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market analysis
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 Foreign Exchange Market Analysis]: A collection of good and bad news affecting the foreign exchange market." Hope this helps you! The original content is as follows:
1. The US dollar: dovish signals strengthen the negative, and hedging demand provides support
Positive factors
Global hedging capital inflows form a periodic support. In September, global physical gold ETFs recorded the largest single-month inflow in history, with total inflows reaching US$26 billion in the third quarter, and asset management scale exceeding US$472 billion, reflecting that market risk aversion remains high amid the tug-of-war in the Middle East and controversies over AI technology risks. As a traditional safe-haven currency, the U.S. dollar index found support around 97.8, which was basically unchanged from the beginning of the month, indicating that early expectations for interest rate cuts have been partially digested. In addition, Tesla's Q3 financial report showed corporate-level pressures such as tariffs cutting profits and Meta layoffs to optimize costs, which intensified the market's cautious attitude towards risky assets and indirectly benefited the demand for US dollar liquidity.
Negative factors
The expanded consensus within the Federal Reserve to cut interest rates suppressed the trend of the US dollar. Board member Bowman clearly expects two more interest rate cuts before the end of the year, and board member Milan stressed the need to ease trade tensions as soon as possible. Even if Chairman Powell maintains a "one meeting, one meeting" stance, the market has priced in a cumulative interest rate cut of more than 100 basis points by the end of 2026. Concerns about economic fundamentals have further weakened the U.S. dollar's confidence: the U.S. government shutdown has entered its 24th day, and key data such as retail sales and PPI continue to be missing. Director Waller warned that AI technology may lead to an increase in layoffs, and job market risks are heating up, weakening the U.S. dollar's economic fundamental support.
2. Non-U.S. currencies: European currencies are under pressure, and xmaccount.commodity currencies are hindered
Euro: Expectations of interest rate cuts dominate the negative, and energy costs provide respite
Negative: European Central Bank President Lagarde made it clear at the IMF annual meeting"The direction of interest rate cuts has been determined," internal differences between hawks and doves have narrowed, and the market is betting on a 32 basis point interest rate cut in December. Superimposed on the fact that the manufacturing PMI of the Eurozone has shrunk for eight consecutive months, and the energy transformation has caused the growth rate of crude oil demand to drop below 700,000 barrels per day, the EURUSD fell back after encountering resistance at 1.1645, and the short-term pressure was obvious.
Positive: The continued decline in international oil prices has eased the pressure on energy costs. Brent crude oil prices have fallen by more than 15% from their September highs. The trade deficit in the Eurozone, which is highly dependent on energy imports, is expected to narrow, providing marginal support for the euro.
Japanese Yen: Political games have intensified volatility, and expectations for a policy shift still exist
Good news: After Japan’s Liberal Democratic Party and the Reform Party reached a joint governance agreement, the market’s expectations for a xmaccount.combination of “fiscal easing + monetary normalization” policies have increased. Although the probability of raising interest rates in October is only 24%, 96% of economists expect interest rates to rise to 0.75% by the end of March next year. The expectation of narrowing interest rate differentials has pushed the US dollar against the yen to fluctuate at the 151.20 support level.
Bad news: The multilateral talks between the United States and Iran on October 26 are approaching. If a sanctions relaxation agreement is reached, Iran's crude oil exports may increase by 500,000 barrels per day, exacerbating oversupply and possibly lowering the safe haven premium and weakening the support of the Japanese yen's safe haven demand.
Australian dollar: xmaccount.commodity prices are a drag on the negative, while Chinese data release is positive
Bad: JPMorgan Chase and Goldman Sachs have lowered their crude oil price expectations, and Brent crude oil may test US$52 in 2026. As a xmaccount.commodity currency, the Australian dollar is dragged down by the weakening of xmaccount.commodity prices. The Australian dollar failed to break through the key resistance of 0.6535 against the US dollar and is still in a downward channel.
Positive: China’s total foreign-related receipts and payments in the first three quarters reached US$11.6 trillion, a record high for the same period in history. In September, cross-border receipts and payments of the non-bank sector increased by 7% month-on-month, indicating that China-Australia trade capital flows are active. Market expectations for China to cut reserve requirements and interest rates before the end of the year have increased. The 500 billion yuan in policy financial instruments will boost domestic demand and indirectly benefit the export-related demand for the Australian dollar.
3. RMB: The scale of cross-border funds is stable, and policy support is effective
Positive factors
Foreign exchange reserves and cross-border receipts and payments form dual support. At the end of September, my country's foreign exchange reserves reached US$3,338.7 billion, continuing to remain abundant and providing a "ballast stone" for exchange rate stability. In the first three quarters, the net inflow of funds under trade in goods remained high, and the flow of service trade and investment income was stable. Even if there was a net outflow under the capital account, the overall foreign-related revenue and expenditure structure still showed resilience. Zou Lan, deputy governor of the central bank, emphasized the construction of a financial system adapted to technological innovation. The expansion of direct financing is expected to attract long-term foreign capital inflows and enhance the attractiveness of RMB assets.
Negative factors
Interest rate cuts by small and medium-sized banks triggered expectations of easing. Since October, more than 10 small and medium-sized banks have intensively lowered deposit interest rates, with the largest reduction reaching 80 basis points. Although the aim is to stabilize interest rate spreads, the market is worried that subsequent systemic easing may lead to slight pressure on the RMB exchange rate. The overall weakness of non-U.S. currencies also has a passive impact, the Japanese yen and the British pound fell by 1.1% and 0.5% respectively against the US dollar in September. The fluctuations in major currency pairs were transmitted to the RMB exchange rate, which fluctuated within a narrow range around 8.95 in the short term.
4. Core trading tips
Key data: Pay attention to the US initial jobless claims data for the week in the evening. If it is higher than the expected 320,000, it will strengthen the Fed's expectation of interest rate cuts, and the US dollar index may fall to 97.5 support.
Key points: The EURUSD needs to be wary of falling support at 1.1560, the USD/JPY should focus on a breakthrough in the 151.20-152.0 range, and the AUD/USD can test long positions before the 0.6440 support is broken.
Risk warning: The multilateral talks between the United States and Iran on October 26 and the OPEC+ technical xmaccount.committee meeting at the end of October may cause geopolitical and xmaccount.commodity price fluctuations, and stop losses need to be set in advance.
The above content is all about "[XM Foreign Exchange Market Analysis]: 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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