The strong dollar scares the market

EUR/JPY

Key zone: 183.00 - 184.00

Buy: 184.50 (on a pullback following a retest of 183.50); target 186.50-187.50; StopLoss 184.00

Sell: 182.50 (on strong negative fundamentals) ; target 180.50-180.00; StopLoss 183.00

Global financial markets have once again come under pressure. In just one trading session, most major markets moved into the "red zone": declines affected U.S. technology indices, Asian stock markets, and major currency pairs alike.

However, the current situation does not yet resemble a full-scale crisis. Rather, it appears to be a standard decompression shock, further amplified by geopolitical uncertainty and changing market expectations.

The combination of strong U.S. macroeconomic data, growing expectations that the Federal Reserve will maintain a restrictive policy stance, and persistent geopolitical risks has once again strengthened demand for the U.S. dollar. The DXY index rose above 101.5 points, reaching a new annual high.

The primary trigger for the sell-off was once again the U.S. technology sector. Investors have begun to question whether multi-billion-dollar investments in AI can generate returns within the projected time frame.

Reminder:

• SpaceX shares plunged more than 16% following reports of plans to raise approximately $20 billion through a bond issuance. The funds are needed to build new AI infrastructure, but the market reacted negatively to such a large increase in spending.
• An additional blow to the technology sector came from a talent crisis at Google. Several key developers from the DeepMind division moved to startup Anthropic, increasing concerns about the sustainability of technological leadership among major companies.
• Against this backdrop, Alphabet shares lost around 5%, dragging down other Big Tech companies, including Amazon, Microsoft, and Meta.

Additional pressure also came from the oil market. The United States and Iran unexpectedly agreed on a roadmap for a peaceful settlement, while Washington temporarily eased sanctions on Iranian oil exports.

The first two supertankers have already passed through the Strait of Hormuz, and Brent crude prices fell below $77 per barrel. This triggered a record capital outflow from the commodities sector and further weakened the resilience of global stock indices.

Strong June business activity data from the United States further reinforced the dollar's position. The composite PMI rose to 52.2 points, the manufacturing sector is showing its fastest growth in several years, and the services sector continues to expand confidently.

Meanwhile, the Federal Reserve kept interest rates unchanged within the 3.50–3.75% range, but Warsh's rhetoric proved significantly more hawkish than the market had expected. In practice, this means that a return to cheap money this year is highly unlikely. U.S. Treasury yields rose sharply, which traditionally puts pressure on growth stocks and the technology sector.

Asian markets reacted particularly painfully. South Korea's KOSPI index lost nearly 10%, while automatic trading halt mechanisms were triggered twice during the session.

And what is the result?

Global markets experienced a synchronized correction amid a stronger dollar, hawkish Federal Reserve rhetoric, and persistent geopolitical uncertainty. The current wave of panic is gradually fading, while fundamental factors continue to pressure the market.

From a technical perspective, markets are gradually moving from a stage of uncertainty toward a potential phase of more sustainable downward dynamics.

• Additional pressure comes from the strengthening dollar and the growing divergence between expectations for the monetary policies of the ECB, the Bank of England, and the U.S. Federal Reserve. The market is once again pricing in a scenario of a prolonged period of high interest rates in the United States.
• The risk-off environment continues to provide significant support to the dollar. Despite some easing of tensions surrounding Iran, the geopolitical risk premium has not disappeared entirely.
• Any new statements regarding Iran's nuclear program, international inspections, or the implementation of the agreements reached could quickly bring heightened volatility back to both commodity and currency markets.

In the short term, particular attention will be focused on investor reactions to local market rebounds. Increasingly, such movements are viewed not as the beginning of a new sustainable rally, but as opportunities to resume selling.

If U.S. and European stock markets manage to stabilize, the dollar may enter a consolidation phase. Traders will remain focused on upcoming PCE inflation data and further signals from the Federal Reserve, which could determine the direction of the currency market through the end of June.

So we act wisely and avoid unnecessary risks.

Profits to y’all!