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The technical structure of Europe and the United States has turned bearish, and the Fed's interest rate cut "long pricing" has been exhausted!
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Hello everyone, today XM Forex will bring you "[XM Forex Decision Analysis]: The technical structure of Europe and the United States has turned bearish, and the Fed's interest rate cut 'long pricing' has been exhausted!". Hope this helps you! The original content is as follows:
Asian market conditions
On Thursday, the U.S. dollar index rose for the fourth consecutive trading day, standing at the 99 mark. As of now, the U.S. dollar is quoted at 99.32.
Federal Reserve - ①Williams: Supports further interest rate cuts, and the labor market is likely to slow further. ②Barr: Interest rates should be cut cautiously, as the current interest rates are mildly restrictive. ③Kashkari: Basically agree with everything Barr said.
US media: The US Bureau of Labor Statistics has recalled some employees to prepare the CPI report, which is expected to be released during the government shutdown.
The first phase of the ceasefire agreement in Gaza officially www.xmltrust.comes into effect. Trump said he would go to Egypt to attend the Gaza ceasefire agreement signing ceremony.
U.S. Ambassador to NATO: The United States may transfer some military capabilities to Ukraine.
The Governor of the Central Bank of the Democratic Republic of the Congo: The central bank will start building gold reserves as gold prices soar.
Summary of institutional views
Strategist James Stanley: The euro’s rise has already been overdrawn. Will last year’s “selling facts” market attack the euro again?
EUR/USD had a strong first half of the year, but that backdrop started to change in the third quarter. Markets were already beginning to prepare for a rate cut by the Fed at the time - and as seen last year, pricing in rate cuts often has the biggest impact. But this does not mean that the trend will inevitably continue after the interest rate cut is announced. The market trend last yearThis is clear evidence: the U.S. dollar hit bottom around the time the Federal Reserve cut interest rates in September 2024, and then started to reverse in the fourth quarter, with the strong U.S. dollar trend gradually taking over.
We believe the bullish momentum for the euro this quarter is fully priced in. The www.xmltrust.combination of concerns about a U.S. recession and Trump's continued pressure on the Federal Reserve to cut interest rates caused the U.S. dollar to post its largest half-year decline in 33 and a half years. But the key turning point came when the dollar bottomed out in April - when upward momentum was showing signs of exhaustion. EUR/USD continued its gains but weakened, with bulls becoming more cautious at the highs in the third quarter, although still positive on the pullback. However, a healthy upward trend requires bulls to continuously break through previous highs to maintain the "higher highs - higher lows" sequence. Once it stalls, it indicates a change in the market.
The mirror effect observed from the perspective of the US dollar has appeared in the EURUSD. Bulls could have taken advantage of the momentum to continue the trend (especially when the Federal Reserve cut interest rates in September), but they continued to avoid breaking new highs. EURUSD bears started to gain steam this week, with prices falling to a new two-month low, forming a bearish "lower highs - lower lows" sequence. In the short term, the bearish trend still has the potential to continue, which echoes the "buy expectations and sell facts" scenario last year - when the US dollar bucked the trend and strengthened even if the Federal Reserve cut interest rates. Current technical conditions suggest that euro bears are expected to remain in control.
Capital Economics: The United States and Japan are expected to close at 150 by the end of 2025
Thomas Mathews, head of Asia-Pacific markets at Capital Economics, said that the agency no longer expects the Bank of Japan to raise interest rates this month. The shift would not affect its 10-year JGB yield forecast but delayed an expected yen rebound. Capital Economics now predicts that the USDJPY will close at 150 by the end of 2025, followed by weakening to 140 by the end of 2026 and 135 by the end of 2027. The previous forecasts were 140, 135 and 130 respectively. Mathews believes that the yen looks extremely weak, so it does not require a sharp rise in JGB yields to trigger a rebound in the yen. He said: "We suspect that once the Bank of Japan really resumes the pace of raising interest rates next year, a sustained rebound is more likely."
HSBC: Global fiscal concerns have shifted, and the U.S. dollar is no longer the "worst choice"
Currently, fiscal problems outside the United States are driving the U.S. dollar's rebound in October. Not so long ago, structural dollar bears might have viewed the United States' twin deficits as a real concern for foreign exchange markets. But since President Trump’s One Big Beautiful Bill Act was passed into law in July, fiscal concerns surrounding the United States have faded from market radar screens. Instead, fiscal concerns are fueling weakness in other currencies, particularly in France and Japan, and still in the UK. This external factor is fueling a modest rebound in the U.S. dollar that has broken through key technical levels.
It is particularly noteworthy that the U.S. government shutdown has not weakened the dollar, which is in marked contrast to price movements during previous shutdowns. At the same time, noThe rising stock market shows that risk aversion is not the reason for the rise in the US dollar, even international spot gold has also risen simultaneously.
The fundamentals of the U.S. dollar itself are not perfect, but at this point in time, when investors look around at other major economies around the world, the U.S. dollar may simply be "not the worst choice."
Royal Bank of Canada: There is an essential difference between a government shutdown and the debt ceiling
Due to the uncertainty of the duration of the government shutdown, the release of the originally scheduled economic data will be delayed. We conducted an in-depth analysis of the shutdown and its replacement data series.
The government shutdown and the debt ceiling are often confused, but they are two www.xmltrust.completely different issues. With recent legislation delaying the next debt ceiling standoff until 2027, this distinction is important. The debt ceiling has a greater impact on interest rate markets because it poses substantial risks such as insufficient funds, a technical default, or the inability of U.S. Treasury securities (USTs) to make interest payments on time.
But the shutdown is not a lack of money, but a lack of agreement on how to distribute it. A shutdown simply means that "non-essential" government services are suspended and relevant staff are temporarily laid off. That means economic data won't be released, small business loan approvals are stalled, and maintenance on national park facilities is halted. But the issuance of U.S. Treasury bonds continues as usual. In other words, there will be no disruption to auctions during the shutdown, no technical default risk, and no interest rate market dislocations like we saw during the debt ceiling crisis.
As for the impact of the shutdown on the economy, it is worth noting that much of the decline in government activity and spending during the shutdown is only delayed and will be made up after the shutdown ends, rather than disappearing permanently. For example, after the five-week partial shutdown in 2019 ended, the Congressional Budget Office (CBO) estimated that by the fourth quarter of 2019, GDP would be almost back to the growth path it would have been on without the shutdown.
The above content is all about "[XM Foreign Exchange Decision Analysis]: European and American technical structures turn bearish, the Fed cuts interest rates and 'long pricing' is exhausted!" It is carefully www.xmltrust.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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