The US dollar is hanging by a thread

The US Dollar Index has once again fallen below the 98 mark, closing under 98 this time.

Although the CPI did not meet expectations, it is still somewhat shocking that the dollar has faced such a sell-off. Ultimately, it comes down to a change in sentiment—there's no love for the dollar anymore, so regardless of whether the data is good or bad, there could be a signal to sell the dollar. For example, with the CPI, if it is higher than expected, it can be used to speculate on US stagflation and debt risks; if it is lower than expected, it can be traded on narrowing interest rate spreads. In any case, those wanting to sell the dollar can do so either way.

In addition, the severe divergence among non-US currencies amid the dollar's sharp decline is even more bizarre.

1. Euro: Unmatched in the Forex Market

Since last week, the euro has shown astonishing buying interest. Even last Friday, when the non-farm payrolls exceeded expectations, just when it seemed like the market positions could be washed out, the euro fell for a day and then rebounded, subsequently breaking through 1.16. Do you recognize those two bullish candles from a couple of days ago?

Why is everyone buying euros? Besides the European Central Bank's strong hawkish statement on "approaching the end of rate cuts" last Thursday, US Treasury Secretary Janet Yellen mentioned early yesterday that the deadline for tariff suspensions on the EU is likely to be extended, which also alleviated some tail risks for the euro. Therefore, even with the escalation of US-Iran tensions, the euro has performed better than the yen, which is considered a safe-haven currency. Of course, from the CFTC positioning, the long positions in yen are much more crowded than those in euros.

2. Double Delight: Korean Won and New Taiwan Dollar Surge Again

Yesterday, these two currencies surged again, although it seems there wasn't any new news. The New Taiwan Dollar mainly rose due to local market sell-offs of the dollar; I personally speculate that it might be due to accelerated foreign exchange hedging flows from the dollar's depreciation. The Korean Won has a bit more positive news, as the new president Lee Jae-myung took office, and the Korean stock index Kospi rose over 7%, reaching a three-and-a-half-year high, which likely accelerated foreign investment in Korean stocks and significantly boosted the won.

3. Renminbi: Rising on the Surface, Falling in Reality?

Yesterday, the renminbi appreciated against the dollar, but its increase ranked at the bottom, especially under the backdrop of the euro and won's significant gains, which likely caused the renminbi index to drop considerably.

However, there is one point that is very noteworthy from yesterday: the closing price of USDCNY hit a new low. Combined with yesterday's midpoint of 7.1803, today's midpoint is very likely to fall below 7.18. Therefore, the intraday trend of the RMB today is very critical. If there continues to be mysterious buying support below, and 7.17 holds, then the RMB may at most appreciate moderately or continue to maintain a small range of fluctuations. However, if 7.17 breaks during the day and ultimately fails to recover, we may need to be alert to a wave of panic selling that could drive the RMB to appreciate rapidly.

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at your own risk