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The market has already retreated before Powell's words came out. What else can EUR/USD rely on to counterattack?
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market www.xmltrust.commentary]: Before Powell's words, the market has retreated first, what else can the EUR/USD rely on to counterattack?". Hope this helps you! The original content is as follows:
During the European session on Thursday (October 9), the EURUSD continued its weakness in the previous three days and is now trading above 1.16. The exchange rate continues to be under pressure after retracing its highs during the week. The near-end technical structure has not yet shown a reversal signal, and the short-term risk tendency is still biased to the downside. At the fundamental level, the U.S. dollar is supported by cautious sentiments, while the euro is squeezed by uncertainty within Europe and swings in policy prospects.
Fundamentals
In the past three trading days, the US dollar's "resilient rebound" has been the main line of the euro's decline against the US dollar. The market continues to ignore the noise of the temporary shutdown of the U.S. federal government and the delayed release of macro data, and returns the pricing anchor to policy www.xmltrust.communication and the path of inflation. There are no surprises in the minutes of the latest Federal Reserve meeting, but the wording "some members are still worried about inflation" strengthens the market consensus that "the path of interest rate cuts is not one-way proof": after the 25 basis point interest rate cut has been implemented, although the next two interest rate cuts have not been www.xmltrust.completely ruled out, the flexibility of the path has expanded, allowing the dollar interest rate premium to gain time value again. CMEFedWatch shows that the market currently has a 22% probability of "holding no action" in December, which jointly supports the "defensive buying" of the US dollar in terms of interest rate swaps and duration preference.
In the data vacuum period, the right to speak is particularly amplified. The cautious stance during the European session helped the US dollar "hold its ground", making the EUR/USD rebound unsustainable. Next, the focus will fall on the Eastern session - Federal Reserve Chairman Powell will deliver the opening speech at an event in Washington. If he once again emphasizes the need to be patient with further policy easing in the context of a lack of key data due to the government shutdown, it will prompt the market to lower its bets on an interest rate cut in December, and the dollar may gain upward momentum again.
On the European side, another source of pressure on the euro is the continuation of the "French factor": the uncertainty of the political landscape has not yet been cleared, and the forward-looking discount of macro policy coordination and reform agenda has caused the euro area risk premium to rise in stages. Potential fluctuations at the geopolitical level are also increasing the demand for safe havens, indirectly supporting the US dollar. In this structure, the euro's short-term counterattack requires "foreign aid" - for example, from the Federal Reserve's obviously dovish tone, or from the rapid cooling of risks within the euro zone - both of which currently lack sufficient evidence.
In general, the absence of data, dominance of speech, and swings in interest rate expectations constitute the current three major frameworks. As long as the U.S. dollar maintains the www.xmltrust.combination of "higher real interest rates + strong voice", it will still be difficult for the euro to rise against the U.S. dollar. If the euro wants to get out of trouble, in addition to waiting for the "French risk" to dissipate, it also needs an improvement in growth margins at the European level to hedge the U.S. dollar's yield advantage.
Technical aspect:
As shown on the daily chart, the Bollinger Bands show a mild opening, and the price runs closely to the lower track after three consecutive negative lines. The lower track is located at 1.1610, forming the primary static/dynamic support band that overlaps with the 1.1600 integer mark; the middle track is at 1.1728, which is the first strong resistance to the upward trend; the upper track 1.1845 and the previous high of 1.1918 form a higher resistance cluster.
In terms of K-line form, the recent negative line entity is relatively long and the upper shadow line is relatively limited, which reflects "selling pressure with the trend" rather than purely emotional selling. There has not yet been a clear reversal signal such as a hammer line or a morning star. RSI (14) is about 40, which is in the weak zone but has not entered extreme oversold, suggesting that "technical rebound space exists but the winning rate is insufficient"; in terms of MACD (26, 12, 9), DIFF is about -0.0013, DEA is about 0.0004, and the histogram is about -0.0035. The negative kinetic energy below the zero axis is still there, and there is no sign of a golden cross.
If the exchange rate effectively falls below the 1.1610/1.1600 support band, the "volatility following" selling pressure caused by the expansion of the Bollinger Bands' lower track may intensify; on the contrary, if it exceeds 1.1728 and the backtest confirmation is www.xmltrust.completed, the mean reversion trend from "consolidation lower edge" to "middle track regression" can be discussed. At historical points, the low of 1.1391 and the recent high of 1.1918 jointly define the boundary of the wide horizontal channel. The current price is in the lower half of this range, and the trend advantage is still on the short side.
Market Sentiment Observation
Since this week, the risk preference index and cross-asset correlation have shown the shadow of "defensive position rebalancing": the equity market band has retreated, the long-term yield of U.S. debt is more sensitive to policy remarks, and the "safe haven attribute" of U.S. dollar liquidity on the foreign exchange side has increased. The EURUSD's handicap feedback is reflected in the following: the attempt to break through was "slapped" by rapid selling pressure, the rebound was weak in sustainability, and the volume-price relationship was biased towards a "volume-energy-led" decline - that is, a rebound in shrinking volume and a fall in volume. At the collective psychological level, the market's confirmation bias on "if the Fed cuts interest rates in October, whether another cut in December is necessary" is still strong. Once the word "more patient" is heard, it is easy to trigger "repricing - price pursuit - stop loss"chain reaction.
Correspondingly, the sentiment is not extreme: RSI has not triggered the traditional oversold threshold, and there is no typical pattern of panic selling, which means that any upside is more likely to be a "technical rebound" rather than a trend reversal. Reverse indicators suggest that if Powell is less "cautious" than expected and instead releases a softer signal, it will easily trigger a short-term squeeze in the crowded short-term range. However, this "short-term squeeze" lacks macro support and is doubtful in its sustainability.
The above content is all about "[XM Foreign Exchange Market www.xmltrust.commentary]: Before Powell's words, the market has retreated first, how can the EUR/USD rely on to counterattack?" It was 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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