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A collection of good and bad news affecting the foreign exchange market
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Hello everyone, today XM Forex will bring you "[XM Forex Platform]: A collection of good and bad news affecting the foreign exchange market". Hope this helps you! The original content is as follows:
1. The U.S. dollar: a mix of good news and bad news, maintaining a volatile pattern in the short term
(1) Positive factors
The Fed’s policy shift is expected to heat up: there are signs of financial pressure in the repo market. Analyst Wrightson pointed out that this may prompt the Federal Reserve to announce the end of balance sheet reduction at next week’s meeting. The market interpreted it as a signal of easing, with the 2-year U.S. Treasury yield falling 1.47 basis points to 3.451%. The attractiveness of interest-rate sensitive U.S. dollar assets has increased marginally. The U.S. dollar index rose slightly by 0.07% to 98.62 in early Asian trading.
Geographic and trade agreement support: The United States and Australia signed a rare earth cooperation agreement. Both parties promised to reduce the mining and processing approval process, strengthen the dominance of the key mineral supply chain, and benefit the US dollar credit system in the medium and long term. At the same time, Argentina signed a $20 billion currency swap agreement with the United States to further expand the liquidity of the U.S. dollar in Latin America.
(2) Negative factors
The risk of government shutdown remains unresolved: the U.S. Senate’s 11th vote on appropriation bill has not yet passed, and the National Nuclear Security Administration, which is responsible for the management of nuclear weapons, has launched a large-scale forced vacation. This is the first time such a situation has occurred since the establishment of the agency. The market is worried about the impact of the fiscal impasse on the economy. If a consensus cannot be reached this week, the dollar may encounter a sell-off by safe-haven funds.
The plunge in crude oil suppressed related currencies: WTI crude oil fell below US$57 and hit a new low this year. As a core xmaccount.commodity priced in US dollars, the continued decline in oil prices may weaken the US dollar through channels such as the expansion of the trade deficit and the fall in inflation expectations. The US dollar only rose slightly by 0.12% to 1.4039 against the Canadian dollar and other xmaccount.commodity currencies, and the increase was significantly limited.
2. European currencies: The euro is under pressure and the pound is shockedSwing
(1) Euro/USD (EUR/USD): Negative factors dominate the short-term trend
Core negative factors: While the plunge in crude oil has dragged down the cost of energy imports in the Eurozone, it has also intensified concerns about a recession in the manufacturing industry. The Eurozone manufacturing PMI continued to shrink, coupled with the strengthening of the US dollar index, the EUR/USD Asian market fell 0.07% to 1.1642. From a technical perspective, the exchange rate is approaching the key support level of 1.1630. If it falls below, it may test the 1.1600 integer level.
Potential support: The Governing Council of the European Central Bank previously issued a hawkish signal, emphasizing that it would not rule out restarting interest rate hikes due to sticky inflation, which contrasted with the Fed's easing expectations and provided bottom support for the euro.
(2) GBP/USD: Balance of long and short forces
Negative factors: UK public sector net borrowing data for September will be released at 14:00. Market forecasts will increase month-on-month, and fiscal expansion pressure may suppress the pound. GBP/USD fell 0.17% to 1.3404 in early trading, continuing a volatile downward trend.
Positive factors: The minutes of the Bank of England's October meeting showed that most members believed that inflation fell faster than expected and the need to maintain policy unchanged increased, alleviating market concerns about excessive tightening.
3. xmaccount.commodities and Asian currencies: The Australian dollar bucks the trend and strengthens, and the Japanese yen is wary of intervention
(1) Australian dollar against the US dollar (AUD/USD): the only rising G10 currency
Core benefits: US and Australian rare earths The cooperation agreement directly benefited the Australian dollar, with Australia's iron ore exports increasing by 8% year-on-year in the third quarter, and xmaccount.commodity exports supporting the expansion of trade surplus. AUD/USD rose 0.29% to 0.6513 in early trading, becoming the best-performing G10 currency on the day.
Risk warning: The plunge in crude oil may be transmitted to overall xmaccount.commodity demand expectations. If iron ore prices follow suit and fall, the Australian dollar's gains may be limited.
(2) USD/JPY: Approaching the intervention threshold
Negative factors for the Japanese yen: The interest rate differential between the United States and Japan remains high. Although the 10-year U.S. bond yield fell 3.45 basis points, it is still significantly higher than the Japanese government bond yield. USD/JPY rose 0.09% to 150.76, approaching the historical intervention level of 151.00.
Potential benefits: Bank of Japan member Hajime Takada stated that it is necessary to be wary of the risk of rising prices and be prepared to raise benchmark interest rates. The hawkish remarks provide theoretical support for the yen, but the market expects less than 20% of the actual probability of a policy shift.
IV. Operation strategy suggestions
Trend trading: short EUR/USD with light position, entry level 1.1640, stop loss 1.1670, target 1.1600, relying on the dual logic of weak crude oil and strong US dollar.
Range trading: USD/JPY sells high and buys low in the 150.50-150.90 range, with stop losses set at 20 points each to avoid the risk of sudden intervention by the Bank of Japan.
Risk aversion: Temporarily avoid cross currency pairs, focus on highly liquid products such as EUR/USD, AUD/USD, and reduce positions before the release of Canadian CPI data at 20:30.
The core contradiction in today’s foreign exchange market lies in the game between “Federal Reserve policy expectations” and “U.S. fiscal risks.” Superimposed on the chain reaction caused by the plunge in crude oil, currency pair volatility may intensify. It is recommended to build positions in batches based on intraday data and strictly set stop losses to deal with unexpected situations.
The above content is all about "[XM Foreign Exchange Platform]: Collection of good and bad news affecting the foreign exchange market". It is carefully xmaccount.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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