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EUR/USD fundamentals-led consolidation pattern
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Hello everyone, today XM Forex will bring you "[XM Group]: Consolidation pattern dominated by EUR/USD fundamentals". Hope this helps you! The original content is as follows:
During the European trading session on Friday (November 28), the time-sharing chart of EUR/USD was in the stabilizing stage after a short-term rapid decline. The overall trend was that shorts dominated the day and recovered slightly in late trading. The exchange rate fluctuated within a narrow range around 1.1557, slightly down 0.32% from the previous trading day.
In 2025, the EUR/USD will show the distinctive characteristics of "strengthening and then stabilizing": from February to September, it went out of a strong unilateral rise, with a cumulative increase of 11.96% since the beginning of the year, making it one of the best-performing mainstream currencies in the world; after entering the fourth quarter, the increase has significantly converged, and the exchange rate has fallen into a periodic consolidation in the 1.14-1.18 range, with trading volume declining simultaneously as the long-short divergence increases.
Fundamental Analysis
In the United States, the easing expectations on the US dollar are the core driver of the current exchange rate resilience. New York Fed President Williams made it clear last Friday that if inflation continues to fall toward the 2% target, "it may be necessary to implement U.S. interest rate cuts again in the short term." This remark broke the market's previous perception of the Fed's "hawkish pause." According to the CME Fed Watch Tool, the market's probability of a 25 basis point interest rate cut in December has soared to 85%, and the shift in interest rate expectations has directly exerted continuous pressure on the US dollar.
In Europe, as the "engine" of the Eurozone economy, Germany's data performance directly dominates the short-term trend of the euro. On the negative side, in addition to the decline in the IFO index, the initial value of HCOB Germany's xmaccount.comprehensive PMI fell from 53.9 to 52.1 in November, a two-month low. Among them, the manufacturing PMI fell from 49.6 to 48.4, and the decline in export orders hit the fastest pace since January, indicating that the growth momentum of core industries continues to weaken. The German Finance Ministry has lowered its forecast, believing that the economy will only achieve "at best" by the end of the year."Weak growth". France, Spain, Italy and Germany released preliminary CPI data for November today. The inflation situation will not change significantly in the short term, and the European Central Bank may not adjust interest rates throughout 2026.
The dual impact of the U.S. Thanksgiving holiday and the failure of the trading system has significantly exacerbated short-term fluctuations in exchange rates. On Friday, the Chicago Mercantile Exchange (Chicago Mercantile Exchange) CME) caused the foreign exchange, futures and other market transactions to be suspended for several hours due to the monthly contract settlement day. The centralized processing of a large number of open positions may cause subsequent price changes. Traders reported that "the lack of futures market guidance makes spot trading like flying in the dark", and the shrinking liquidity makes the exchange rate extremely prone to irrational fluctuations.
Full Global risk appetite provides indirect support. The MSCI global market stock index is still close to historical highs, and high risk appetite drives capital flows to carry trades. In the current low foreign exchange volatility environment, investors can obtain stable income through the interest rate difference between the euro and the US dollar. This logic effectively limits the euro's correction space and becomes an important buffering factor in the consolidation pattern.
The European Central Bank yesterday. The minutes of the meeting released on the same day confirmed that any policy adjustments are more likely to be biased towards the easing direction. If the inflation rate continues to be lower than expected during the forecast period, the moderates in the European Central Bank may take stronger actions and push for further interest rate cuts. Before the release of relevant U.S. data, or before the Fed announces an interest rate cut in December, the only factor that can really promote the continued rise of the euro. On the one hand, the peace talks in Poland have made positive progress.
Volkmar Baur, a foreign exchange analyst at xmaccount.commerzbank, pointed out that the economic growth momentum in the United States is stronger, and people are skeptical about the improvement of the German economy.
Technical analysis: The resistance level above 1.1600 for EUR/USD suppresses the bulls
EUR/USD rebounded from the weekly low near 1.1500, but encountered resistance below the upper track of the downward channel extending from the early October high (currently about 1.1615), and the momentum of the rally weakened on Friday. The 4-hour relative strength index (RSI) showed a downward trend, falling to 50. Below the mark; at the same time, the moving average convergence divergence (MACD) indicator is crossing the signal line, highlighting that the bullish momentum is gradually fading.
The immediate support level is found at the previous resistance conversion level of 1.1550 (close to the highs of November 21 and 24). Further below, the psychological mark of 1.1500 and the low of November 5 (about 1.1470) will constitute a bearish trend. The test, further down, is the lower track of the current channel around 1.1420.
On the contrary, if there is a bullish counterattack, it will need to break through the upper track of the channel near 1.1615 to confirm the trend change, and then bring the October 28 high (about 1.1670) into sight. The higher target points to the October 17 high, which is slightly lower than 1.1730./p>
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