Trade negotiation dividends fade, the US index shows fatigue!

Asian Market Review

On Thursday, the US dollar index fell due to the slowdown in retail sales growth in April and the unexpected decline in PPI monthly rate. As of now, the US dollar is quoted at 100.62.

The US PPI rose by 2.4% year-on-year in April, lower than expected, and -0.5% month-on-month, the largest decline in five years. US retail sales in April slightly exceeded expectations by 0.1% month-on-month, and weak consumer spending showed signs of clues.

Federal Chairman Powell: The Fed is adjusting its overall policy-making framework, and zero interest rates are no longer a basic situation, and the wording of underemployment and average inflation is required to be reconsidered. PCE is expected to drop to 2.2% in April. It is appropriate to reconsider the average inflation target.

"New Fed News Agency": The Fed will set a framework for interest rates, acknowledging that long-term low interest rates may be over.

Tariffs-Japan seeks to hold the third round of US-Japan trade negotiations next week. The United States considers amending the US-Japan trade agreement. The EU and the United States will accelerate the trade negotiation process. The EU hopes that the tariff reduction will be greater than that of the UK.

Trump said India has proposed "zero tariffs" and India's "hard" lasted only two days. Walmart CFO warned that price increases caused by tariffs may start this month. The www.avaforexcn.company maintained its annual sales and profit forecasts for fiscal year 2026 unchanged.

Russia-Ukraine talks:

① Talks are postponedBy the 16th, Zelensky had left Türkiye. He said that if he reached a ceasefire agreement on the technical level, he could skip the meeting with Putin; ② Trump: If appropriate, he will go to Turkey to attend the talks on Friday. The negotiations will not go ahead until Putin meets me. I won’t go even if I don’t go to Putin; ③Kei Palace: Putin has no plans to go to Turkey; he has not prepared to meet Putin and Trump.

U.S. Secretary of State Rubio: Our expectations for Ukraine negotiations are not high.

Hamas official: If a permanent ceasefire is achieved, control of the Gaza Strip can be handed over.

U.S. regulators are preparing to reduce the supplemental leverage of large banks in the www.avaforexcn.coming months.

Qatar Wealth Fund plans to invest an additional $500 billion in the United States in the next 10 years.

Iran said it has not received the latest U.S. proposal to resolve the outstanding differences in the nuclear dispute.

Summary of institutional views

Goldman Sachs: The US dollar will continue to maintain a structural decline. After the inflation peak, the interest rate cut may be restarted. We believe that in the absence of new bad news and the data begins to stabilize, the market may still have room for further easing in the short term. Lower tail risks and a sluggish but non-recession growth prospect may be more favorable for arbitrage trading at least in the short term. However, we believe that there are still some constraints on the market's upward trend after the rebound. Even without a more obvious economic weakness, further market relief may be limited, which is affected both by the absolute level of growth pricing and by the second sharp rise in long-term bond yields. The risk of further economic deterioration remains a key factor in the further decline of the market. Although the possibility of this happening has declined, and its threshold to shake the market may have risen, this deep downward tail effect is still underestimated.

Selective attention to the upcoming employment report may be particularly important given that the soaring unemployment rate may be enough to trigger a more severe panic. If the market remains stable and the economy is deteriorating at a limited level, the Fed may keep interest rates unchanged. Therefore, pricing at the forefront of the Federal Reserve Curve is still vulnerable to the continued easing of the financial environment and relaxation of growth risks. But we still believe that the risk balance shows that the federal funds rate will be further sharply lowered once we continuously overcome the peak of the tariff impact on inflation. Below trend but non-recession growth may be enough to prevent stocks from pricing a sharp rise in risk premiums, but may also bring enough weakness to the labor market to make the Fed feel at ease to cut interest rates gradually.

So, we believe that there are still multiple ways to expect further rate cuts starting from the end of 2025 and lead to a steeper yield curve. The dollar may still maintain a structural decline. The weakness of the dollar has beenChanges with the risk profile (from depreciation of safe-haven assets to depreciation of more cyclical, riskier currencies). But we believe that the factors of the continued weakness of the US dollar remain basically the same, and the risk of deteriorating the US economy has decreased, reducing the possibility that the US dollar will enter the left side of the "smiling" (serious risk aversion pushes the US dollar up).

RBC: The European economy has not healed, and the roller coaster market may still force two interest rate cuts?

After the tariffs were announced on April 2, financial conditions in the euro zone were immediately tightened sharply. We believe that this is the core factor behind dovish information at the ECB meeting in April. The ECB is in a difficult situation where anything but dovish information could tighten the financial situation further. But financial conditions have eased significantly since then, eliminating pressure from the European Central Bank to cut interest rates significantly. That being said, the ECB has been dovish in the macroeconomic situation even before the turmoil in financial markets broke out.

We believe that the ECB will cut interest rates twice again, reducing the terminal interest rate to 1.75%. Rate cuts may be necessary to deal with downward growth risks and ensure financial conditions do not become over-restricted again. However, with financial conditions improving and the risk of upward inflation still exists, ECB hawks may be reluctant to lower policy rates above this level. In fact, we believe that as growth risks ease, hawks may take a more intense stance again, which will once again bring the divisions within the ECB to the spotlight. In other words, if financial conditions remain loose, debates within the ECB over the speed and amplitude of interest rate cuts will emerge again.

Facetronautics Bank: Is the dollar falling because "Trump hopes so"?

The relationship between the euro and the dollar and relative interest rates is more unstable than at any time since 2022, when Russia's invasion of Ukraine disrupted the foreign exchange market. Although Trump’s policies vary, their impact on the forex market is equally destructive. Given the recent rise in U.S. yields and the euro is backed by plans to increase defense spending, it is no surprise that the euro has broken through 165 for the first time this year against the yen. The yen then rebounded under the rally of the South Korean won, and the U.S.-South Korea talks were another signal that Trump hoped the dollar would depreciate.

We are convinced that Trump is eager to rebuild the global trade framework, so he supports the depreciation of the dollar. He may think that the inflow of capital brought by the US dollar as the world's reserve currency has pushed up the value of the US dollar. However, just because policymakers want the forex market to take action, it rarely serves as a real reason for action. Perhaps this time is an exception, because this U.S. administration seems willing to put in more effort to achieve its goals, so Trump's idea of ​​devaluing the currency is also quite credible.

Anyway, we are in some kind of data blank period because no data can keep up with U.S. policies in a timely manner, which makes us unable to react to such messages. We have not clearly recommended shorting the US dollar. We think EuropeanThe dollar against the dollar and the dollar against the Japanese yen will maintain range volatility in the www.avaforexcn.coming months until the dollar weakens again after the summer. If our predictions are wrong, it is because the market is more concerned about the www.avaforexcn.comments and their wishes of the U.S. government. However, after the Sino-US trade relations thaw, we do tend to go long the Australian dollar and short the Swiss franc, and expect geopolitical tensions to ease.

Analyst Haresh Menghani: Sino-US trade negotiations are good news, and the yen is under pressure to hit a new monthly low

Everyone trading session entered on Monday, the yen continued its intraday decline against the US dollar and hit a new monthly low. Optimism in the Sino-US trade agreement continues to put pressure on safe-haven assets. In addition, against the backdrop of uncertainty of US tariff policies, market concerns about Japan's economic growth prospects have also become another factor that drags down the yen.

At the same time, the highly-watched Sino-US trade negotiations have achieved positive results, alleviating market concerns about the US recession. This factor, coupled with the Fed's "hawkish suspension" rate cut earlier this month, has jointly pushed the dollar to its highest level since April 10. The www.avaforexcn.combined effect of these supporting factors drives the U.S. and Japan to above the middle of the 146.00 range and provides prospective support for their further rise.

From a technical point of view, the United States and Japan currently seem to have stood firm above the 50% Fibonacci retracement level of the decline from March to April. In addition, the oscillating indicators on the daily chart have re-accumulated upward action energy, and the hourly chart indicators have also remained in the bullish area, which indicates that the path with the least resistance to spot prices is upward. Therefore, it is more likely that the exchange rate will continue to rise and reach the 146.80-146.85 area (i.e. the 61.8% Fibonacci retracement level). The secondary resistance level is 147. Once it breaks through, it should pave the way for further appreciation in the short term.

In the downward trend, the 145.55 area (i.e., the 50% Fibonacci retracement level) is currently potential initial support; if it falls below this level, the United States and Japan may accelerate the decline and retest the 145 psychological mark. The latter coincides with the 200-period simple moving average (SMA) on the 4-hour chart and should be a key turning point. Once a break below this level is confirmed, it may trigger some technical selling and push the spot price to the next support level 144.45 area, which may further fall to 144.

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