📉 👀 Cautious Sentiment Prevails Ahead of U.S.-China Trade Updates and Geopolitical Risks
🗓️ Market Overview & Strategy Notes – May 7, 2025
🔸 Yen Weakens on U.S.-China Trade Hopes, but FOMC Looms Large
The Japanese yen weakened at times today following reports that U.S.-China trade talks may resume, offering the market temporary relief. However, with the FOMC decision due early on May 8 (Japan time), traders remain reluctant to commit heavily in one direction, resulting in nervous, range-bound price action.
Geopolitical risks—such as reports of military tensions between India and Pakistan—are also adding to market caution. USD/JPY briefly struggled to hold gains above the 144 level.
🔸 German Chancellor Vote & Political Developments in Europe
Germany’s Bundestag failed to elect a new chancellor in the first round—a postwar first—though Mr. Merz secured a majority in the second round. Expectations are rising that the new government will introduce stimulus measures to support the economy.
Meanwhile, some media reports even suggest Trump’s influence is indirectly affecting global institutions such as the Vatican’s conclave, highlighting the unusual global reach of U.S. political dynamics.
📊 Key Economic Events Tonight (JST)
🇫🇷 France: Trade Balance & Current Account (Mar)
🇪🇺 Eurozone: Retail Sales (Mar)
🇺🇸 U.S.: MBA Mortgage Applications (Apr 26–May 2)
🇺🇸 FOMC Policy Rate Decision (3:00 AM on May 8 JST)
🇺🇸 Fed Chair Powell Press Conference (Around 3:30 AM JST)
📌 Rate hold is already priced in. The key focus is on whether any guidance for rate cuts is provided.
🧭 Current Trading Strategy Notes
✅ Maintain USD bearish bias due to U.S. economic slowdown and policy uncertainty
⚠️ Avoid new positions until after the FOMC
⏱ Focus on short-term range trades until a clear trend emerges
👀 Stay alert to U.S.-China trade headlines and geopolitical risks
📌 Short-Term Trade Map – May 7, 2025
💴 USD/JPY
| Timeframe | Technical Trend | Strategy Notes |
|---|---|---|
| 5m–15m | Bullish (short-term yen weakness) | Yen remains under pressure due to BoJ dovishness. Resistance near 144.20–144.50. Sell on rallies may be valid. |
| 1H | Range-bound | Watch 143.50–144.50 zone. Directionless ahead of FOMC. |
| Daily | Weak to neutral | Supported by post-BoJ sentiment, but upside capped by U.S. rate outlook. |
🔸 Strategy:
Sell into rallies short-term. If a breakout occurs post-FOMC, shift quickly to trend-following positions.
💶 EUR/USD
| Timeframe | Technical Trend | Strategy Notes |
|---|---|---|
| 5m–15m | Bullish | A stronger-than-expected Services PMI could trigger EUR buying. |
| 1H | Neutral | Box range 1.1300–1.1350. Break above 1.1350 could increase upside momentum. |
| Daily | Bearish tone | Fundamentally weaker than the U.S. outlook. Further downside remains possible. |
🔸 Strategy:
Buy on break above 1.1350, or consider fading the rally if momentum stalls.
🪙 XAU/USD (Gold)
| Timeframe | Technical Trend | Strategy Notes |
|---|---|---|
| 5m–15m | Bullish | Rate expectations + risk aversion driving demand. Buy dips in short-term. |
| 1H | Uptrend | Testing upper range of $3270–$3300. Breakout may lead to further gains. |
| Daily | Range to firm | Potential to test $3400 if rate cut expectations intensify. |
🔸 Strategy:
Buy the dip targeting a breakout above $3300. If FOMC leans dovish, gold could accelerate higher.
