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Interest rate cut expectations and personnel suspense are in the same frame. What exactly depends on the strength of the US dollar?
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Hello everyone, today XM Forex will bring you "[XM Group]: Interest rate cut expectations and personnel suspense are in the same frame, what does the strength of the US dollar rely on?". Hope this helps you! The original content is as follows:
Before the U.S. market opened on Thursday (October 9), the U.S. dollar index (DXY) was trading near 99, still maintaining a high range. There was still no progress in the Senate's vote on restarting the government. There were almost no heavyweight economic data released that day, and the market could only use interest rate expectations and bond market clues to "move forward in the dark." In this environment of incomplete information, every fluctuation in the US dollar is more like a vote on expectations.
Fundamentals
US dollar performance: Before the US market opened, the changes of the US dollar against major currencies were: EUR+0.05%, JPY flat, GBP+0.21%, CHF-0.14%, CAD-0.02%, AUD-0.20%, NZD+0.12%. The structure is not a unilateral "long market", but more like a consolidation market under the rotation of different assets.
Policy www.xmltrust.communication: New York Fed President John Williams reiterated his support for further interest rate cuts during the year, while emphasizing that the U.S. economy is not on the verge of recession; the slowdown in employment growth and the declining willingness of www.xmltrust.companies to recruit workers are worthy of attention, but inflation is falling, and core indicators are "slowly approaching" the 2% target. He admitted that tariffs have raised the prices of some imported goods, but did not observe a second round of inflation. The overall tone is: interest rates should return to neutral territory, and the central bank needs to focus on its dual mission amid political noise.
Uncertainty about central bank personnel: Treasury Secretary Bessent and his team have interviewed 11 potential candidates for the chairman of the Federal Reserve in the past few weeks. Each session lasted for two hours, focusing on their views on interest rates, quantitative easing and "mission expansion." Uncertainty in personnel matters will prolong the market's pricing process of long-term policy paths, thereby amplifying volatility.
Bond market pricing: US Treasury yields fluctuated within a narrow range - 2-year 3.588% (+0.5bp), 5-year 3.722% (flat), 10-year 4.124% (-0.6bp), 30-year 4.710% (-1.4bp). The yield curve is almost standing still, showing that terminal interest rate expectations are stable, but there are still doubts about long-term growth and the nominal neutral interest rate.
Government shutdown and "data vacuum": The shutdown has entered its ninth day and the bill has repeatedly failed to advance, which has led to the postponement of non-farm payrolls and initial applications last week. If the deadlock continues, next week's CPI may also be pending.
Federal Reserve Minutes: The September minutes showed that “most officials tend to cut interest rates again within the year,” but some members warned against moving too quickly because the stickiness of inflation has not www.xmltrust.completely subsided. The minutes simultaneously pointed out that labor market risks have risen and employment growth has been moderate, which means that policy space is open but the pace is cautious.
Technical aspect:
From the daily chart, the U.S. dollar index crossed the upper Bollinger Band at 98.8724, the middle Bollinger Band at 97.7913, and the lower track at 96.7102. The price is running strongly close to the upper track, and the short-term characteristics are "acceleration section in the upward channel", but it also means that the probability of retracement-backtesting the upper track increases.
Resistance and support: The upper side first focuses on 99.0940 (stage high) as the immediate resistance level; further, 100.2599 (previous band peak), which is a strong resistance and "psychological gate" resonance range. 98.8724 below is converted into dynamic support. If it falls, it will look towards 97.7913 (Bollinger middle track), and then to 96.7102 (lower track). The lows of 96.3729 and 96.2109 form a static double support band.
Trend and Momentum: MACD shows DIFF0.2019>DEA0.0465, and the MACD column 0.3109 is positive and enlarged, indicating that bull momentum is accumulating and there is no top divergence signal. RSI (14) is 62.8397, falling in the strong zone but not overbought, giving bulls technical space to continue their upward attack.
Technical summary: It is currently more like a test of the upper edge of a strong range. As long as 98.8724 is not effectively broken below, an upward attack to 99.0940 is still a high-probability path; if it stands firm at this level, the price will test the 100.2599 line. However, if it falls back below 97.7913, it means that the uptrend band has www.xmltrust.come to an end, and there is a risk of entering a box consolidation or even a phased reversal.
Market Sentiment Observation
Emotional Tone: The statement of interest rate cuts brings restraint to the bullish market sentiment of the US dollar; the data gap caused by the shutdown magnifies the weight of news drivers and makes sentiment more elastic.
Consensus and divergence: The market has almost reached a consensus on the Fed’s “cutting interest rates again within the year”. The differences lie in the pace and terminal interest rates. This means that near key levels, confirmation signals (such as: the closing price is stable above the upper track, or the volume is rising) can drive subsequent trend trading better than "guessing one step early".
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