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Hello everyone, today Avatrade Aihua Foreign Exchange will bring you "【Avatradescn】: 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. International economic data and policy trends
Soft US economic data dragged down the US dollar
The U.S. ADP employment in May was only increased by 37,000, a two-year low, far lower than the expected 114,000. Employment in manufacturing and trade transportation industries has decreased, and growth in services has slowed, showing signs of cooling in the labor market. After the data was released, the US dollar index fell in the short term, and market expectations for the Fed's interest rate cuts heated up. In addition, the US ISM service industry PMI fell to 49.6, shrinking for the first time in a year, exacerbating concerns about economic slowdown. These two data pose negative negative for the US dollar and may push non-U.S. currencies such as the euro and the yen to strengthen.
Expectations of interest rate cuts in the European Central Bank have heated up
The market generally expects that the European Central Bank will announce a 25 basis point cut to 2.00% on June 5 to cope with the weak euro zone economy and inflationary pressure. The eurozone's CPI grew by 1.9% year-on-year in May, 2.2% lower than the previous value, and core inflation continued to fall, providing room for interest rate cuts. European Central Bank President Lagarde recently hinted that although there is limited room for interest rate cuts, easing policies need to support economic recovery. If interest rate cuts are implemented, the euro may be under further pressure, but we need to pay attention to the central bank's guidance on future policies.
The Bank of Canada kept interest rates unchanged
The Bank of Canada announced on June 4 that it would keep the benchmark interest rate unchanged by 2.75% due to high uncertainty in U.S. trade policy and weak domestic economic data. The Bank of Canada pointed out that the U.S. raising tariffs on steel and aluminum puts pressure on exports and www.avaforexcn.commercial investment, and the economic outlook poses downward risks. Despite rising international crude oil prices (Brent crude oil closed up 1.55% on June 4), the Canadian dollar is still subject to policy dovish positionsSuppression, the US dollar/Canada may maintain high fluctuations.
2. Geopolitics and trade relations
Seasing trade frictions between China and the United States boosted the market
On June 4, China and the United States announced that they had reached a phased trade agreement, lowered some tariffs on each other, and suspended the escalation of the trade war. The agreement involves cooperation in agriculture, energy and other fields, eases market concerns about global trade tensions. The RMB exchange rate against the US dollar rose, and the offshore RMB once broke through the 7.1 mark. In addition, China's May trade data showed that exports grew more than expected year-on-year, further supporting the short-term strengthening of the RMB.
The situation in the Middle East continues to tense
Israeli military operations in the Gaza Strip have escalated, causing regional risk aversion to heat up. The United Nations warns that the humanitarian crisis has intensified and the international www.avaforexcn.community calls for a ceasefire. Geographical risks pushed up the price of gold (spot gold closed up 0.61% on June 4), which was beneficial to safe-haven currencies such as the yen. At the same time, Iran's confrontation with Israel escalates, and Houthi forces continue to attack Israeli targets, which may further disturb market sentiment.
3. Central Bank policies and market expectations
Bank of England Governor Bailey said on June 4 that there is uncertainty in the path to cut interest rates and inflation and economic data need to be observed. Although the OECD lowered its UK economic growth forecast to 1.3%, the market has disagreements on the timing of the rate cut. The pound rose to 1.35 against the dollar, supported by weaker expectations of interest rate cuts and improved trade data. If the Bank of England sends hawkish signals, the pound may strengthen further. Bank of Japan maintains a loose stance
Bank of Japan Governor Kazuo Ueda said on June 4 that the Japanese economy can withstand the impact of US tariffs, and wage growth supports inflation to rebound. Japan's base currency rose 31.6% year-on-year in May, a record high, indicating that the central bank is still expanding its easing. The yen-USD exchange rate is affected by the dual influence of interest rate spreads and safe-haven demand, and may remain weak in the short term, but attention should be paid to the impact of geopolitical risks on the flow of safe-haven funds.
4. www.avaforexcn.commodity and exchange rate linkage
Crude oil price fluctuations affect www.avaforexcn.commodity currencies
OPEC+ extends the production cut agreement until 2025, but Saudi Arabia proposes further increase production, resulting in a fluctuation in oil prices. On June 4, Brent crude oil closed up 1.55% to $65.63 per barrel, and WTI crude oil closed up 1.42% to $63.41 per barrel, which was good for the Canadian dollar and the Australian dollar. However, U.S. crude oil inventories increased beyond expectations, limiting the upward space for oil prices. www.avaforexcn.commodity currencies need to pay attention to supply and demand game and geopolitical risks.
Iron ore prices rebounded to support the Australian dollar
The main iron ore futures contract rose 1.37% on June 4, boosted by the increase in steel mill procurement and the recovery of coking coal market. Australia exports as iron ore����� Group��In a big country, the Australian dollar rebounded to 0.6993 in a short term, but then gave up the gains due to interest rate cuts. The RBA cut interest rates by 25 basis points to 1.25%, and suggested further easing in the future, suppressing the Australian dollar for a long time.
5. Market sentiment and technical analysis
The US dollar index fell below the 99 mark
Driven by weak US economic data and expectations of interest rate cuts, the US dollar index closed down 0.42% to 98.813 on June 4, hitting a six-week low. Technical aspects show that the short-term downward trend of the US dollar has been established. If it falls below the 98.50 support level, it may further fall to 98.00. Non-US currencies such as the euro, pound, and yen have opportunities to rebound.
Gold safe-haven demand heats up
Geopolitical risks and weakening of the US dollar drove spot gold to close 0.61% to $3373.72 per ounce on June 4, hitting a new high in the past month. If the situation in the Middle East continues to deteriorate or the Fed sends dovish signals, gold may continue to rise.
6. Trading strategies and risk warnings
Euro/USD: Pay attention to the European Central Bank's interest rate cut resolution. If the interest rate is cut by 25 basis points and Lagarde releases dovish signals, the euro may fall below the 1.0750 support level. Conversely, if the policy wording is neutral, the euro may rebound to 1.0850.
U.S./JPY: Geographical risks support the Japanese yen’s safe-haven demand. If the US./JPY falls below the 135.50 resistance level, it may fall below 134.00.
GBP/USD: Pay attention to UK economic data and central bank policies. If the resistance level exceeds the 1.3550 level, it may open upward space to 1.3650.
Australia/USD: The rebound in iron ore prices provides short-term support, but the RBA's easing policy suppresses long-term trends and is recommended to short when highs are highs.
U.S. dollar/Canadian: crude oil price fluctuations and the Bank of Canada policy dominate trend. If crude oil stabilizes at $63 per barrel, the Canadian dollar may rebound to 1.3350.
Risk warning: The Federal Reserve's June interest rate meeting is approaching, and market volatility may intensify; geopolitical risks such as Middle East conflicts and Sino-US trade frictions need to be closely watched; exchange rate fluctuations are affected by multiple factors, and investors need to make www.avaforexcn.comprehensive judgments based on technical and fundamentals to reasonably control positions and stop losses.
The above content is all about "【Ava Aihua Foreign Exchange】: Collection of positive and negative news that affects the foreign exchange market". It was carefully www.avaforexcn.compiled and edited by the Avatrade Foreign Exchange editor. I hope it will be helpful to your trading! Thanks for the support!
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