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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 Decision Analysis]: A collection of good and bad news that affects the foreign exchange market." Hope this helps you! The original content is as follows:
1. The U.S. dollar: a long-short game under policy split, with weak crude oil acting as implicit suppression
(1) Positive factors
Hawk officials continue to exert pressure, and interest rate cut expectations have cooled: After Chicago Fed Chairman Goolsby emphasized that "the threshold for interest rate cuts in December is higher than in October," the market's expectations for the Fed's easing pace have further converged. The current CME Fed Observation Tool shows that the probability of an interest rate cut in December has dropped from 72% at the beginning of the month to 58%. The U.S. dollar index maintains a five-month high with support at the 100 mark, forming a natural suppression of non-U.S. currencies.
Marginal improvement in economic data: U.S. ADP private employment increased by 42,000 in October, and ISM non-manufacturing PMI rose to 52.4, showing that the resilience of the service sector is still there. While alleviating concerns about economic recession, it also reduces the need for the Federal Reserve to radically cut interest rates, indirectly strengthening the U.S. dollar's interest rate advantage.
(2) Negative factors
Dovish directors strongly called for easing: Federal Reserve Board Director Milan made it clear on November 5 that if there are no major changes in economic data, interest rates should be "continued on the path of lowering interest rates" in December, and even advocated a faster return to "neutral interest rates." As a supporter of last week's 50 basis point interest rate cut, his remarks exacerbated policy uncertainty and weakened the dollar's unilateral upward momentum.
The plunge in crude oil dragged down related currency support: WTI crude oil hit a two-week low of $59.60 per barrel, and U.S. EIA crude oil inventories surged by 5.2 million barrels, far exceeding expectations, reflecting weak domestic demand in the United States. Although the traditional negative correlation between crude oil and the U.S. dollar has weakened, the weakness of the energy industry may indirectly affect U.S. economic expectations and have a negative impact on the U.S. economy.Yuan forms implicit suppression.
2. European currencies: The euro is under pressure and the pound is on the sidelines, with data becoming the key variable
(1) Euro (EUR/USD): Negatives dominate, downward pressure intensifies
Core negative: OPEC+ announced an increase in production in December of 137,000 barrels per day, coupled with a surge in U.S. crude oil inventories, the global supply easing pattern has strengthened, and the Eurozone trade deficit pressure as a major energy importing area may expand. At the same time, the European Central Bank has suspended interest rate cuts in October, and the market expects that the policy in 2026 will be more dovish, diverging from the Fed's policy and suppressing the euro.
Potential good news: The Eurozone’s September retail sales monthly rate will be announced at 18:00 today. If the data rebounds beyond expectations, it may temporarily boost the euro. However, the market currently lacks confidence in the economic recovery of the Eurozone, and the positive impact may be limited.
(2) Pound Sterling (GBP/USD): Risk events are approaching, and the long-short balance is yet to be broken
Positive factors: The Bank of England will announce an interest rate decision at 20:00 today, and the market is generally expected to maintain the current interest rate unchanged. www.xmserving.compared with the European Central Bank's easing tendency, the Bank of England's policy stability is stronger, and the expectation of policy differences provides relative support for the pound.
Negative factors: The UK’s fiscal deficit rate is still higher than the 3% warning line, falling energy prices have dragged down North Sea oilfield income, and the lack of momentum for economic recovery under the pressure of fiscal austerity has limited the rebound of the pound.
3. www.xmserving.commodity currencies: Weak crude oil suppresses the Canadian dollar, and policy easing is a www.xmserving.common negative.
(1) Canadian dollar (USD/CAD): Long and short, crude oil and policy struggle
Negative factors for the Canadian dollar: International oil prices fell 1.59% in a single day. As a major exporter of crude oil, Canada is a major crude oil exporter, and the deterioration in energy revenue expectations directly suppresses the Canadian dollar. At the same time, the Bank of Canada www.xmserving.completed its fourth interest rate cut last month and signaled that easing is nearing its end. However, uncertainty about the Fed's policy has made it difficult to expand the interest rate advantage, and USD/CAD remained volatile around 1.4103.
Favorable factors for the Canadian dollar: Canadian Prime Minister Carney's budget plan plans to lift the oil and gas emission cap, and the market expects long-term energy supply to increase. If oil prices stop falling and rebound, the Canadian dollar is expected to benefit from improved exports.
(2) Australian dollar (AUD/USD): China's loose liquidity is the only support
Positive factors: The People's Bank of China launched a 700 billion yuan three-month buyout reverse repurchase operation on November 5, achieving an equal amount of renewals, and at the same time restarting open market government bond trading to release liquidity. As China's main exporter of www.xmserving.commodities, the Australian dollar has been boosted by expectations of loosening Chinese policies and has room for a rebound in the short term.
Negative factors: The oversupply of global crude oil has dragged down the overall sentiment of www.xmserving.commodities. Iron ore prices have recently fallen by 3.2%, coupled with the suspension of interest rate hikes by the Reserve Bank of Australia, the upward momentum of the Australian dollar has been limited.
4. Japanese yen and Swiss franc: safe-haven attributes diverge, policy shift becomes key
(1) Japanese yen (USD/JPY): expectations of interest rate hikes rise, depreciationStress Relief
Favorable factors for the yen: The Bank of Japan is gathering momentum to normalize its monetary policy. Two members supported an interest rate increase at the October meeting, and the market expects an interest rate increase to begin in December or January next year. If the interest rate gap between Japan and the United States narrows, the return of arbitrage funds is expected to promote the appreciation of the yen.
Bad factors for the Japanese yen: The U.S. dollar index is still at a high level, and the policy divergence between the Federal Reserve and the Bank of Japan has not yet been substantially reversed. USD/JPY is still supported by the 150 mark in the short term, and depreciation pressure has not been www.xmserving.completely relieved.
(2) Swiss franc (USD/CHF): The game between safe-haven demand and the strengthening of the US dollar
Positive factors for the Swiss franc: The split in the Fed’s policy has exacerbated market uncertainty, and the Swiss franc’s safe-haven attribute has become more prominent. Although USD/CHF rose to a two-week high of 0.8110, the increase was limited by safe-haven buying.
Bad factors for the Swiss franc: The strong pattern of the U.S. dollar index has not changed, the Swiss franc interest rate advantage is weaker than that of the U.S. dollar, and it is difficult to get rid of the passive following trend in the short term.
5. Core trading tips and risk warnings
(1) Operational suggestions for key currency pairs
EUR/USD: Negative dominance, you can go short in the 1.1490-1.1500 range, stop loss 1.1520, target 1.1460, rely on the logic of weak crude oil and policy differentiation to operate with the trend.
USD/CAD: The shock pattern is clear. You can sell high and buy low in the 1.4100-1.4110 range, with a stop loss of 5 points each. Pay attention to the impact of the linkage between crude oil prices and the Bank of England's decision.
USD/JPY: Wait and see cautiously, wait for the Bank of England’s decision to enter the market, and if expectations of interest rate hikes increase, you can go short with a stop loss of 150.50.
(2) Core risk warning
Data and event risk: Today we need to focus on German industrial output at 15:00, Eurozone retail sales at 18:00, Bank of England resolution at 20:00 and US initial jobless claims data at 21:30. Any data that deviates significantly from expectations may trigger exchange rate movements.
Risk of policy speech: If Fed Chairman Powell unexpectedly makes a more easing statement, or the Bank of Japan releases a signal to raise interest rates, it may reverse the current currency trend and needs to be tracked in real time.
Crude oil linkage risk: If WTI crude oil falls below the support of US$59.25, www.xmserving.commodity currencies such as the Canadian dollar and the Australian dollar may be further sold off, and you need to be wary of concentrated risk exposure.
The above content is all about "[XM Foreign Exchange Decision Analysis]: Collection of good and bad news affecting the foreign exchange market". It is carefully www.xmserving.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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