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market analysis
Why does the euro always turn below the middle track
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange]: Why does the euro always spin under the middle track". Hope it will be helpful to you! The original content is as follows:
On Wednesday (August 20), the euro/dollar exchange rate hovered at 1.1640; it once fell to 1.1622 during the session, setting a new low and approaching the Bollinger's lower track of 1.1620. As the minutes of the FOMC meeting and Jackson Hall annual meeting approached, market risk appetite cooled down, and the xmniubi.combined xmniubi.combination of the safe-haven aversion of the US dollar and the rebound in real interest rates expected put pressure on the euro. The selling pressure in the equity market was concentrated in the technology sector on the eve of the eve, and the spillover effect of the overall weakening of risk assets also dragged down the performance of the euro.
State
In terms of the euro zone, the CPI in July was consistent with the initial value, with inflation remaining at 2% year-on-year, core prices -0.2% month-on-month and 2.3% year-on-year. Inflation stickiness did not accelerate significantly, which kept the market's bet on the European Central Bank's further tightening in the short term in a moderate range. Lagarde emphasized in Geneva earlier that the recent economic and trade agreements have not eliminated economic uncertainty and have made a more moderate judgment on growth in the fourth quarter; she also pointed out that the eurozone economy has shown certain resilience since this year. This statement is generally neutral and cautious, and fails to provide new upward action energy for the euro.
In the United States, the minutes of the FOMC meeting will be released tonight, but the discussion is earlier than a series of key labor and inflation data in the near future, and the timeliness may be limited. The real policy clues still look at Powell’s speech at Jackson Hall on Friday—the market is more concerned about whether “high interest rates last longer” is still the benchmark assumption, and the path to rebalancing between nominal interest rates and a decline in inflation. Before this, the rise in uncertainty itself strengthened the US dollar's defensive attributes.
Geo-level According to Reuters, the Kremlin's cold response suppressed the market's previous optimistic expectations regarding the follow-up progress after the US-Ukrainian meeting; Moscow's proposal as a potential meeting place was in UkraineCrane's refusal changed again, causing the prospects for subsequent negotiations to change. The tail risks to the European growth and energy chain are once again priced, and the risk premium of the euro has risen slightly.
At the same time, in the context of lack of heavy macro data, the US technology leader was under pressure on the eve of the past, leading the overall drawdown of the equity market, and the opening of major European trading sessions was also under pressure. The simultaneous decline in risky assets has increased the demand for US dollar capital and its long-term defense preference, suppressing the euro's rebound.
Technical aspect:
4-hour K-line shows that the exchange rate has fallen since 1.1729 and continues to fall in the Bollinger Band channel. It is currently at 1.1642, with the low point reaching 1.1622, approaching 1.1620 of the Bollinger lower rail; the middle rail is at 1.1666 and the upper rail is at 1.1711. The price of multiple entities running under the middle track indicates that the short-term is in the "weak range". At the index end, the MACD index DIFF is -0.0008, DEA is -0.0003, and the bar chart is -0.0010. The dead cross continues and the green column is lengthened, and the momentum is still bearish. The relative strength index (RSI, 14) is near 42.4860, below the neutral level 50, indicating that the trend short sellers dominate but have not yet been deeply oversold.
Structurally, 1.1698 and 1.1729 constitute two-stage intraday resistance in the continuous decline band; 1.1589 and earlier 1.1527 are the dense support areas below. If the short-term rebound is hindered by 1.1666 (Bolling's middle track) and falls back, the typical weak rhythm of "moving down-pulsing back-down" will still be maintained; only if 1.1666 is effectively recovered and back-tested upwards will not be broken, will there be a chance to restart the test of the 1.1711-1.1729 resistance band.
Preview of Market Sentiment
From the cross-asset linkage observation, equity asset drawdowns and the heating of hedging preferences, the US dollar has once again benefited from the "dual role" of liquidity and settlement currency. Information uncertainty increases during the period and event risks are ahead. Traders tend to reduce net risk exposure, and the options side prefers protective positions, and the bullish risk premium of the euro is under pressure.
There is no extreme panic in emotions. The RSI remains at the "weak balance zone" of 40-45, which means that "following the trend" is still the choice of multiple quantitative strategies; the demand for hedging is higher than the demand for bottom-up purchases, and the macro guidance is unclear, and short-term liquidity will surge more to the US dollar. Overall, the emotional framework and technical structure form a "same-directional resonance": risk aversion → strong US dollar → weak rebound of the euro.
The above content is all about "[XM Forex]: Why the euro always spins under the middle track". It was carefully xmniubi.compiled and edited by the editor of XM Forex. I hope it will be helpful to your trading! Thanks for the support!
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