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The Fed's interest rate cut script may turn into a "Shura field" in an instant, and the euro will be bullish and short?
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Hello everyone, today XM Forex will bring you "[XM Forex Platform]: The Fed's interest rate cut script may become a "Shura Field" in an instant, and the euro will be bullish and short?". Hope this helps you! The original content is as follows:
Before the US market opened on Friday (October 24), the EURUSD consolidated sideways around the 1.16 line. The exchange rate has tried several times to approach and stand above 1.1630 but failed, and the range characteristics are obvious; at the intersection of data and policy, the short-term trend selection is postponed until after the release of US inflation.
Fundamentals
The most important data at the European level this week www.xmhouses.comes from HCOBPMI: the initial value of the manufacturing industry rose from 49.8 to 50.0 in October, returning to the threshold of prosperity and decline; the service industry accelerated from 51.3 to 52.6, the strongest in the past 12 months. The German PMI released earlier also showed marginal improvement, with the manufacturing industry rising slightly from 49.5 to 49.6, and the service industry jumping from 51.5 to 54.5. The improvement in data has increased the room for the European Central Bank's "hawkish" discussion. The market has cooled down on bets on further easing in recent months, and the interest rate differential has provided certain support for the euro.
On the U.S. dollar side, September CPI will be announced: the monthly rate is expected to be 0.4%, and the annual rate is expected to be 3.1%, which is an increase from 2.9% in August; the annual core CPI rate is expected to be 3.1%, the same as last month. The path of inflation will directly frame the wording and pace of the Fed's decision next week. Current derivatives pricing shows that the market is almost "marginally pricing" a 25 basis point interest rate cut - with a probability of 98.9%; at the same time, the probability of another 25 basis point cut in December is assessed at 91%. This means that the direction of interest rate convergence is not unilaterally positive for the euro. The key lies in the re-pricing of the CPI's stickiness to US inflation tonight.
Technical aspect:
The daily chart shows that the middle track of the Bollinger Bands is 1.1673, the upper track is 1.1809, and the lower track is 1.1538. The exchange rate is currently running below the middle rail and above the lower rail.The lower area shows the "neutral to weak" mean reversion state. In recent days, the K-line entity has narrowed and the upper shadow line has appeared frequently, reflecting that the selling pressure above is still tenacious in the range of 1.1630-1.1673.
MACD(26,12,9) is glued near the zero axis, DIFF is -0.0025, DEA is -0.0022, and the histogram is -0.0006. Although the kinetic energy is negative, the absolute value is very small, which belongs to "kinetic energy passivation in weak consolidation". Once the data is triggered, it is easy to form directional diffusion. The RSI is at 44.2827, which is below 50 but has not triggered oversold. The rhythm is more like a "short balance in the shock".
From the perspective of price structure, the short-term resistance first focuses on 1.1630, followed by the Bollinger middle track of 1.1673, and the strong resistance is at the upper track of 1.1809 and the previous high of 1.1918; the lower support first looks at the recent low of 1.1541, which forms a "resonance support" with the Bollinger lower track of 1.1538, and then looks at the deeper 1.1391. If there is a "bandwidth restart" in the future, you need to be wary of unilateral releases after the Bollinger Bands squeeze - upwards, you need to break through with heavy volume and backtest to confirm that 1.1673 turns into support; downwards, observe whether 1.1538/1.1541 falls and whether there is a "false breakthrough-rapid retracement" pattern signal.
Outlook
Scenario 1: Inflation is higher than expected. If the annual CPI rate is significantly higher than 3.1%, or the monthly rate exceeds 0.4%, the Federal Reserve's "second confirmation rate cut" will be questioned, and the US dollar may receive a short-term boost. Corresponding to the disk, the euro is likely to test the resonance support of 1.1541/1.1538; if the heavy volume breaks down and forms a second confirmation of "pullback cannot be broken", 1.1391 will enter the midline view. However, it needs to be emphasized that MACD is near the zero axis, and any "breakdown" must be accompanied by simultaneous resonance of the histogram amplification and RSI falling below 40, otherwise it is more likely to evolve into a "false breakthrough-V-shaped pullback".
Scenario 2: Inflation is in line with or lower than expected. If the CPI and core are both at 3.1% or below, and the monthly rate is no higher than 0.4%, the interest rate differential logic will be biased towards the euro, and the mid-track 1.1673 will become the primary challenge. If it can recover with the physical positive line and www.xmhouses.complete the "backtest successfully", the upper side will open up the technical repair space for 1.1809 and 1.1918. It should be noted that the upper limit of Bollinger Bands is still downward and passivated. If the upward trend wants to "go far", it must be accompanied by the bandwidth expansion and MACD returning to the zero axis. Otherwise, after rising high, it will easily fall back to the 1.1630-1.1673 box and repeat.
Risk points. First, the non-farm payrolls after inflation may revise expectations; second, if subsequent hard data in Europe fails to keep up with the pace of PMI stabilization, market consensus will cool down rapidly; third, if there is "unexpected hedging" in the caliber changes of the European Central Bank and the Federal Reserve, it will amplify fluctuations rather than provide trends.
Overall, the current situation is more like a "silence in front of the direction." European data provides the prototype of the story. The real sequel depends on how inflation writes the word "turning point" tonight.Before a clear signal appears, respecting the range and threshold is a dual reverence for price and risk.
The above content is all about "[XM Foreign Exchange Platform]: The Fed's interest rate cut script may turn into a "Shura Field" in an instant, and the euro will be bullish and short?" It was carefully www.xmhouses.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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