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market analysis
Dollar gains pause, EUR/USD narrows losses
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange]: The rise of the US dollar pauses, the decline of EUR/USD narrows". Hope this helps you! The original content is as follows:
EUR/USD rebounded slightly during the European trading session on Friday (October 10). The pair was trading above 1.1572 after hitting a fresh two-month low near 1.1540 yesterday. Affected by the uncertainty of France's political and fiscal situation, the euro has fallen by more than 1.4% this week and is expected to be its worst week this year.
If the exchange rate of the euro against the US dollar falls again, more active buying behavior is expected to occur near the 1.150 level, ING analysts said. This price level implies room for more than 2% upside in the short term - assuming, of course, that USD/EUR swap spreads do not widen further. Analysts still prefer to see the exchange rate recover to the 1.170 level, although this process may not be very smooth and will not move in one direction.
On the other hand, the dollar is getting support from concerns about the situation in France and similar problems in Japan, analysts said. Sanae Takaichi, a candidate from the Liberal Democratic Party of Japan who supports economic stimulus policies, is currently regarded as the favorite to become the next prime minister. In addition, due to the delay in the release of most economic indicators due to the U.S. government shutdown, recent dovish www.xmltrust.comments from Federal Reserve policymakers have failed to weaken the strength of the U.S. dollar.
Market pricing shows that the probability of a 0.25 percentage point interest rate cut in October is 95%. However, the probability of further easing of monetary policy in December has dropped to 80%, www.xmltrust.compared with 90% a week ago.
In Friday’s economic calendar, the University of Michigan Consumer Confidence Index is expected to show a further decline in consumer confidence in October.
French Prime Minister Sébastien Le Corny earlier this weekThe unexpected resignation www.xmltrust.comes as markets await President Emmanuel Macron to appoint a new prime minister. The new prime minister will face the difficult task of pushing through an austerity budget, and opposition within parliament is strong - five prime ministers have been forced to step down in the past two years.
The weak and short-lived euro rally was understandable given Wednesday's French political news. Although the 10-year interest rate spread between German Bunds and French Bunds has fallen back to a low of around 80 basis points, the more forward-looking foreign exchange market still believes that there is little reason for investors to be optimistic about the trend of the euro.
As the candidate for the new prime minister is about to be announced today, it is generally believed that the new prime minister's political support base is still very weak. Although outgoing Prime Minister Lecornu has promised to fulfill the government's budget obligations to appease the market, these promises are obviously not enough to eliminate concerns about the stability of the French government.
Having said that, it is still difficult for us to see a substantial impact on the euro beyond the short term. Nonetheless, the euro may still get some benefit from today's new Prime Minister's statement.
If the U.S. employment data - whenever it is released - shows a trend that is more weak than strong, and next week's CPI data can also support the Fed's view of cutting interest rates in October, then political risks in France are likely to evolve into a negative impact on the entire European bond market, thus continuing to exert downward pressure on EUR/USD. For now, the conditions for this to happen do not exist. Although France's budget situation is very www.xmltrust.complex, market vigilance usually makes all parties act more cautiously on fiscal issues; the situation in the UK after Truss came to power, and the previous example in Italy, are clear evidence.
Technical Analysis
The exchange rate fluctuations of the euro against the U.S. dollar in recent months have formed an upward channel, and the exchange rate has fallen below the support line S. After falling below 1.16600, the downward trend of the euro against the U.S. dollar continues.
In mid-September, the exchange rate entered a supply zone. This supply zone is located above the previous high near 1.1790 and the psychological level of 1.1800. As the LiquiditySweep pattern shows, smart money appeared to be establishing short positions at the time.
Since then, the market has been seeking liquidity in the opposite direction. On the EURUSD chart, we have identified a potential demand area near key points, including: the lower track of the blue ascending channel; 1.1530, where a long stop-loss order may exist; and 1.14500 support.
From a short perspective, the market is currently in a downward channel; the midline of the channel and the previous local support level of 1.1600 may both constitute resistance.
Based on the above analysis, in the short term, the market still maintains a bearish trend; in the medium term, the bearish pressure may ease, and the EURUSD may enter the market.whole stage.
Whether this trend can be realized and what form it will take depends largely on the development of news and political situations in the United States and France.
The above content is all about "[XM Foreign Exchange]: The rise of the US dollar pauses, the decline of EUR/USD narrows". 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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