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USD Bulls Trial Week! Four major storms hit together, one whale fell on all living things
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Official Website]: USD Bull Trial Week! Four major storms hit together, one whale fell and everything was born". Hope this helps you! The original content is as follows:
On Friday (November 28), the U.S. dollar index rebounded slightly during the Asia-Europe period, and has shown obvious weakness recently. The index currently rose slightly by 0.05% around the 99.58 line, but the cumulative decline this week has reached 0.60%, which is about to set the largest weekly decline since July. The index had just hit a six-month high a week ago, and its rapid decline in just a few days highlighted the market's increasing bearish sentiment against the U.S. dollar. This was also the U.S. dollar's steepest weekly decline in four months. This article lists some of the recent factors that have had a greater impact on the U.S. dollar index.
Hassett's candidacy amplifies easing expectations, and the dollar's word count fluctuates weakly
This correction in the U.S. dollar index stems from the current market pricing that the probability of the Federal Reserve lowering its benchmark interest rate by 25 basis points at the December meeting has soared to more than 87%, while only a week ago this probability remained at a low of 39%, and the rate cut expectations have increased significantly.
The more recent and more important news is that Kevin Hassett, director of the White House National Economic Council, has become a core candidate for the next chairman of the Federal Reserve. This news further strengthens easing expectations. Hassett once served as a senior economist at the Federal Reserve and is considered to be close to the Trump administration. Both parties support accelerating the pace of interest rate cuts.
On the Polymarket* platform, Hassett’s odds have climbed 18 percentage points to 53%, followed by Waller (22%) and Wash (16%).
But it is worth noting that Art Hogan, chief market strategist of B.RileyWealth, emphasized: "The market is very clear that interest rate decisions are not made by the Fed chairman alone.
The core responsibility of the chairman is to guide the consensus of the www.xmtraders.committee and ultimately control the voting power.in the hands of 12 www.xmtraders.committee members.
” Hogan further added: “Even if the market is worried that an extremely dovish chairman may implement ultra-loose monetary policy during his term, from the actual mechanism point of view, it is difficult for this to happen. As a result, the U.S. dollar index oscillated weakly.
U.S. bond yields have continued to fall back, suppressing the U.S. dollar
Since the United States announced its withdrawal from QT, the Federal Reserve has begun to resume the purchase of Treasury bonds and provide liquidity to the market. This behavior, together with the rising expectations of interest rate cuts, has suppressed the performance of U.S. bond yields. The lower U.S. bond yields have reduced the market's interest in allocating U.S. dollar U.S. debt, suppressing the trend of the U.S. dollar.
The Thanksgiving effect and the linkage between the US dollar and US stocks may
Previous articles have written that the US dollar index usually declines around Thanksgiving due to liquidity. At the same time, the previous article mentioned that US technology stocks may increase the pressure of short sellers to force the Federal Reserve to make policy changes. Later, Federal Reserve officials did issue many dovish signals, and at the same time, U.S. stocks rebounded, boosting market preference. Similarly, the depreciation of the U.S. dollar is another way to boost U.S. stocks (i.e., the depreciation of the U.S. dollar is beneficial to the value of U.S. stocks priced in U.S. dollars), which is helpful for the soft landing of U.S. stocks after their excessive gains.
Japanese, British and European currencies have significantly suppressed the US dollar index recently
Francisco Pessole, foreign exchange strategist at ING, pointed out that the current thin liquidity environment may attract the Japanese authorities to intervene in USD/JPY transactions, but he also reminded that the authorities may be more inclined to take action after the United States releases negative data, and the recent stabilization of the USD/JPY exchange rate has alleviated some of the urgency for immediate intervention.
It is worth noting that the recent strength of the yen has also benefited from the hawkish remarks of Bank of Japan officials, which is in sharp contrast to the US dollar's easing expectations, further exacerbating the fluctuation pressure of the US dollar against the yen.
The British government's unexpected financial plan and tax hikes made a clear statement that it is confident in handling government debt, boosting the pound.
At the same time, the European Central Bank meeting minutes released by the euro zone also clearly mentioned the stance of not intending to continue cutting interest rates this year and before the middle of next year. This stance is also reflected in the recent rebound of the euro.
Geopolitical risks weaken the dollar's safe-haven status
The continued advancement of negotiations on a potential peace agreement between Russia and Ukraine has diluted the dollar's safe-haven buying.
Regarding the progress of Russia-Ukraine negotiations, Russian President Vladimir Putin said that consultations with the United States and Ukraine may pave the way for a resolution of the problem, but analysts are skeptical about whether results can be seen in the short term. The uncertainty of the geopolitical landscape still provides potential volatility factors for the foreign exchange market.
Differences in institutional views and trading allocation recommendations
There are clear differences in the market's views on the outlook for the US dollar. Mark Heifele, chief investment officer of UBS Global Wealth Management, urged investors to re-examine currency allocation, saying that as the attraction of the U.S. dollar fades, it is more recommended to allocate the euro and the Australian dollar than the U.S. dollar;
BarclaysTymos Fiotakis, the bank's global head of foreign exchange strategy, put forward a different view. He said that the interest rate differential pattern and Eurozone growth expectations had previously been clearly beneficial to Europe, but these assumptions are currently being challenged - the high valuation of the euro and the solid resilience of the U.S. economy may limit the dollar's further decline.
Overall, the U.S. dollar will still be suppressed by interest rate cut expectations and policy uncertainty in the short term, while liquidity fluctuations, geopolitical developments and policy trends of major central banks will become key variables affecting U.S. dollar transactions. Investors need to focus on the forward-looking signals of the Federal Reserve’s December interest rate meeting and the progress of Hassett’s chairmanship, and be wary of the trading risks brought about by the valuation differentiation of non-U.S. currencies.
Technical analysis:
The U.S. dollar index has recently fallen below the red short-term uptrend line and the orange original uptrend line.
It is currently suppressed by the orange line and the 5-day line, while the lower support is near 99.3621.
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