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market analysis
The consensus on interest rate cuts is full, how can the US dollar breathe "underwater"?
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange]: The consensus on interest rate cuts is full, how can the US dollar breathe "underwater"?". Hope it will be helpful to you! The original content is as follows:
On Wednesday (September 10), the US dollar index was narrowly tug-of-war around the 97.8 line in Europe, just a short distance from the 98 mark. The market focused on tonight's PPI and tomorrow's CPI to judge the extent and path of the Fed's interest rate cut next week.
Branditional:
The annual benchmark revision of the US employment data, which has been highly concerned by the market, is implemented. Previously, the market expected that the Bureau of Statistics would draw down about 680,000 new non-agricultural growth from April 2024 to March 2025, but the actual revision was to a decrease of 911,000, corresponding to -0.6%, far greater than the average revision of 0.2% in the past 10 years, confirming that the "cooling" of the labor market in the past year is stronger than the previous appearance. Despite this, the US dollar did not show a significant unilateral trend. The reason is: First, this is a "rearview mirror" information, and the recent employment reports in August and the previous month have forced the market to lower interest rate path expectations in advance; Second, after two consecutive months of weak labor data, the market began to bet on more radical easing scenarios. Currently, the 25bp interest rate cut in September has been fully included, and the expectations for the total of nearly three interest rate cuts in 2025 are relatively stable. More radicals have even bet on the loose space of 125-150bp in the next nine months.
In terms of inflation, the market cares more about forward-looking signals than historical revisions. In terms of PPI, the market generally expects that both core and total value will be 0.3% month-on-month. In terms of CPI, inflation has rebounded moderately in the past few months, with the latest year-on-year of 2.9% (overall) and 3.1% (core) respectively. The trend shows that prices have not formed new systematic upward pressure, which clears the obstacles for interest rate cuts next week, but at the same time limiting the "upward accident" of limiting the easing range. The game between interest rates and inflation makes the US dollar's short-term elasticity to data more likely to be reflectedIt is a "fast in and out" intraday fluctuation, not a trend reversal.
Georally, recent events (local strikes in the Middle East, intercepting drones in Poland, etc.) only brought short risk aversion and oil price pulses, and failed to continue to affect the main exchange rates; new restrictions on Russia by Europe are still advancing, but the foreign exchange market has not used it as the main line. The atmosphere in the equity market is relatively warm, and the excellent performance of large technology xmaccount.companies' xmaccount.computing power and data center business has strengthened the macro narrative of "soft landing + loose and promising". Leverage and position management tend to maintain a "full allocation" in risky assets, which poses moderate passive pressure on the US dollar. Overall, this is a macro environment that is "unfriendly to the US dollar but not catastrophic": employment revisions are bearish, inflation is moderate, and easing expectations rise, but the real catalysis still depends on the details of the subsequent price data and the wording of the Fed's xmaccount.communication.
Technical aspect:
According to the daily chart, the US dollar index is currently located in the narrow range below the middle rail and above the lower rail: Bollinger band middle rail 98.0563, upper rail 98.6424, lower rail 97.4702, the price hovers around 97.8, close to the lower side of the middle rail and retraces to the lower rail. The DIFF of MACD is -0.1268, DEA is -0.0891, and the columnar value is -0.0753, both below the zero axis, indicating that the short kinetic energy is still there, but the amplitude is not strong, and it is close to the "weak mean regression" area. Any fundamental accident may trigger a fast direction selection. RSI (14) is 47.0704, which is just below the 50 center, and has not formed oversold, reflecting the "neutral and weak" swing trading characteristics.
At the price level, 97.4702 corresponds to the primary dynamic support of the lower track, below is the small near-end step 97.2409; once it falls below, the previous retracement low of 96.3729 will become the static support of the next ladder. The above are 98.0563 (Ballinger's middle rail and intraday equilibrium point), 98.6424 (upper rail), and the upper front high density zone is 99.4229 and 100.2599, forming a medium-term resistance zone. In the past two weeks, the candle chart entity is relatively small and the upper and lower shadows alternate. Quantitatively, the xmaccount.combination of indicators, "repeated backtesting below the middle track of the Bollinger band + weak negative MACD value", usually means that the directional breakthrough requires external force (data or policy). If the subsequent K-line reaches a continuous closing above the middle track, it will be able to challenge the upper track and test 98.64; if on the contrary, it falls below 97.47 and releases negative momentum, the bears are expected to lead a new round of downward trend.
Future Outlook:
Short-term: The 98 mark has significant psychological and technical support effects, forming a "magnetic level" with Bollinger's middle rail 98.0563. If the PPI tonight and the CPI tomorrow are roughly in line with the year-on-year pattern of 0.3% month-on-month and 2.9%/3.1%, the US dollar index is likely to maintain a horizontal channel of 97.5-98.6; in this "data is not alarming" scenario, MACD is expected to further move towards the zero axis, and the RSI is back and forth between 45-55, reflecting a typical marketCharacterization of the whole market. If inflation rises slightly and the Fed xmaccount.communicates more cautiously, the price may initiate a "upper track backtest" from above the middle track. 98.6424 will be the first resistance, followed by a dense area test of 99.4229. On the contrary, if inflation is soft and there is a signal of growth cooling, falling below 97.4702 will open the lower edge of 97.2409, and then look at 96.3729.
The above content is all about "[XM Forex]: The consensus on interest rate cuts is full, how can the US dollar be ventilated "underwater"?". It is carefully xmaccount.compiled and edited by the editor of XM Forex. I hope it will be helpful to your trading! Thanks for the support!
Due to the author's limited ability and time constraints, some content in the article still needs to be discussed and studied in depth. Therefore, in the future, the author will conduct extended research and discussion on the following issues:
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