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Analysts note the Australian dollar at 0.6445 after a dovish RBA announcement
The Australian Dollar recently dropped after the Reserve Bank of Australia adopted a more cautious approach, sitting at 0.6445. This decline was somewhat cushioned by a weakening US Dollar, as various external factors played a part.
Currently, the Australian Dollar shows no strong direction. The nearest resistance levels are 0.6460 and 0.6550, while support is found at 0.6420 and 0.6340.
US dollar, Treasuries, and equity futures decline, signaling a tough selling environment
The US Dollar is having a tough trading day, dropping amid a widespread sell-off in the US market. US Treasury yields have risen sharply, with 10-year yields surpassing 4.5%. This increase is due to worries over a stalled tax-cut bill that could hurt US debt and deficits.
In Europe, stock performance is weak, and US stock futures are also falling. Increasing yields and geopolitical tensions, especially between Israel and Iran, are dampening investor enthusiasm. Crude oil prices have gone up by 1%, and gold is also gaining value. In the currency market, the Swedish Krona (SEK) and Norwegian Krone (NOK) are doing well against the South African Rand (ZAR) and Mexican Peso (MXN).
Currency Policies and Discussions
US and Asian officials are discussing foreign exchange policies, raising concerns about possible adjustments to the USD. As assessments of US trade tariffs continue, a coordinated change to the USD seems unlikely. The market is closely monitoring the DXY index for any potential losses, while the Treasury is conducting a USD16 billion bond auction during this period. The US Dollar is weaker not only against a few currencies but across many pairings, driven by renewed debt concerns and changing investor sentiment. Yields on US 10-year Treasuries have surged beyond 4.5%, due to hesitations about a significant tax-cut proposal. This delay raises concerns over the government’s long-term borrowing capacity. As yields increase, stock markets are weakening on both sides of the Atlantic. Investor sentiment in Europe is down, and US equity futures are also weak before the market opens. There hasn’t been a single event causing this decline, but rising worries about geopolitical issues are impacting risk assessments. Tensions between Israel and Iran are once again influencing assets that are usually considered safe havens. Oil prices are rising due to these developments and current supply factors, while gold is gaining attention as investors seek safer options. In the currency market, Nordic currencies are performing well against higher-risk currencies like the South African rand and Mexican peso. This suggests a broader adjustment in how investors view different currencies, favoring those backed by stable economies and lower volatility.Wider Policy Discussions
A broader discussion on policy is taking place, signifying a slight resurgence in currency diplomacy. US and Asian officials are revisiting conversations about exchange rate alignments. While no concrete agreements have emerged, these talks are closely monitored by dollar speculators. Guidance from officials remains vague, especially regarding current trade tariffs. Though there are no immediate hints of coordinated currency actions, the discussions may influence future trading behavior. The DXY index, which measures dollar strength, is nearing critical support levels. If these levels are broken, technical models may prompt reactions in the market. Momentum traders often respond to such technical breakdowns, and with differing yields across G10 economies, the potential for a sharp drop in the USD should not be ignored. Additionally, Treasury auctions provide insights into market dynamics. A recent USD16 billion auction occurred amid these conflicting signals. Participation ratios and primary dealer engagement provide indirect indicators of foreign demand. If bidding weakens or foreign allocations decrease, this could reinforce rising yields and put further pressure on the Dollar. Investors focused on interest rate-sensitive strategies are adjusting to market volatility, especially given the daily fluctuations in bond markets. For now, short-term sentiment is likely to see more significant swings. The interplay of technical factors, geopolitical events, and potential issues during auctions are more important than ever, suggesting a rethink of current investment positions. Create your live VT Markets account and start trading now.OCBC analysts note that USD/JPY has continued to decline, hitting 143.74
The USD/JPY exchange rate has dropped to 143.74. Analysts have noted a decrease in bullish momentum and a falling RSI (Relative Strength Index). They predict support levels at 142.30 and 141.80, with resistance between 144.40/50 and 146.
They are holding a short position in USD/JPY, which they entered at 148, targeting 141, with a stop loss set at 151. These insights come with risks and should not be seen as advice to buy or sell any assets.
Investment Risks and Disclaimers
Forward-looking statements might contain errors, and investments carry the risk of loss and emotional stress. The opinions shared reflect the author’s views and do not represent official policies. The author is not responsible for any external content linked on this page. At the time of writing, the author had no ties to the mentioned companies and did not receive compensation from them. Neither the author nor the source offers personalized advice or guarantees about the suitability or accuracy of the information. Currently, the dollar-yen pair is significantly lower than in previous weeks, approaching the support levels of 142.30 and 141.80. The rapid decline in bullish momentum, shown by a falling RSI, indicates waning upward strength. As the price hovers around 143, there’s a broad pressure, especially as yields decline and risk sentiment shifts slowly. Resistance levels around 144.40–146.00 have held firm, limiting any recovery efforts. As long as prices remain below this range, any rallies are likely to be met with selling pressure rather than fresh demand. If the price settles firmly under 142.30, attention may shift to the psychological level of 141, aligning with ongoing medium-term goals. The position we established at 148 continues to target 141 unchanged. Despite notable market retracement since entry, the stop loss remains at 151, allowing for short-term fluctuations without undermining the overall strategy. Downward pressure could persist, as speculative trends and fundamental indicators appear to align for now.Market Volatility and Strategy
This situation requires vigilance. While the momentum seems to support a downward trend, sudden reversals due to policy changes or macroeconomic data are always a risk. The Bank of Japan’s yield curve decisions and U.S. economic reports can add to volatility, especially during policy meetings or inflation announcements. Low RSI readings hint at mild oversold conditions. This doesn’t guarantee a reversal but does indicate the possibility of consolidation or erratic bounce attempts, especially when liquidity is low, like during the Asia-Pacific crossover. As we move through the next sessions, it’s crucial to monitor levels around 142.30. A clear break could confirm our goal near 141 and might open new downward opportunities, potentially reaching year-to-date lows. If a bounce occurs, we can expect initial resistance near 144.50 unless significant fundamental changes arise. From our perspective, it’s a time for careful observation without overreacting. Tightening the stop too soon may lead to losses from brief corrections. However, allowing the price to reach our profit target aligns with the broader trend seen during the early breakdown past 145. Traders should practice patience as the price may grind rather than fall sharply. Position sizing remains essential. We see signs of range compression easing, which could indicate that future directional moves may not be as clear-cut as before. While the structure still supports a downward trend, preparing for responsive price action is crucial. This market reflects a mix of technical exhaustion and macro adjustments, which are closely linked but evident in how prices interact with longer-term ranges and fading momentum at resistance. Create your live VT Markets account and start trading now.Stronger CPI data leads to narrower interest rate spreads, benefiting CAD against USD, says Scotiabank
April’s surprising rise in CPI data has changed expectations for a rate cut by the Bank of Canada in June. This shift affects the interest rate gap between the US and Canada. As a result, the Canadian dollar has strengthened against a weaker US dollar, with the spot rate estimated to be fairly valued at 1.3868.
The tighter interest rate spreads may spark interest in selling USD near the 1.40 mark. Finance Minister Champagne and BoC Governor Macklem will speak at the conclusion of the G7 meeting. The spot rate has faced strong resistance above 1.40 in May, and if it drops below 1.3895/00, it could further decline toward the 1.3750/1.38 range.
Bearish Momentum and Resistance Levels
Bearish signals suggest a possible decline for the USD. Initial resistance is at 1.3910/15, with stronger resistance at 1.4025, which aligns with the 200-day moving average and recent highs. Please remember that this information is not a trading recommendation and should be verified independently. April’s increase in consumer price index data was surprising, affecting the likelihood of a June rate cut by the Bank of Canada. This change has narrowed the interest rate gap between Canada and the US, helping the Canadian dollar strengthen, especially as the US dollar has weakened. The estimated fair value for USD/CAD is around 1.3868, which serves as a benchmark for evaluating whether the spot rate is trading at a premium or discount. This helps us understand overall market sentiment. In the short term, traders should be aware of potential increased selling of USD as the rate approaches 1.40. This level has acted as resistance several times in May. For the USD to break through, a strong reason would be needed; otherwise, it may face selling pressure as it nears 1.40.Support Levels and Policy Speeches
Support appears stronger around the 1.3895/1.3900 area. If this support fails, we could see a move into the 1.3750–1.3800 range, especially with current bearish momentum indicators suggesting a weakening USD. We should pay close attention to speeches from key policymakers, like Champagne and Macklem. While they may aim to reassure the market, their comments can sometimes shift market psychology and inform future expectations, particularly at the end of the G7 meeting. Keep a lookout for resistance at 1.3910/15, with more significant resistance at 1.4025. This level is crucial because it also coincides with the 200-day moving average and previous highs. Failure to convincingly break through 1.4025 would reinforce the current trading range. We are monitoring how consistently the Canadian dollar finds buyers near the lower end of this range. A sustained drop below 1.3895, followed by continued selling, might indicate that USD positioning was too optimistic. Create your live VT Markets account and start trading now.OCBC analysts predict further decline for the DXY, currently at 99.59
The US Dollar (USD) has fallen against most currencies, with the DXY at 99.59. Initially, safe-haven assets like the Swiss Franc (CHF), Japanese Yen (JPY), and gold rose due to fears about Israel potentially acting against Iran.
Moody’s recent downgrade serves as a warning about the risks of rising deficits without proper fiscal management. This raises ongoing concerns about the USD’s status as a safe haven and reserve currency, which may drive investors to spread their assets across different markets.
Dollar Rally Strategy
The idea of selling USD during price increases may continue. Signs of weakening bullish momentum are evident in the declining Relative Strength Index (RSI). Current support is at 99.10, with resistance levels at 100.10, 100.80, and 101.40. Recent movements in the US Dollar highlight a growing caution in currency markets. The DXY index, now at 99.59, suggests a shift away from the dollar, as concerns about geopolitical risks lead to investments in traditional safe havens. Although there was interest in gold and the yen, the USD’s rebound has been weak, even in situations where it typically performs well. The Moody’s downgrade cannot be dismissed as an isolated incident; it signals broader concerns about fiscal challenges, with rising deficits mostly unaddressed. Investors may start to compare dollar-based assets with those from regions with more stable monetary and budget policies. This reassessment is a natural reaction in the market. Practically speaking, this means that the demand for USD is becoming less stable. This is significant because if the dollar loses its status as a safe option during times of risk aversion, the premium it typically holds will diminish. Analysts are beginning to shift their views, no longer automatically linking geopolitical tensions or stock market declines to a stronger dollar. This change could alter market behaviors, requiring tactical adjustments.Market Adaptation and Strategies
When considering market levels, technical indicators should be approached carefully, but they still provide useful insights. The downward trend in the Relative Strength Index indicates decreasing momentum. Short squeezes may happen, but without strong data or fresh investments in dollar assets, any rallies are likely to face limitations. The market is skeptical about climbing past 100.10 due to consistent supply issues at those levels. Currently, 99.10 is a key level. If it breaks, a move toward the next support level is likely. Falling below that could lead to a stronger bearish sentiment. It’s wise to watch for intraday trends before anticipating a price rebound; there aren’t clear signals for a significant upward move right now. In planning future strategies, several factors need to be considered. Prices may continue to feel heavy. We are in a phase where previous strategies, like “buy dollars in trouble,” are losing relevance. Traders must now account for volatility and adjust their short-term strategies accordingly, which will also affect expectations for options pricing. Not every strategy has to be directional. Neutral positions or specific trades can still create value. The main focus should be on adapting to the changing dynamics of the dollar’s role, both in immediate transactions and in broader economic contexts. Create your live VT Markets account and start trading now.USD/CHF pair drops near 0.8240 during European trading, marking a three-day losing streak
USD/CHF has dropped to about 0.8240 as the US Dollar weakens. This decline follows Moody’s downgrade of the US Sovereign Credit rating from Aaa to Aa1. The US Dollar has been losing ground for three consecutive days, continuing its downward trend during the European trading session.
The US Dollar Index has fallen to around 99.50, its lowest point in two weeks. Uncertainty in US politics over a proposed tax-cut bill, which could increase US debt by $3 trillion to $5 trillion, has further weakened the US Dollar.
Swiss National Bank Policy
Interest is now on the Swiss National Bank (SNB) as the Swiss economic calendar is light this week. The SNB has expressed willingness to consider negative interest rates in case of global economic challenges. USD/CHF has fallen below the 20-day Exponential Moving Average (EMA) at about 0.8340, indicating a bearish short-term trend. The 14-day Relative Strength Index (RSI) is between 40.00 and 60.00, showing that volatility is low. If the pair falls below the May 7 low of 0.8186, it may reach lower support levels. However, if it rises above 0.8500, we could see a recovery towards higher resistance levels from April.Market Sentiment and Technical Analysis
Moody’s recent downgrade of the US sovereign credit rating from Aaa to Aa1 has put significant pressure on the US Dollar. This downgrade raises concerns about America’s long-term debt, which is unsettling for the markets. As a result, USD/CHF continues to decline and is now around 0.8240, marking its third straight drop in European trading, highlighting ongoing weakness in the Dollar. Additionally, political gridlock regarding a multi-trillion-dollar tax-cut bill has added to market anxiety. The proposed bill may add $3 trillion to $5 trillion to the national debt, leading to reduced investor interest in holding US Dollars. The Dollar Index now sits at around 99.50, its lowest level in two weeks, serving as a key indicator of confidence in the currency. This downturn reveals a lack of investor enthusiasm. Meanwhile, the focus has shifted to the Swiss National Bank as Switzerland has released little economic data recently. The SNB is open to further cuts in interest rates, preparing for potential global economic issues. While immediate SNB changes may not be expected, such comments can influence market expectations. From a technical view, breaking below the 20-day EMA at 0.8340 is significant. Holding below this level may keep sellers in control. The RSI indicates neutral momentum, between 40 and 60, signaling a period of reduced activity without strong buying or selling pressure. This reflects uncertainty in the market leaning slightly bearish. The next key level to watch is the low from May 7 at 0.8186. If it is tested and breached, it would suggest further declines and could lead to testing lower demand zones not seen since early spring. However, if the pair rebounds and exceeds 0.8500, it might change market sentiment dramatically, possibly leading to increased interest in previous resistance levels seen in April. For those trading options or making strategic decisions, it’s better to focus on taking advantage of short rallies rather than attempting to chase prolonged downturns. Given the current volatility, it calls for patience and careful execution until clear direction emerges from upcoming events. Create your live VT Markets account and start trading now.Scotiabank’s Chief FX Strategist reports a 0.5% rise in EUR against USD due to overall dollar weakness.
The Euro has risen by 0.5% against the US Dollar. This increase is happening because the USD is weaker, influenced by government bond markets and recent fiscal developments in the US.
The European Central Bank (ECB) is also shifting its focus away from easing policies, contributing to the Euro’s strength. Key events to watch for the Euro this week include preliminary PMI releases and Germany’s IFO business sentiment report.
Technical Overview Of Euro
The EUR/USD pair is going up but has not yet hit new highs. The Relative Strength Index (RSI) is showing bullish signals, although it is below 70, indicating potential for further growth. Resistance for the Euro is around 1.14, while recent highs were near the upper-1.15 range. Support is expected around 1.11. The Euro has climbed about half a percent against the Dollar, benefitting from the Dollar’s overall weakness. This trend is supported by decreasing US bond yields, influenced by changes in Treasury issuance and ongoing deficit worries in Washington. These fiscal concerns are not just talk; they are affecting actual price movements in sovereign debt markets, and the Dollar’s response is significant. From Frankfurt, recent messages suggest the ECB might pause further rate cuts or dovish language for now. This change is providing the Euro with some support, even though it isn’t a major shift. It simply removes one of the recent challenges the Euro faced. This week offers several important economic releases. Preliminary purchasing managers’ indices (PMIs) for the Eurozone will provide insight into the health of the manufacturing and service sectors. Additionally, the IFO business climate survey will update us on sentiment in Germany, Europe’s largest economy. Depending on whether the PMI results are significantly above or below expectations, traders in FX and rates may quickly adjust their macro forecasts.Market Reactions And Strategy
Technically, EUR/USD is steadily rising, though it hasn’t broken through any major levels yet. The RSI indicates buying interest, remaining below 70, which suggests there’s room for more growth. This is positive, especially if resistance levels aren’t challenged too quickly, allowing for a smooth momentum build-up. We are observing resistance around 1.14, which could limit further gains if buyer confidence wanes. This resistance extends toward recent highs above 1.15, but that area hasn’t been tested yet. Conversely, if there’s a retracement, support levels around 1.11 may come into play, as they have previously provided support. Options data is starting to show some bullish sentiment, but it’s not overly strong. The patterns we track are widening in favor of the Euro, indicating that short-term contracts are being set up for a move upwards, albeit without complete confidence. We will closely monitor how volatility changes after the PMI data is released. Sudden market reactions could lead to temporary price discrepancies, especially if traders are one-sided in their positions. Cross-asset indicators, which have been reliable in the past, remain useful. We need to keep an eye on European yields. If bund yields rise while Treasuries drop, we can expect continued inflows into the Euro. As always with currency derivatives, price mismatches won’t last long. If you’re holding short volatility, managing gamma will be crucial this week. Traders using spreads may want to adjust their positions and expiry dates based on the timing of these economic announcements. We have seen how European morning data can influence the market before the New York open. Create your live VT Markets account and start trading now.UOB Group analysts predict US Dollar will range between 7.1850 and 7.2450 against the Yuan.
The US Dollar is expected to trade between 7.1850 and 7.2450 against the Chinese Yuan. Recent trends show that downward pressure is easing, leading to a neutral outlook for now.
Recently, the Dollar rose to 7.2260 but then fell back to 7.2146. The day closed with little change, indicating weaker upward momentum.
Change from Negative to Neutral Outlook
There’s been a shift from a negative to a neutral stance, with a focus now on fluctuating within a range. Traders should stay updated, keeping in mind the potential risks in the foreign exchange market. The recent stability in dollar-yuan prices shows a decrease in downward pressure. After hitting a high of 7.2260, the Dollar slipped to 7.2146, revealing little movement in either direction. The earlier bearish energy seems to have faded, leaving the pair trading aimlessly for the moment. This change suggests a balance forming between buyers and sellers. What began with lower highs and broken supports is now a standoff. While this doesn’t signal urgency, it is important not to be complacent. In such ranges, traders might mistakenly favor premium or discount positions when volatility is low, but these boundaries can quickly change without warning.Short-Term Expectations and Risks
Support appears strong between 7.1850 and 7.1900, where previous buyers showed strong interest. Resistance is also nearby, as the Dollar has struggled to hold above 7.2200. The pair may revisit these extremes quickly or gradually, so staying alert at the start of each trading session is essential. Currently, it’s not the ideal situation for making bold bets. The market seems to be testing the edges of this range rather than making strong movements through it. If overall dollar sentiment remains steady without surprising data, aggressively pursuing a specific direction might not yield the best results in the short term. A sudden shift in volatility expectations could break the range, affecting short-term positions. Keep an eye on critical US macro data, especially reports that could impact prices overnight in Asia—these often disrupt the calm trends we’re seeing now. Anyone investing in short-term structured products or chasing momentum should closely monitor shifts in market skew and implied volatility. We are in a waiting period for new catalysts, but these pauses can lead to unexpected movements. The neutral tone conceals uncertainty, requiring careful attention, especially as positioning becomes skewed without notice. Create your live VT Markets account and start trading now.British inflation unexpectedly rises to 3.5%, pushing GBP/USD through key resistance levels due to higher costs
In April, UK inflation unexpectedly rose to 3.5%, the highest since January 2024. This uptick was fueled by increasing household bills and ongoing services inflation. This inflation rise makes it harder for the Bank of England (BoE) to make decisions, creating uncertainty about when they might cut rates.
The GBP/USD exchange rate strengthened, hitting levels not seen since February 2022, close to 1.3470. Even after a slight drop, the overall picture remains positive.
UK Inflation Data
The UK’s Office for National Statistics reported that the Consumer Price Index (CPI) rose to 3.5% year-on-year in April, up from 2.6% in March. This was higher than the expected 3.3%. The monthly CPI increased by 1.2%, following a 0.3% rise in March. Meanwhile, the core CPI, which excludes food and energy, climbed by 3.8% annually. This unexpected inflation could lead the BoE to delay any potential rate cuts. High inflation could make the BoE act more cautiously. The rise in GBP/USD reflects market expectations about the BoE’s upcoming decisions. We are witnessing a change in expectations, primarily due to the latest UK inflation report, which surprised many. The 3.5% inflation rate is not what markets anticipated. The 1.2% month-on-month rise, which is more than triple the previous month’s increase, puts a lot of pressure on policymakers. The BoE now faces unexpected challenges. With core inflation at 3.8%, it’s difficult to justify easing monetary policy soon. Markets had anticipated lower inflation, which would have supported the idea of rate cuts this summer. Now, that view is being reconsidered.BoE Actions And Market Reactions
For those in derivatives markets, this means practical changes. Immediate beliefs about easy monetary policy now look exaggerated. Current data suggests stronger demand, especially in services, which doesn’t align with a quick shift from the BoE. This disconnect is causing the market to reevaluate. We already see this in the strength of the pound. The pound surged past important resistance levels after the CPI release, briefly hitting its highest since early 2022 before losing some steam. While foreign exchange markets are sensitive to this data, the movement in yields could provide clearer guidance for future options structures. Volatility in short-term interest rate futures has increased. This shows a shift in the yield curve, especially at the front end, which is no longer confident that a summer rate cut is likely. Positions around interest rate-sensitive products must factor in the reduced chance of immediate policy changes. It’s now more about “how late” any cuts might come, rather than if they will happen. As Bailey and the committee analyze price pressures across different sectors, near-term contracts should adapt to new data and guidance. There is still plenty of room for adjustment if inflation continues to affect housing costs, wages, and consumer services. The momentum in GBP/USD is still strong in the medium term, now influenced by macroeconomic updates. If positioning relied on dovish assumptions, it needs to be revisited. We see tighter volatility markets indicating a lower appetite for downside protection in GBP. For tactical positioning, expect more focus on currency carry flows and slightly stronger demand for sterling assets. In rates, the situation has grown more complicated, with BoE rate expectations increasing but not fully shifting towards a hawkish stance. Rate volatility is likely to stay elevated in the coming weeks, creating opportunities for short-term strategies. Particularly in gamma, where implied changes may lag behind shifts in rate expectations. Keeping an eye on breakevens and real yields could help signal when to adjust positions. Any remaining dovish sentiment is gradually being priced out, especially in August and September contracts. If service inflation continues into May and June, option skews may start to show a more balanced outlook—not leaning heavily toward quick easing. A stronger emphasis on patience is emerging. Those working in short-term rate derivatives or FX volatility should stay flexible. Changes will likely follow a month-to-month basis with fewer clear signals from macro officials. Anticipate that upcoming wage and employment data will significantly influence repricing. Expect implied rates to remain sensitive, especially in STIR futures and 1-week FX volatilities, with short-term gamma strategies suited to capitalize on any sharp market realignments. Create your live VT Markets account and start trading now.During European trading, the AUD/USD nears 0.6460 as the US dollar struggles against rivals.
The Australian Dollar (AUD) has strengthened against the struggling US Dollar (USD) after a downgrade in the latter’s credit rating. The Reserve Bank of Australia’s recent decision to lower interest rates by 25 basis points to 3.85% has also had mixed effects on the AUD.
The AUD/USD exchange rate climbed to about 0.6460, while the USD Index dipped to around 99.50, the lowest it has been in two weeks. Political issues in the US, including President Trump’s admission that he was unable to convince Republicans to back his new tax plan, have further affected the USD’s value.
