US dollar index struggles, pay attention to Sino-US trade negotiations

On the Asian session on Tuesday, the US dollar index hovered below the 99 mark. Since the Fed is expected to have no major policy changes and global growth risks are linked to trade tensions, the US dollar trend is expected to maintain range fluctuations to the bearish tone before inflation data is confirmed and trade issues are resolved.

Analysis of major currencies

U.S. dollar: As of press time, the US dollar index hovered around 98.96. The US dollar index fell slightly on Monday, falling from its rebound high last Friday, but it is still above the key technical support levels of 98.351 and 97.921. This moderate decline reflects a temporary rest of the dollar momentum, and the market has turned cautious before the Sino-US trade negotiations open in London. As the Fed is not expected to have a major policy change and global growth risks are linked to trade tensions, the US dollar trend is expected to maintain range volatility to the bearish tone before inflation data is confirmed and trade issues are resolved. From a technical perspective, the US dollar index faces resistance at key points of 99.949 and 100.300, and the 50-day moving average forms a resistance range at 100.300. If there is no trade negotiation breakthrough or CPI/PPI data unexpected, the upward space seems to be limited in the short term.

Euro: As of press time, the euro/dollar hovered around 1.1425, and the euro/dollar rose on Monday, driven by optimistic market sentiment driven by high-level Sino-US tariff negotiations held in the UK. This www.avaforexcn.combined with the rate cuts that the European Central Bank (ECB) is seen as a "hawkish" have brought the pair to a break of 1.1400. In the Euro Zone (EU), the economic schedule is rarebut ECB officials, including Bundesbank President Joachim Nager, ECB's Isabel Schnabel and Kazimir, said they should remain flexible in response to interest rates. Nager said the ECB should remain flexible in response to interest rates, and Schnabel pointed out that the ECB should not expect continued decoupling from the Fed. Kazimir turned hawkish, saying the central bank was almost or near the end of the easing cycle. Technically, the upward trend of the EUR/USD remains unchanged, and the pair has achieved continuous highs and lows. At the same time, the Relative Strength Index (RSI) shows a bullish trend. However, the pair must close above 1.14 to allow bulls to challenge higher prices. If this result is achieved, the next resistance level of the pair will be 1.1450, followed by 1.15. Next is the 1.16 mark. Conversely, if the EUR/USD falls below 1.14, the next support is at the two-day low of 1.1344 in June. Breakthroughs of the latter will expose the 20-day simple moving average (SMA) at 1.1318, followed by 1.13 and 50-day SMA at 1.1268.

GBP: As of press time, GBP/USD hovered around 1.3552. On Monday, the GBP/USD was under pressure against the US dollar during the North American period, trading around 1.353. The market is digesting a series of upcoming UK local data and global macro risk events, and overall volatility may be amplified. The current market is focusing on the upcoming UK employment and GDP data this week. The UK's unemployment rate forecast rose to 4.6% in April, a high since July 2021, which may intensify market concerns about a slowdown in the UK economy. At the same time, the average annual salary growth rate is expected to remain at 5.5%, and salary stickiness may strengthen inflationary pressure. Technically, the current pound pound versus the US dollar maintains an upward trend on the 240-minute K-line chart. The Bollinger band structure converges, the Bollinger middle rail is at 1.3545, and the Bollinger upper rail and lower rail are 1.3592 and 1.3498 respectively, indicating that the exchange rate is in the short-term oscillation convergence range. The recent high of 1.3616 constitutes short-term resistance, while the lower 1.3500 is the key support range. If it falls below 1.3500, it will open up space for further retracement to the 1.3440 area. The MACD indicator shows that the short-term kinetic energy is slightly dominant, DIFF and DEA are bonded near the zero axis, and the bar chart turns green again, indicating that the short-term kinetic energy has weakened but no obvious divergence has been formed, and there is no clear reversal signal.

Summary of news in foreign exchange market

1. Focus of Sino-US trade negotiations: Can the situation be reversed?

The market attention is currently focused on high-level trade negotiations held by Chinese and American officials in London. U.S. Treasury Secretary Becente, www.avaforexcn.commerce Secretary Lutnik and TradeRepresentative Jamison Greer will lead the US delegation. The discussion follows the previous rounds of negotiations in Switzerland, and is at a sensitive moment in the economies of both countries. Analysts point out that unless a structural breakthrough is reached, any agreement will be difficult to change market sentiment. "Unless a specific breakthrough is seen, the impact on sentiment may remain limited," said SaxoMarkets analyst Charu Chanana. Nevertheless, negotiations could affect short-term capital flows in Treasury and Forex markets as traders reassess the geopolitical risk premium.

2. Inflation data approaches Treasury yields decline

U.S. Treasury yields fell slightly on Monday, with the 10-year Treasury yields falling to 4.504% and the 2-year Treasury yields falling to 4.02%. This trend reflects investors' caution, and the market is preparing for Wednesday's CPI report and Friday's PPI data. The two figures are expected to provide key insights into the inflationary impact of Trump's recent 10% universal tariff on non-USMCA imports. Expectations of interest rate cuts have eased, and the futures market shows that it is only expected to cut interest rates by 25 basis points by October, reflecting the Fed's wait-and-see attitude during the silence period before the meeting.

3. The California government sued Trump for transferring troops into Los Angeles

The California government filed a lawsuit with the court on the 9th, requesting the court to rule that the presidential memorandum issued by US President Trump on the 7th and the US Department of Defense's order to dispatch the California National Guard into the Los Angeles area based on this illegal, and requesting the court to revoke the relevant orders. According to a statement issued by the California Attorney General's Office, the case was prosecuted by Trump and Defense Secretary Hegsey, accusing them of overran the federal government's authority without the governor's request for federal government orders and violated the Tenth Amendment to the U.S. Constitution.

4. New Zealand Treasury Secretary urges the Fed to increase the frequency of interest rate meetings

New Zealand Treasury Secretary Willis hopes the Fed will increase the frequency of interest rate decision-making meetings, end the three-month summer recess, and be consistent with other major central banks around the world. "I am particularly concerned about the 12-week recess in the summer, with the time between the two meetings being too long. I think the Fed should resume eight meetings a year," Willis said in a statement. The Fed had previously stated that the Monetary Policy www.avaforexcn.committee had the ability to hold unplanned meetings if necessary. The www.avaforexcn.committee meets seven times a year, less than in the UK, Canada, Australia and the United States. Since 2https://www.avaforexcn.com016, the New Zealand Fed has had an unusually long interval between November and February of the following year, and has actually skipped a interest rate decision.

5. Trump: Talks with Iran will be held on Thursday

U.S. President Trump:The US will hold talks with Iran on Thursday; Iran pursues nuclear enrichment, and we cannot allow this. They are making some unrealized demands; alternatives are very, very serious.

Institutional View

1. FASHION: The US dollar may remain stable for the time being

Foreign exchange analysts at Societe Generale said that the US dollar may be stable against other major currencies at present. Better-than-expected U.S. jobs data released last Friday boosted the dollar. The dollar is still likely to fall if investors cut their exposure to U.S. assets due to uncertainty in U.S. trade and budget policies. However, before the dollar weakens again, there may be clearer signs that tariffs are hurting U.S. economic growth. Ultimately, uncertainty in U.S. policy “will erode people’s confidence in the U.S. dollar, which will fall further.”

2. Institutions: The euro rose as market expects the European Central Bank to end interest rate cuts

Dutch International Group said that the prospect of eurozone interest rates being lowered only once should support the euro. The ECB said at a meeting last week that the rate cut is www.avaforexcn.coming to an end. European Central Bank President Lagarde painted a picture of the eurozone economy growing despite global uncertainty. According to LSEG data, the European Central Bank will only cut interest rates by another 25 basis points, and will not cut interest rates until December.

    

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