There have been some interesting changes in the foreign exchange market recently. Last week, after the ceasefire agreement between the US and Iran was announced, the euro surged by 1.78%, the US dollar index fell by 1.49%, and all non-dollar currencies rose, with the Australian dollar leading the gains at 2.47%, and the British pound also rising by 2.04%.

First, let's talk about the euro's recent rally. EUR/USD rose for five consecutive days, mainly because the ceasefire expectations eased risk aversion. But there's a detail worth noting — the US-Iran negotiations didn't actually produce any results; instead, Trump turned around and threatened to block the Strait of Hormuz, preventing Iran from selling oil. This has caused the market to become conflicted again.

From the Federal Reserve's perspective, the expectation of interest rate cuts has basically disappeared. The market now expects no rate cuts from the Fed this year, with only a 16% probability. This directly suppresses the euro's upward potential. Conversely, the European Central Bank (ECB) is showing some interesting signs. Rising oil prices have boosted inflation expectations, and the market now generally expects the ECB to raise interest rates twice this year, with the probability of a rate hike at the April policy meeting reaching 50%. But the problem is, economic growth in the Eurozone is slowing down, so the rate hike expectations can't really boost the euro's momentum. In short, the recent euro rally still largely depends on how the US-Iran situation develops in the short term.

Next, let's look at the yen. USD/JPY briefly broke through the 160 level but retreated after the ceasefire news, finally closing down 0.24%. Japan is under significant pressure now; soaring oil prices have led the government to spend about 600 billion yen per month on fuel subsidies, and at this rate, funds could run out in three months. Against this backdrop, the likelihood of the Bank of Japan raising interest rates in April has actually decreased. Overnight swap market pricing shows that traders now see the probability of a rate hike in April dropping from 60% last week to 44%. If the Bank of Japan ultimately chooses to keep rates unchanged, the yen will likely continue to weaken.

From a technical perspective, the euro is oscillating around the 100-day moving average. If it can hold above this line, further gains are possible, with resistance at 1.181. Conversely, if it is pushed below the moving average, the risk of decline increases, with support around the 21-day moving average at 1.157. USD/JPY has already broken above the 21-day moving average, indicating bullish strength. If it can break through the previous high of 160.46, there could be more room to rise, with resistance at 161.9.

This week, the focus remains on the US-Iran situation and the US March Producer Price Index (PPI) data. If tensions continue to ease, both the euro and the yen could benefit. Conversely, if conflicts escalate, safe-haven funds will flow into the dollar, putting pressure on both the euro and the yen.