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market analysis
Multiple factors intertwined, the trend of the US dollar stabilized
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Decision Analysis]: Multiple factors are intertwined, and the trend of the US dollar is stabilizing." Hope this helps you! The original content is as follows:
During the European trading session on Thursday (November 27), the U.S. dollar index was affected by multiple factors. After the opening, it fluctuated and dropped to an intraday low of 99.0050. After 16:00, it quickly rose to an intraday high of 99.6842, and then fell back to the current 99.3233. The overall fluctuation rhythm was "bottom-high-correction".
Durable goods orders and initial jobless claims data present divergent prospects
U.S. Census Bureau data showed that core durable goods orders excluding transportation increased by 0.6%, and non-defense orders increased by only 0.1%, indicating that following the strong performance last month, the growth momentum in related fields has slowed down. Labor market data provided some support, with weekly initial jobless claims falling to 216,000, a seven-month low.
However, the Chicago PMI index fell to 36.3, the lowest in months, reflecting continued pressure on business activity. Although the mixed data stabilized the dollar, it failed to change market expectations for recent policy easing.
The Federal Reserve’s dovish remarks suppress the dollar
A series of recent statements by senior Federal Reserve officials have strengthened market expectations for a possible interest rate cut at the Federal Open Market www.xmtraders.committee (FOMC) meeting on December 9-10. New York Fed President John Williams said that policy adjustments can be made without affecting progress in controlling inflation; Federal Reserve Governor Christopher Waller pointed out that the cooling of the labor market provides support for further easing; former Federal Reserve official Stephen Millan added that the overall economic weakness means that more significant interest rate cuts are necessary.
Geopolitical developments support risksPreference
Russian-Ukrainian negotiations achieved a diplomatic breakthrough, risk assets received a boost, and market sentiment further improved. Although officials warned that reaching a final agreement was still a long way off, the resumption of dialogue boosted investor confidence and reduced safe-haven demand for the U.S. dollar, keeping the U.S. dollar index under pressure.
Liquidity dropped significantly during Thanksgiving Day
This week’s correction in the U.S. dollar was mainly due to the decline in interest rates caused by the Federal Reserve’s loose monetary policy, rather than the weakening of safe-haven demand caused by the fall in geopolitical risks. Judging from market performance, the Japanese yen is more resilient than high-beta European currencies such as the Swedish krona. This difference shows that the weakening of the US dollar is more driven by monetary policy expectations rather than changes in risk aversion.
Affected by Thanksgiving Day, the U.S. market was closed, resulting in a significant decline in liquidity. In a thin trading environment, the Japanese authorities theoretically have more opportunities to intervene in the USD/JPY exchange rate. However, with the exchange rate showing recent stagnation, Japan may still prefer to wait for unfavorable data for the dollar before taking action. Although the U.S. dollar is still relatively expensive relative to G10 currencies, after this week's sharp adjustment, there is limited room for continued significant weakness in the short term. Ahead of more data, the dollar is expected to remain neutral.
Hassett becomes the popular candidate
The focus of the foreign exchange market gradually turns to the changes in the candidate for the chairman of the Federal Reserve. Kevin Hassett becoming the popular successor is driving the market to strengthen expectations for an interest rate cut in December.
Hassett is seen as a dovish candidate, and his addition has further tilted market expectations toward easing. But the dollar's reaction has been mixed: While data has yet to suggest the U.S. economy may be heading into recession, the slowdown has prompted investors to reassess the path of interest rates. The market's recent volatility may stem more from continued uncertainty about the direction of the Fed's policy than from a single event.
Technical Analysis
The U.S. Dollar Index is currently hovering around 99.48 after pulling back toward the upward trend line that has dominated the overall upward trend since early October. Prices are testing the support area formed by this trend line and the 200-day exponential moving average (EMA) at 99.40, which has become a key bull-short reaction point.
The relative strength index (RSI) is near 45, indicating that momentum has cooled, but there are no signs of extreme weakness. If bulls successfully defend this trend line support, the U.S. Dollar Index may rebound to 99.98 and challenge the recent swing high of 100.38.
On the contrary, if it falls below the 99.40 support level, it may drop to 99.10 and weaken the short-term upward structure. At present, the trend line is still the key observation point to determine the next direction of the price.
The above content is all about "[XM Foreign Exchange Decision Analysis]: Multiple factors are intertwined, the trend of the US dollar tends to be stable". It is carefully www.xmtraders.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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