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The box shocks and hidden dangers, can the euro hold the last line of defense at 1.1470?
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Hello everyone, today XM Forex will bring you "[XM Forex]: Box shocks hide hidden dangers, can the euro hold the last line of defense at 1.1470". Hope this helps you! The original content is as follows:
On Wednesday (November 5), the euro-dollar exchange rate continued to be weak during the North American session, trading below the 1.1500 mark, and is currently trading around 1.1480. Risk aversion continues to rise, and the U.S. dollar, as a traditional safe-haven currency, has received strong support. At the same time, the economic data released by the Eurozone were mixed and failed to provide an effective boost to the euro.
Fundamental Analysis
The latest economic data released by the Eurozone show a clear trend of differentiation. Both the Eurozone and German HCOB services purchasing managers' indexes exceeded market expectations, showing that service industry activities accelerated their expansion. The final value of the Eurozone HCOB service industry PMI rose to 53.0 from the previous 51.3, higher than the initial value of 52.6; the final value of the German HCOB service industry PMI climbed to 54.6, the strongest performance in more than a year, far exceeding the 51.5 last month, and also higher than the initial value of 54.5. This series of data should have brought support to the euro, but the weak performance of the euro zone producer price index offset the positive signals from the services sector.
The Eurozone producer price index fell 0.1% month-on-month in October, continuing the 0.4% decline in September and weaker than market expectations of being flat. Year-on-year data also showed weakness. In October, PPI fell by 0.2% year-on-year. Although the decline narrowed from 0.6% last month, it still reflected the continued weakening of inflationary pressure on the production side. This data constitutes an important consideration for the European Central Bank's monetary policy decision-making. The persistence of deflationary pressure may limit the European Central Bank's space to tighten monetary policy.
In Germany, factory orders increased by 1.1% month-on-month in September, reversing the 0.4% decline in August and exceeding market expectations of 1% growth. However, the year-on-year data reveals hidden worries. In SeptemberFactory orders fell 4.3% year-on-year, in sharp contrast to the 2.1% growth in the previous month, highlighting the structural weakness on the demand side of Germany's manufacturing industry.
Across the Atlantic, the US government shutdown has entered its fifth week and is heading towards the longest shutdown record in history. In the context of the lack of official employment data, the ADP employment report and the ISM services PMI are given special significance. The market expects ADP employment to increase by 25,000 net jobs in October, an improvement from the 32,000 decline in September, but still well below the average monthly new employment level of 150,000 between 2010 and 2025. In terms of the ISM Services PMI, the market expects a moderate rebound to 50.8 in October, an improvement from 50 in September.
Actually released ADP data showed that the number of private sector jobs in the United States increased by 42,000 in October, and annual wages increased by 4.5%. This data was better than market expectations of 25,000, and was a significant improvement from the revised September decrease of 29,000 (preliminary value was a decrease of 32,000). Dr. Nella Richardson, chief economist at ADP, pointed out that private employers recorded their first job growth since July in October, but hiring remained cautious www.xmserving.compared with earlier this year. At the same time, wage growth has been basically flat over the past year, indicating that labor supply and demand are balancing.
From the perspective of monetary policy path, the Federal Reserve faces the dual challenges of a weak labor market and rising inflation risks, and the differences in views among policymakers have become increasingly apparent. Powell cited the disagreement as the main reason to proceed cautiously with easing policy, paving the way for a pause in rate cuts in December.
Technical Analysis
From the 60-minute K-line chart, after experiencing a sharp decline from 1.1540 to 1.1472 in the early stage, the EURUSD is currently building a box consolidation pattern in the 1.1470-1.1500 range. 1.1500, as a key psychological barrier and early support-to-resistance level, has significantly suppressed the exchange rate. The exchange rate has tested this level many times and failed to effectively break through, indicating heavy selling pressure from above. The lower edge of the box at 1.1470 forms an important short-term support. If this position falls, it will open up further downside space.
The MACD indicator shows that both the DIFF line and the DEA line are running below the zero axis, and the overall trend is in the bearish control area, indicating that the mid-term trend is still bearish. However, there have been noteworthy changes in the MACD histogram recently: the green columns have gradually shortened, reflecting the continued decline of downward momentum; the latest K-line has begun to appear red columns, suggesting that the power of shorts has weakened, and bulls have begun to try to counterattack. If this signal is confirmed, it may indicate that a short-term bottom is being built. However, the DIFF line and the DEA line have not yet formed a golden cross, and the short pattern has not been reversed yet. The market still needs to observe whether the indicator can form an effective cross upward below the zero axis to confirm the trend reversal signal.
The current reading of the relative strength index RSI is 40.1962, which is in the neutral to weak range of 30-50. It has neither entered the oversold area nor shown signs of overbought. RSI shock chart in this rangeIt shows that the market sentiment is relatively cautious, and the strength of the long and short sides is relatively balanced. Judging from historical trends, RSI rebounded slightly after hitting a low in early November, but then fell back again, indicating that the rebound was limited. The RSI is currently stabilizing around 40. If it can continue to rise and break through the 50 midline, it will provide technical support for the exchange rate; otherwise, if it falls below 40 and further tests the oversold zone of 30, the bears will once again take the lead.
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