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market analysis
The external data is impressive, but the inside is already "falling apart"?
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market xmtraders.commentary]: The surface data is eye-catching, but is it already "falling apart" on the inside?". Hope this helps you! The original content is as follows:
Tuesday, November 18th. The current focus of the foreign exchange market is on the one hand, the unexpected improvement in the Eurozone's growth rate in the third quarter, and on the other hand, how the Federal Reserve will reassess its policy path before the release of the latest employment data. The EURUSD is currently oscillating around 1.1590 during the European session, and the US dollar index is hovering around 99.50. Traders are constantly weighing between "improving European growth expectations" and "recurring expectations for U.S. interest rates", which also constitutes the core background for the recent fluctuations in the EURUSD.
The preliminary growth rate of the Eurozone in the third quarter was better than expected, which is the first "pillar" to support the euro sentiment. What is more worth emphasizing is that this unexpected performance did not xmtraders.come from a single economy, but was driven by France and Spain. Among them, France's growth rate is higher than the market's original estimate and is close to Spain, which has a stable performance; while Spain continues to maintain its "leading" status against the average growth rate of the euro zone. This xmtraders.combination shows that the euro area is not in a downturn, but showing structural differentiation: some countries in southern Europe still have strong recovery momentum.
But in sharp contrast, Germany and Italy almost stagnated in the third quarter, significantly weaker than the previous "slightly positive growth" forecast. As the traditional engine of manufacturing and exports in the euro zone, Germany continues to "lag behind", making traders remain cautious when interpreting this stronger-than-expected growth data. In other words, while macro data at the euro area level boosts confidence, it also exposes imbalances in the economic structure, which is still a constraint that cannot be ignored when pricing the mid- to long-term trend of the euro.
It can be seen from the time dimension that in the post-epidemic period, Italy once became a relatively leading economy with a strong rebound, but since 2022Since the end of the year, France has gradually regained its advantage in average quarterly growth thanks to more stable domestic demand and the recovery of the service industry. This change in the "frontrunner" does not mean that the Eurozone as a whole is off the low-growth track, but it does send a signal: the growth driver within the Eurozone is shifting from the traditional "German-Italian manufacturing portfolio" to the "France-Spanish service industry and consumption", which will have a certain repricing effect on the valuation logic of the euro.
Looking to the future, the market generally believes that there is room for continued improvement in the macroeconomic climate of the Eurozone. Surveys of business and household confidence continued a modest recovery trend in October, indicating a marginal improvement in demand expectations. At the same time, European defense and armament-related expenditures are gradually implemented, and Germany's large-scale investment plan is also advancing, which will provide a certain foundation for medium-term growth. More importantly, inflation has fallen significantly and is close to the target range, allowing the European Central Bank's policy to be at a relatively "comfortable" level and maintain moderate restrictions without rushing to tighten again. This will not only help stabilize prices, but also avoid a second blow to fragile growth.
In the United States, the focus of the macro narrative is gradually shifting from "inflationary pressure" to "employment risk." The return of the official jobs report is particularly critical due to the temporary interruption in important economic data caused by the previous government shutdown. The recent statements of many Federal Reserve officials have gradually prepared public opinion for the scenario of "employment cooling". Director Waller pointed out that xmtraders.companies are "making room" for artificial intelligence-related investments by reducing recruitment, and the weakening consumption of low- and middle-income groups has also put pressure on recruitment plans, thus providing a reason to continue cutting interest rates.
In contrast, Vice Chairman Jefferson, while acknowledging the rising downside risks to employment, also emphasized that the current interest rate level is close to the "neutral range" and that it is necessary to remain cautious when further easing and avoid acting too quickly. This xmtraders.combination of "dove yet cautious" has caused a subtle adjustment in the market's expectations for an interest rate cut in December: according to derivatives pricing, the probability of a 25 basis point interest rate cut has dropped from more than 60% a week ago to less than half. This re-pricing process pushed up the U.S. dollar index in the short term, causing a significant upward trend on Monday before falling slightly around 99.50.
For the euro against the dollar, this means that interest rate spreads and policy expectations are entering a more xmtraders.complex stage. On the one hand, if euro area growth does gradually stabilize and inflation close to target allows the European Central Bank to keep interest rates relatively stable, while the United States is forced to cut interest rates faster due to weaker employment, the narrowing of interest rate differentials will provide some support for the euro in the medium term. On the other hand, if the Fed waits longer and cuts interest rates at a slower pace than currently xmtraders.compressed expectations, the short-term interest rate advantage will still be biased towards the U.S. dollar, limiting the upward space for the euro.
Technical aspects
From a daily perspective, the EURUSD has generally maintained a downward shock structure after falling from the high of 1.1918. In the early stage, it gradually formed three lows at 1.1573, 1.1541 and 1.1468. The current price is running around 1.1590 and is in the consolidation stage after the recent rebound. 1.The early intensive trading area around 1700 is still clearly suppressed from above, and the short-term trend has not yet gotten rid of the previous high and downward pattern.
The MACD indicator shows an upward cross between DIFF and DEA below the zero axis, and the columnar line turns from green to red, indicating that the short and medium-term short-term momentum has weakened, and the price has entered the rebound repair stage, but the trend is still neutral and weak. RSI has risen from the low to around 50, indicating that the oversold condition has eased and the long and short forces have become balanced. If the price continues to fluctuate around the above-mentioned support and resistance range in the future, it will more reflect the re-pricing process of fundamentals and news facing the mid-term direction.
The above content is all about "[XM Foreign Exchange Market xmtraders.commentary]: The surface data is eye-catching, but the inside is already "falling apart"?", which is carefully 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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