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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market Analysis]: A collection of good and bad news affecting the foreign exchange market". Hope this helps you! The original content is as follows:
Since December, the foreign exchange market has become more volatile due to the multiple effects of Federal Reserve policy expectations, data divergence from major economies, and easing geopolitical risks. This week's Federal Reserve interest rate meeting is approaching, coupled with the intensive release of key economic indicators from various countries, the market direction has become increasingly critical. The following is a summary of the core positive and negative factors currently affecting the foreign exchange market.
Negative factors are concentrated: U.S. ADP employment decreased by 32,000 people in November, a new low since March 2023, the number of initial jobless claims last week was 191,000 lower than expected, and the cooling labor market signal strengthened the logic of interest rate cuts. The CMEFedWatch tool shows that the market is betting that the probability of the Federal Reserve cutting interest rates by 25BP this week has risen to 89%. At the same time, the Trump administration's tariff policy has shaken the credit foundation of the U.S. dollar. The U.S. dollar index rebounded to around 100 at the end of November and came under pressure again. Technically, it has fallen below the 50-day moving average, and 99.0 has become the short-term watershed between long and short.
Potential support appears: the Fed’s independence still exists, Powell has withstood political pressure to maintain policy stability, and the market’s concerns about “the central bank becoming a political tool” have been marginally alleviated. In addition, the negative correlation between international gold prices and the US dollar has been broken, and the expansion of gold trading demand has provided implicit support for the US dollar.
The positive logic is highlighted: data from the General Administration of Customs show that my country’s total foreign trade import and export value increased by 3.6% in the first 11 months, and the export growth rate accelerated to 5.7% in November. The proportion of imports and exports of private enterprises increased to 57.1%, and the trade structure continued to be optimized. The www.xm-bx.combination of solid economic fundamentals and the weakening of the U.S. dollar has pushed the central parity rate of the RMB against the U.S. dollar to rise.To 7.0733, the FOB price once exceeded 7.06, setting a new high since October 2024. In October, northbound funds increased their holdings of Chinese government bonds by more than 3.2 trillion yuan, and foreign capital inflows further consolidated exchange rate support.
Risk warning: Guan Tao of BOC Securities reminded that there is a possibility that the RMB will rise above the 7 mark, but it is necessary to be alert to the risk of unilateral market reversal brought about by the rebound of the US dollar and changes in policy rhythm, and www.xm-bx.companies need to strengthen exchange rate risk management.
Euro and Japanese yen: Positive policies dominate: The euro against the U.S. dollar maintains a rebound trend after nine consecutive positives, with the 5-day line of 1.1650 forming effective support. Stable German inflation and improved manufacturing PMI expectations strengthen bull confidence. The Japanese yen was driven by expectations of an interest rate hike by the Bank of Japan. The U.S. dollar fell to the 155.50 range against the yen. After Kazuo Ueda released a hawkish signal, the market priced in a rate hike probability of December rising to 73%.
www.xm-bx.commodity Currencies: The long-short game intensifies: The Australian dollar benefits from the policy divergence between the United States and Australia, but iron ore prices are expected to fall by another 4% next year due to China’s real estate demand, restricting appreciation space, and the technical head-and-shoulders pattern suggests the risk of a correction. The Canadian dollar was supported by Canada's third-quarter GDP exceeding expectations, and the U.S. dollar maintained a volatile range against the Canadian dollar, waiting for U.S. manufacturing data to guide the direction.
In the short term, the focus should be on the Federal Reserve’s interest rate resolution on Wednesday. The intensity of interest rate cuts and policy statements will determine the mid-term direction of the US dollar. Also pay attention to China's November foreign exchange reserves data, the Eurozone manufacturing PMI and the Bank of Japan's interest rate decision. In terms of operations, dollar shorts need to be wary of the risk of overdraft in policy expectations, long RMB orders can be held with the support of 7.08, and the euro needs to pay attention to the breakthrough of the 1.1700 resistance level to avoid pursuing the unilateral market trend of non-US currencies.
The above content is all about "[XM Foreign Exchange Market Analysis]: Collection of good and bad news affecting the foreign exchange market". It is carefully www.xm-bx.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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