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market analysis
A collection of good and bad news affecting the foreign exchange market
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Hello everyone, today XM Forex will bring you "[XM Group]: A collection of good and bad news affecting the foreign exchange market". Hope this helps you! The original content is as follows:
On January 29, the foreign exchange market ushered in the first trading day after the Federal Reserve’s decision. The U.S. dollar index rebounded strongly to 96.60. G10 currencies such as the euro and the Swiss franc were generally under pressure. The Japanese yen weakened sharply after expectations of intervention cooled. The core contradictions in the market are concentrated on the three main lines of "the Federal Reserve's suspension of interest rate cuts + rising geopolitical risks + trade policy variables", and the long-short game has entered a white-hot stage.
1. The U.S. dollar: Good and bad factors intertwine, and the short-term rebound momentum is strong
Positive factors
The Federal Reserve kept interest rates unchanged: In the early morning of January 29, it announced that it would stabilize the federal funds rate at 3.50%-3.75%, ending three consecutive interest rate cuts. The 10-2 vote showed an eagle The faction's strength has increased (Milan and Waller support a 25 basis point interest rate cut)
Powell's hawkish stance: Emphasizing that "the next interest rate cut is not a basic assumption," suggesting that high interest rates will remain high for a longer period of time, suppressing the market's pricing of two interest rate cuts during the year
The U.S. Treasury Secretary reiterated the strong dollar: Bessant made it clear that "the United States has absolutely no intervention" "The foreign exchange market strengthens the yen" and reiterated the strong dollar policy to support the dollar's rebound
Economic data differed for the better: the Conference Board's consumer confidence index rose to 114.8 in January (a three-month high), showing that the resilience of the consumer side still exists
Negative factors
Trump has an ambiguous attitude towards the depreciation of the dollar: previously said "It is not a bad thing if the dollar falls too much", triggering market concerns about the shift in U.S. policy
The manufacturing industry continues to be sluggish: the Dallas Fed manufacturing index -14.3 in January, contracting for 12 consecutive months, suggesting that the foundation for economic recovery is not yet solid
The father of the "Dollar Smile Curve" warned: Stephen Jen saidA new round of decline in the U.S. dollar may have just begun, and the market is ill-prepared for a weakening U.S. dollar while the U.S. economy is strong
2. Major non-U.S. currencies: clear differentiation. The euro is under pressure and the Australian dollar is resilient
EUR/USD: negative-led fall of the 1.20 mark
Negative: Although ECB officials have expressed a hawkish stance, the euro zone economic recovery is weak strength, the PMI only rebounded slightly in January; the U.S. dollar rebounded after the Federal Reserve decision, and the euro fell below the 1.20 mark against the U.S. dollar, hitting as low as 1.1916
Positive: Euro zone inflation continues to fall, leaving room for subsequent policy adjustments; the German and French manufacturing PMIs have rebounded for two consecutive months, indicating a gradual recovery in industrial demand
GBP/USD: Shocking Downtrend UK National inflation data has become key
Bad: The market expects CPI to increase by 3.2% year-on-year in January. If the data exceeds expectations, it will strengthen expectations for an interest rate cut by the Bank of England; technical short positions account for 91%, dominating market sentiment
Positive: The British labor market remains resilient, with the unemployment rate remaining at a low of 4.2%, supporting the pound to maintain a certain degree of resilience during the correction
USD/JPY: Intervention expectations cooled and the yen weakened sharply
Bad for the yen: Bessent denied that the United States and Japan jointly intervened in the currency market, and the Japanese Finance Minister’s warning of intervention weakened; the Bank of Japan maintained a negative interest rate policy, and the policy divergence from the Federal Reserve expanded
Positive for the yen: tensions between the United States and Iran escalated, and geopolitical risks supported hedging demand; the Bank of Japan may In March, the decision was made to adjust the policy to provide medium- and long-term support for the Japanese yen
Australian dollar against the US dollar: rising against the trend, www.xmtraders.commodity attributes support resilience
Good: China's economic recovery is expected to heat up, and www.xmtraders.commodity prices such as iron ore rise; Australia's PMI rose to 50.5 in January, returning to the expansion range
Bad: The Federal Reserve's high interest rate environment continues, limiting the Limiting the upside of the Australian dollar; global trade policy uncertainty increases
3. Trading strategies and risk tips
Core operation suggestions
EUR/USD: short in the 1.1980-1.2000 range, stop loss 1.2040, target 1.1910-1.1880 (short-term bearish)
USD Against the Japanese yen: buy low in the range of 146.80-147.00, stop loss 146.20, target 147.80-148.00 (intervention expectations cool down)
Australian dollar against the US dollar: buy low in the range 0.7020-0.7030, stop loss 0.6990, target 0.7080-0.7100 (commodity attribute support)
Major risk warning
The Federal Reserve policy exceeds expectations: If subsequent economic data worsens, the interest rate cutting cycle may restart, and the US dollar may be under pressure again
Japanese intervention risk: After the yen falls below 148.00, the Japanese government may take substantive intervention measures, triggering violent fluctuations
The U.S.-Iran conflict escalates: If the situation gets out of control and causes supply disruptions in the Middle East,Risk aversion may drive the Swiss franc and gold to surge, but the U.S. dollar will have limited benefit
Sudden changes in trade policy: U.S. tariff policies may trigger a chain reaction, affecting the pace of global economic recovery and currency exchange rate trends
Summary: On January 29, the foreign exchange market showed a pattern of "dollar rebound and non-U.S. differentiation" under the impact of the Federal Reserve decision. Investors should focus on the breakout of the 96.00-97.00 range of the U.S. dollar index, as well as the support effectiveness of the euro 1.19 mark and the yen 147.00 mark. It is advisable to remain cautious in short-term operations and adjust strategies after the UK CPI and US GDP data are released. In the medium and long term, we need to be alert to the risk of a new round of decline in the US dollar and geopolitical black swan events.
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