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market analysis
Data stalled and geopolitical risks eased, the U.S. dollar index fell below the 100 mark under pressure
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Hello everyone, today XM Forex will bring you "[XM Group]: Data stall and geopolitical risks eased, the U.S. dollar index fell below the 100 mark under pressure." Hope this helps you! The original content is as follows:
On Tuesday (November 25), the U.S. dollar index went out of a downward trend of consecutive bottoms. It fell below the upward trend line with the news and is currently trading around 99.96. According to U.S. officials, Ukraine agreed to the terms of the peace agreement. Some minor details of the peace agreement have not yet been finalized. The 19-point Ukraine peace plan no longer contains amnesty clauses. Market risk aversion has eased and the U.S. dollar index is under pressure.
At the same time, affected by lower-than-expected ADP and September core PPI and lower-than-expected retail sales in September, the U.S. dollar index continued to be under pressure.
Interest rate cut expectations have plummeted, and the U.S. dollar index is under pressure
On Friday, New York Fed President John Williams made it clear that the Fed is expected to start cutting interest rates "in the short term" and that this move will not have a substantial impact on the inflation control target.
Later, San Francisco Fed President Mary Daly further added that the sudden deterioration of the job market has constituted a key basis for cutting interest rates.
The market responded strongly immediately.
Afterwards, two dovish members, Waller and Milan, also believed that the employment data could persuade other members of the Federal Reserve to cut interest rates.
Data from the CME Group’s Federal Reserve Watch Tool (CMEFedWatchTool) shows that traders’ current pricing probability of a 25 basis point interest rate cut in December has climbed to nearly 85%, a leap from the 30% level a week ago.
The rapid rise in easing expectations directly triggered the collective weakening of the US dollar against the major G10 currencies.
The reissue of core data fell short of expectations, and ADP accelerated its deterioration, suppressing the dollar
The latest data shows that private sectorBusinesses are losing an average of 13,500 jobs per week, an acceleration from the 2,500 jobs lost a week ago. As the previous government shutdown is still affecting data releases, alternative data like ADP has been filling in the gaps in the economic picture. Of course, the result of filling in is that ADP shows that the deterioration is accelerating.
PPI is expected to rise by 2.7% year-on-year, and actually rises by 2.7%, which is flat. At the same time, retail sales are expected to increase by 0.4% month-on-month, and actually rise by 0.2%.
Although PPI has temporarily eased the threat of inflation, lower-than-expected ADP and sales data may significantly inhibit the dollar index’s rebound space and increase the market’s dovish expectations.
Inflation concerns have not disappeared, and the economic slowdown has not changed
Consumer confidence has improved marginally. The University of Michigan’s consumer confidence index recorded 51 in November, slightly higher than the initial value of 50.3, but still lower than October’s 53.6.
Inflation expectations show a mild decline: one-year inflation expectations dropped from 4.7% to 4.5%, and five-year inflation expectations dropped from 3.6% to 3.4%.
This data reflects that U.S. household confidence is showing signs of marginal recovery, but caution about inflationary pressures has not xmmarkets.cnpletely dissipated.
Thanksgiving is approaching, and the U.S. dollar index is under pressure
The trend of the U.S. dollar during the Thanksgiving cycle is highlighted: looking back at historical data since 1985, the average return rate of the U.S. dollar index in the three trading days before the holiday (Monday, Tuesday, and Wednesday) was negative, and the probability of rising was less than 50%, and the probability of falling on Tuesday was as high as 59.4%.
On the eve of Thanksgiving (Wednesday), the daily average fluctuation range and the median fluctuation range both reached a peak of 0.74%. This data shows that the fluctuations during this period are highly regular and are not dominated by extreme market conditions.
With the U.S. futures market closed on Thanksgiving Day, volatility fell to cycle lows; and as traders return to the market after the holidays and refocus on core macro contradictions, volatility will expand again. The high agreement between the median and the average daily fluctuation range further verifies the reliability of this seasonal pattern.
Although the average return on Thanksgiving and the first full trading day after the holiday (the second Monday after Thanksgiving) was slightly positive, the median return on Thanksgiving was flat, and the median performance on the Monday after the holiday was stronger.
Market Outlook:
From a trend perspective, the weakening of the U.S. dollar before the long holiday is still the core theme. U.S. market dynamics show that the U.S. dollar index is slightly under pressure and downward, and the market is continuing to digest expectations for further monetary easing in December.
However, the U.S. dollar has actually shown strong resilience. Faced with the increased probability of interest rate cuts and the ebbing of risk aversion brought about by the easing of the Russia-Ukraine conflict, the U.S. dollar index has previously resisted falling. However, under the dual influence of traders weighing the rising expectations for interest rate cuts and the divergent remarks of Federal Reserve officials, the U.S. dollar index bulls have found it difficult to resist.
Follow-up on the U.S. Conference Board Consumer Confidence Index in November, and U.S. Existing Home Contracts in OctoberDuring the period when sales data is released and Federal Reserve officials make intensive statements, investors are adopting defensive trading strategies, and the overall stance is becoming cautious.
The short-term trend of the U.S. dollar will be highly dependent on the performance of core data such as inflation and labor force, as well as clear policy signals released by policymakers. If the start of the easing cycle is confirmed, the U.S. dollar index will continue to be under pressure before the end of the year.
The rise in easing expectations has limited the rebound space of the U.S. dollar index. However, judging from the specific performance of the currency pair, the U.S. dollar/JPY (USD/JPY) also has problems - especially in the recent window guidance area of Japanese officials. After the recent rapid depreciation of the Japanese yen, it has turned to appreciation, and it has also been significantly suppressed against the U.S. dollar.
Investors can then pay attention to the upcoming supplementary indicators in the US housing and manufacturing sectors.
But the main thing is to grasp the main labor market and inflation data, as well as the currency exchange situation of Europe, the United States, and the United States and Japan, and provide key guidance for the trend direction of the U.S. dollar index before the next round of policy xmmarkets.cnmunication by the Federal Reserve.
Technical analysis:
The U.S. dollar index has been stagnant recently, suggesting the end of the rebound. The U.S. dollar index currently falls below the upward trend line and the five-day line, and the strong upward trend has been broken.
However, it is worth noting that if the U.S. dollar index regains its upward trend line, it will still retain the possibility of continuing to rise, although it will conflict with fundamentals.
The latest support is now 99.84, then 99.60 and finally 99.36.
The above content is all about "[XM Group]: Data stalling and geopolitical risk mitigation, the US dollar index fell below the 100 mark under pressure". It was carefully xmmarkets.cnpiled and edited by the XM foreign exchange editor. I hope it will be helpful to your trading! Thanks for the support!
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