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The U.S. dollar index held steady, as the U.S. AI sector worried about the direction of disagreement with the Federal Reserve.
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market xmtraders.commentary]: The U.S. dollar index remains stable, and the US stock AI sector is worried about the direction of disagreement with the Federal Reserve." Hope this helps you! The original content is as follows:
In early European trading on Wednesday (November 19), the U.S. dollar index rose slightly by 0.16% to around 99.74. Judging from the time-sharing chart, the U.S. dollar index showed a strong rebound trend of first declining and then rising, and the overall bullish momentum was concentrated in the afternoon session.
The US dollar’s sensitivity to intraday fluctuations in U.S. stocks has reached its highest level in recent years
In the past week, Nasdaq has fallen by nearly 4%, and the total market value of the seven giants has evaporated by more than 400 billion US dollars. The market’s doubts about the sustainability of AI valuations have significantly increased. Derek Halpenny, a foreign exchange strategist at Mitsubishi UFJ, said in his latest xmtraders.comment that "the sensitivity of the U.S. dollar to intraday fluctuations in U.S. stocks has reached its highest level in recent years, reflecting investors' concerns about technology/AI issues spilling over to the overall economy." High-yield bond spreads widened to their highest level since June, signs of deleveraging emerged, and risk-sensitive currencies such as the Australian dollar and Mexican peso performed weakly.
Federal Reserve officials send signals of disagreement
Differences within the Fed over the policy path for December continue to ferment. Federal Reserve Vice Chairman Jefferson emphasized the need to "slowly" advance interest rate cuts, while Bostic and Schmid repeatedly mentioned that the risk of inflation remains. The data vacuum caused by the government shutdown further exacerbates uncertainty, and the market is concerned that the Federal Reserve will be forced to maintain a hawkish stance despite "incomplete information." The release of the minutes of the October meeting tonight will be the focus. If the minutes show that more members have reservations about further easing, the upward pressure on the US dollar will increase.
The double test of NVIDIA’s financial report and delayed non-agricultural employment
NVIDIA’s Q3 performance has attracted much attention. FactSet data shows that 92% of S&P500 xmtraders.companies have announced financial reports, 82% of which have exceeded expectations, and overall revenueAn increase of 13.1%. However, Nvidia's forward price-to-earnings ratio is still as high as 22.4 times, much higher than the five-year average of 20.0. Once the guidance is conservative or Blackwell's supply bottleneck is exposed, the technology sector may experience concentrated selling, which will be negative for the U.S. dollar in the short term.
The non-farm payrolls in September, which will be delayed tomorrow, are expected to have only 50,000 new jobs and the unemployment rate remains stable at 4.3%. If the data is weak, it may re-raise expectations for an interest rate cut in December and limit the dollar's upside.
Technical Analysis
(U.S. Dollar Index Daily Chart Source: Yihuitong)
The U.S. Dollar Index is generally in a shock stage after an upward trend. It rebounded from 96.2109 in the early stage, once reaching 100.3599, and then entered a downward adjustment. The price is currently running above the middle track of the Bollinger Bands (99.4561), showing that short-term bullish strength still has some support, but it has not yet broken through the pressure area formed by the previous high. The RSI is hovering around 59, with no clear overbought signal yet.
Support level:
First support: 99.31-99.38 (Fibonacci 0.236 retracement level + EMA20 moving average, short-term defensive line for bulls);
Second support: 98.94-98.99 (EMA50 moving average + middle rail of the descending channel, key support for the mid-term trend);
Third support: 98.63 (lower rail of the Bollinger Bands, extreme support level).
Resistance level:
First resistance: 99.67-99.75 (Fibonacci 0.5 retracement level + current price area, the first short-term upward pressure);
Second resistance: 99.84-100.00 (EMA200 moving average + integer mark, mid-term pressure zone);
The third resistance: 100.28-100.36 (Bollinger Band upper limit + previous high, strong pressure level).
If Nvidia triggers a further fall in risk assets tonight, the index may test the support of 99.30, or even test the channel's lower rail at 98.99; conversely, if the minutes are hawkish and the financial report is solid, bulls are expected to break through 99.70 and point to the 100.30 integer mark. The short-term trend is volatile, and the direction depends entirely on the outcome of two major events tonight.
Market Outlook
In the short term, the US dollar is still dominated by the dual factors of technology stocks and the Federal Reserve. If NVIDIA maintains its expectations and the minutes do not show obvious dovish signals, DXY is expected to strengthen slightly after encountering resistance near 99.75; however, any disturbance in the AI sector may trigger a reversal of risk aversion, and the risk of US dollar depreciation cannot be ignored. Employment data before the end of the year will ultimately determine the main tone of the U.S. dollar. Currently, we maintain a range-based approach.
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