, and the first rate cut will be in July.

Federal Daly: There are two reasonable expectations for interest rate cuts in 2025. In monetary policy, we need to maintain a wait-and-see attitude and give all industries time to adapt to tariffs.

Goldman Sachs raises expectations for the U.S. recession probability and tariff rate expectations.

Nikkei News: Japan extends the period for excluding Russia from its most-favored-nation treatment.

Summary of institutional views

Global foreign exchange analyst BobMason: The United States and Japan rose for three consecutive weeks, and the trend this week depends on...

Last week's market review: The United States and Japan experienced violent fluctuations last week, first fell to the low of 149.326 and then soared to the high of 151.208. Changes in US tariff policies shocked the market, and inflation data strengthened the Fed's hawkish stance and expectations, pushing up demand for the US dollar. However, Tokyo's inflation data triggered the Bank of Japan's May interest rate hike, causing the exchange rate to fall on Friday, and finally rose 0.35% throughout the week to close at 149.820.

Analysis of key data in Japan this week: As global economic uncertainty intensifies, trends in Japan's domestic consumption and labor market will provide clues to the inflation outlook. Retail sales data released on Monday are expected to rise slightly by 0.1% (previously 0.5%), which will strengthen the Bank of Japan's rate hike expectations, otherwise it may alleviate policy pressure. Japan's unemployment rate and seeking rate are expected to remain unchanged at 2.5% and 1.26 on Tuesday. The decline in unemployment rate and the increase in job supply may drive wages to rise, supporting consumption and inflation, and otherwise delaying policy tightening. The short-term survey released on the same day may reflect corporate sentiment under the shadow of tariffs, and the performance of non-manufacturing industries is particularly critical.

Analysis of key data in the United States this week: The US job market (JOLTS job vacancy, ADP job data) and service industry PMI released next week will affect the pace of the Federal Reserve's interest rate cut. If the service industry PMI exceeds expectations (expected 53.0→53.5), the rate cut may delay the process of pushing up the US dollar. Otherwise, it may strengthen the expectation of easing.

Technical analysis of the US and Japan: The daily chart shows that although the exchange rate has risen for three consecutive weeks, it is still below the 50-day (149.95) and 200-day (150.48) index moving average (EMA). If the 5avatradescn.com0-day exponential moving average will be moved to the 200-day index.The moving average provides support. If the 200-day index moving average is broken, the bulls' next target may look to the price of 153. On the contrary, if the dollar-yen exchange rate falls below the support level of 149.358, it may indicate that the exchange rate will fall to the March 11 low of 146.537. If the US dollar falls below 146.537 against the yen, then 145 will be the next key support level. The 14th-day Relative Strength Index (RSI) is 49.23, indicating that the US dollar-JPY exchange rate may fall to 145 before entering the oversold zone (the relative Strength Index is below 30).

Trading risk warning: The escalation of Trump's tariff policy may offset the impact of economic data, the expansion of the trade war may push up the safe-haven dollar, and otherwise it may strengthen the Bank of Japan's expectations of interest rate hikes. The short-term trend will depend on: Japan's consumption and employment data, the US PMI and non-agricultural report, central bank policy statements and progress in tariff negotiations.

Dutch International Bank: Will tariffs cut interest rates in April?

For Europe, which is more important, tariffs or defense expenditures? Sentiment in the market has slightly worsened in the past few weeks after the German budget decision sparked optimism about European economic growth. The basic point is that Trump’s trade war is much more important than future increase in public spending for the 2025 growth outlook, even if those increase will eventually change the rules of the game in Europe by the end of the century.

How is inflation in the euro zone? Europe’s retaliation against Trump’s tariffs will naturally exacerbate inflation, although the EU may seek more targeted measures to minimize the impact on domestic prices. There is also a long-term dumping problem. The decline in European avatradescn.companies' access to the United States may drive more products into local markets, while other export partners will also seek to change the direction of trade. All of this, once it happens, will lead to deflation.

Where will all this put the ECB? The market is increasingly interested in the idea that the ECB will cut interest rates again in April and expects further rate cuts later this year. This is not our basic expectation, but it cannot be ruled out that action is taken in April, all depends on the actual content announced by the United States on April 2.

French-Pakistan Bank: It is difficult to borrow the east wind in Europe, why does the pound "follow the rise but not lead the rise"?

The pound has risen sharply so far this year, the trend is opposite to our bearish forecast. However, we expect the pound to slow down, so while we raised our previous expectations, the pound is expected to stabilize near current levels and reach 1.30 by the end of the year instead of further gains. We believe that weak fundamentals limit the pound’s rebound from now on, which means there is room for lag relative to the euro, that is, the upside space of the pound will continue, and the euro is expected to rise to 0.88 by the end of the year.

Fundamentally, we believe that weak growth and fiscal vulnerability in the UK have exposed the pound to the global economy. From this perspective, the pound may benefit from Europe'sActive development (European fiscal shift, optimism about the settlement of the Russian-Ukrainian conflict) and Trump’s not imposing extensive tariffs for the time being. But we do not think the above situation will keep the pound rising from its current level. As far as European fiscal policy is concerned, while accelerated economic growth in neighboring regions is a positive, we believe that UK economic growth is limited by rising bond yields, which in turn may further put financial pressure on the side.

As for tariffs, our basic forecast is that Trump expands the scope of tariffs. In this case, global trade uncertainty has an additional negative impact on UK economic growth. We believe that this weak growth backdrop could lead to a series of rate cuts that the Bank of England have longer than market expectations. The Bank of England is expected to cut interest rates three more times this year, each time at 25 basis points, and the final interest rate will be lowered to 3.5%, leaving room for the narrowing of the UK interest rate spread.

Fabric Bank: The yen has been in a sideways dilemma after the positive yen has been released. The next round of rebound depends on...

At the beginning of this year, some reasons why we expect the yen to perform well (the Bank of Japan's policies converge with other central banks and the sensitivity to weaker global growth expectations) have begun to be realized. Since the yen is one of the best performing G10 currencies so far this year, we believe these positive factors have been gradually denominated, and we expect the U.S. and Japan to maintain range volatility from now on. As for the next round of rebound in the yen, we believe that the Fed must cut interest rates to achieve it, but we expect the next rate cut to 2026, when the yen rebound will resume. It is expected that the United States and Japan will reach 152 by the end of 2025 and 144 by the end of 2026.

We expect two factors that may push the yen to further strengthen ahead of schedule. First, the Federal Reserve cut interest rates early, and second, changes in Japanese investors' behavior. So far, we have not observed changes in Japan's domestic investment behavior during the Bank of Japan's tightening cycle - they have been buying foreign assets. However, if this changes, it could lead to a sharp rise in the yen. Finally, we still expect the Bank of Japan's policy interest rate to reach 1% by the end of 2025 and 1.5% by the end of 2026. Inflation data, especially wage data, may allow the Bank of Japan to continue hike interest rates.

Goldman Sachs looks forward to how the ECB responds to the tariff shock: maintaining the X-month rate cut expectations

Last week, ECB President Lagarde quoted the ECB's forecast that if the EU takes retaliatory tariff measures, 25% of the U.S. tariffs will cause the eurozone's real GDP to fall by 0.5% in the first year and inflation to rise by 0.5%. How should the ECB respond in this situation? We believe that unless the U.S. tariffs lead to a second round of inflation effect, the ECB should cut interest rates in response to U.S. tariffs. Recent long-term inflation expectations and wage dynamics are almost free from worrying about the potential for a strong second round of effects on tariffs.

The avatradescn.comprehensive measures of inflation expectations have weakened in recent months and appear to be performing well near the target level. Salary indicators also cooled significantly, and nominal salary growth is expected to slow to 3% next yearthe following. These dynamics are in sharp contrast to 2022, when inflation expectations and wage growth were rising rapidly, and the energy shock triggered a huge second round of effects, forcing the ECB to quickly raise interest rates amid weak economic growth.

All in all, it may be appropriate for the ECB to cut interest rates in response to tariffs, strengthening the ECB’s reasons for the ECB’s April rate cut. Therefore, we maintain our forecast for a rate cut in April, followed by the last rate cut to 2% in June.

The above content is all about "[Aihua Foreign Exchange Decision Analysis]: Signal of US dollar collapse? The 104 defense line falls or accelerates the decline". It was carefully avatradescn.compiled and edited by Aihua Avatrade Foreign Exchange Editor. I hope it will be helpful to your trading! Thanks for the support!

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