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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange]: The US index rebounds to suppress non-US, will the trend of Europe and the United States reversal? The FOMC resolution may end in a dull manner." Hope it will be helpful to you! The original content is as follows:
On Monday, the US dollar index fluctuated and fell in the Asian and European sessions. Later, due to the boost of ISM non-manufacturing data that exceeded expectations, the US dollar index rebounded below $100. As of now, the US dollar price is 99.76.
The US ISM non-manufacturing PMI in April rose from 50.8 in March to 51.6 in April. The index measuring service input prices jumped to 65.1, the highest since January 2023.
Tariffs:
① It is reported that India proposes to impose zero-equal tariffs on a certain number of U.S. auto parts and steel;
② People familiar with the matter: The United States rejects Japan's request to fully exempt 10% of the reciprocal tariffs;
③ The White House says that no final decision has been made on the movie tariffs;
④Trump: Tariff measures on pharmaceutical products will be announced in the next two weeks.
Kerman Palace: Putin accepted Modi's invitation to visit India.
Middle East:
①Iranian Foreign Minister: If the purpose is to prevent nuclear weapons, an agreement with the United States can be reached;
②Israel launches air strikes on Yemen;
③Israel Prime Minister: The new operation in Gaza will be an intensive military operation. The population in Gaza will be moved;
Despite the sluggish economic data, the US dollar index still emerged from a bullish rebound above the 98.00 support level, and the head and shoulders bottom pattern continued to maintain on the 4-hour chart. However, this trend still needs key confirmation - especially effective breakthroughs above the 100.30 level. The current US dollar index is still fluctuating near the neckline of the extended head and shoulders bottom pattern formed in April. To confirm a short-term bullish reversal, the US dollar index may need to stand firmly above 100.30 - this trend will also be linked to the potential breakthrough downward trend of the European, American, pound and US technical patterns. If the US dollar index fails to break through the neckline and falls below 99.40, it may fall again to the 98.00 area, which may pave the way for the further weakening of the US dollar in 2025, and may also build a new support platform here. (The picture below shows the 4-hour trend of the US index)
Europe and the United States have pulled back to the neckline position of their head and shoulders top pattern, waiting for the effective breaking signal. If it clearly falls below 1.1270, the exchange rate may further fall below 1.1140 and 1.1090; on the contrary, if the head and shoulders top pattern fails and the exchange rate reversal and breaks through 1.1380, it may rebound to 1.1420, 1.1470 or even 1.1570.
Unlike Europe and the United States, the pound sterling chart shows a double top form rather than a head and shoulder top form. It is worth noting that unlike the US dollar index and Europe and the United States, the US pound has not yet fallen below its neckline support, and the RSI continues to release positive momentum, and it remains bullish at present.
Upbound scenario: If the US breaks through the recent high of 1.3345, the next target will look to 1.3380, 1.3400, 1.3440 and 1.3500 in turn.
Downward situation: If the exchange rate falls below the neckline and 1.3200 support level, it may trigger a downward trend and the target is 1.3080.
At the beginning of the year, the prospects of the euro (especially the euro/dollar exchange rate) were generally looked down upon. The market is entirely dominated by the U.S. dollar, as the U.S. dollar has just achieved one of its strongest quarterly performances in years, with the market even expecting European and American exchange rates to fall to parity from January to February.
Relative strength indicators (RSI) can well illustrate the weaknesses of Europe and the United States at the beginning of the year, and the United States' endogenous concerns about the economic recession caused Europe and the United States to hit a three-year high in March and April. The US dollar weekly line entered the oversold zone in April, and the last time this happened was the third quarter of last year I mentioned earlier. At that time, the bears did not stop selling immediately after RSI hit oversold, but instead tug at another five weeks before the bulls could push the rise and reversal. In Europe and the United States, RSI did not fully enter the overbought zone last year, and the weekly chart was only at 69.8. But this still caused the exchange rate to pull back to 1.1000 - the bulls bought here - and then returned to the 1.1200 mark, blocking again.
Now, Europe and the United States have entered the overbought zone, weeklyThere is also a meteor line pattern on the line chart. The pair fell for the second straight week last week, but the bulls are still holding the key Fibonacci support level of 1.1275. There are more and more signs that there may be a trend change, but we are still in a stage similar to January, February or September last year – the current dominant trend is still possible, although the reverse force has been more obvious. Key psychological prices have a great impact on the trend, such as 1.0200 earlier this year, 1.1200 and 1.1000 last year, and 1.1500 marks in recent weeks. This week, if the bulls want to continue the uptrend in March and April, this key price will be the main resistance they need to break through.
Barclays economists say the Fed is expected to keep policy interest rates unchanged this week due to rising uncertainty, rising tariffs, rising inflation expectations and deteriorating household and business confidence. Federal Reserve Chairman Powell may suggest no rush to cut interest rates and suggest tariffs will lead to higher inflation and slower growth. With tariffs in place, Barclays expects inflation to rise sharply in the coming months, the U.S. economy will fall into a mild recession in the second half of the year, with economic activity and employment shrinking in the third and fourth quarters. However, Barclays maintained its benchmark forecast that the Fed will cut interest rates twice this year, cutting interest rates by 25 basis points in July and September respectively, and cutting interest rates twice in 2026.
Investment demand continues to support gold prices to maintain a high level of above $3,300 per ounce. Although some people believe that gold is rising too much, I still think there is a lot of value in the market - mainly depending on the direction of investment. As gold prices stabilize above $3,000 per ounce, it is only a matter of time before investors begin to realize the value and growth potential of the gold mining sector. With the expectation that gold prices remain above $3,000, gold stocks are indeed areas worth allocating. We believe that holding mining stocks is the best strategy at the moment because they are severely undervalued. Currently these companies are generating a lot of free cash flow and paying dividends. More importantly – they are buying back stocks in large quantities due to their very low stock prices. That's why we think this is the right strategy.
While gold prices have fallen from all-time highs, it seems that the market is building a new bottom given the rise in gold over the past year. There will be some uncertainty around the world that will continue to drive capital into gold. In addition, as the market continues to expect the Fed to cut interest rates from this summer to the end of the year, gold will also benefit from further weakening of the US dollar and falling interest rates. Finally, gold is also benefiting from the market's reassessment of the value of fiat currencies such as the US dollar. The Fed once supported the market by creating new currencies during market downturns in 2008 and 2020, and Trump is now encouraging the Fed toSales support the stock and bond markets through monetary operations. The future trend is actually to reduce US dollar and increase gold holdings in Asia and other regions around the world, while central banks in many Asian countries are currently buying gold.
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