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Abnormal surge, the worse the Euro data is, the more violent the rise will be
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange]: Abnormal skyrocketing, the worse the Euro data is, the more violent it will rise." Hope this helps you! The original content is as follows:
The euro continued to rise against the US dollar during the Asia-Europe period on Monday (December 1). The weak manufacturing data in the Eurozone did not change the upward trend. The euro rose rapidly after breaking through the important mark of 1.1600, setting a new two-week high. It is currently trading at 1.1628, a surge of 40 points xmmarkets.cnpared with the opening. The overall weakening of the US dollar constitutes core support.
Although the Eurozone Purchasing Managers Index (PMI) recorded a downward revision in November, it failed to effectively suppress the euro. The core support for the exchange rate came from the overall weakening of the US dollar.
The U.S. dollar index is under pressure as expectations of a rate cut by the Federal Reserve continue to grow. The U.S. dollar index continues to be under pressure, and the market is beginning to price in advance expectations for a rate cut by the Federal Reserve next week.
It is worth noting that US President Donald Trump may nominate White House economic adviser Kevin Hassett to be the next chairman of the Federal Reserve. Please see below for more details.
The data in the Eurozone are weak, and the manufacturing industry has shrunk more than expected
The final value of the HCOB manufacturing PMI in the Eurozone in November was 49.6, hitting a five-month low and falling below the 50 boom-bust line. It was both lower than the initial value of 49.7 and a significant decline from October's 50.0. The manufacturing industry shrank more than expected.
The German IFO index for November disclosed on the same day also sent negative signals, with business confidence deteriorating. Although indicators of current economic conditions improved slightly, indicators of expectations weakened significantly, reflecting the fading of market optimism after previous fiscal stimulus expectations cooled.
However, insufficient budget spending in 2025 means thatFiscal stimulus may be postponed until next year, leaving room for imagination for Germany's economic recovery in 2026.
The weakening of the US dollar has become the core support, driven by the dual factors of interest rate cut expectations and dovish nominations
Weak euro zone data has not effectively suppressed the euro. The core reason is that the US dollar index continues to be under pressure.
The market continues to be increasingly betting that the Federal Reserve will cut interest rates by 25 basis points next week and launch multiple rounds of interest rate cuts next year, directly driving the outflow of U.S. dollar assets and supporting the strength of non-U.S. currencies.
What deserves more attention is that US President Trump may nominate White House economic adviser Kevin Hassett, a clear dovish representative, to be the next chairman of the Federal Reserve.
If it fulfills its duties, it is expected to implement the loose monetary policy agenda and further weaken the liquidity support of the US dollar. From a valuation perspective, the U.S. dollar is generally high relative to G10 currencies, while the euro is still significantly undervalued against the U.S. dollar by 2%, providing potential upside for the euro.
Today’s focus: U.S. ISM Manufacturing PMI and Powell’s speech
The core focus of today’s foreign exchange market is on the U.S. ISM Manufacturing PMI released at 22:30. The index is expected to drop slightly to 48.6 from 48.7 in October. Among them, the payment price sub-index is expected to soar from 50.0 to 59.6, and the employment sub-index will become the wind vane that the market focuses on tracking.
In addition, Federal Reserve Chairman Powell will attend a symposium at Stanford University at 9:00 tomorrow. However, due to the silent period before the December meeting, he is not expected to release any signals related to monetary policy and will have a limited impact on the foreign exchange market.
This week’s data surge is gathering, and multiple indicators are disrupting the trading rhythm
This week will usher in intensive data releases, and various indicators will disrupt short-term fluctuations in the foreign exchange market:
On Tuesday, the Eurozone Harmonized Consumer Price Index (HICP)
On Wednesday, the European Yuan area and US service industry PMI, US ADP employment data
On Friday, the US personal consumption expenditures (PCE) price index
These data will directly affect the market's policy expectations for the Federal Reserve and the European Central Bank, and then dominate the short-term fluctuation direction of the euro against the US dollar.
Trading Enlightenment: Focus on Interest Rate Cut Expectations and Valuation Repair Logic
For Euro traders, the current core trading logic is clear: on the one hand, it is the weakening trend of the U.S. dollar in anticipation of the Fed's interest rate cut, and on the other hand, it is the Euro's own valuation repair space.
It is necessary to focus on tracking U.S. inflation and employment-related data. If the data confirms easing expectations, the U.S. dollar may xmmarkets.cne under further pressure, and the euro is expected to continue its upward trend. However, if the U.S. dollar overshoots, overcrowded trading may expose U.S. dollar shorts to the risk of a rapid U.S. dollar rebound.
At the same time, the Eurozone’s economic data and fiscal policy trends also require continued attention, and their performance will affect the sustainability of the euro’s rise.
Overall, the US dollar's strength switching and policy game will be the core themes of euro trading this week.
Technical Analysis:
EUR/USD relied on the double bottom structure to launch a counterattack. After breaking through the key pressure level of 1.1600, the next pressure level is at the blue neckline. The position of this neckline is the key pressure level of the suspected bullish pattern formed after the rise of the euro, which is around 1.1660.
The exchange rate is supported at 1.1600 and the 5-day line of 1.1596.
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