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Rating downgrades wrestling with expectations of US interest rate cuts, EUR/USD
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: The rating downgrade is in a struggle with the expectations of interest rate cuts in the United States, the euro/dollar dilemma". Hope it will be helpful to you! The original content is as follows:
On Monday (September 15), the euro/dollar exchange rate once retreated to 1.1720 and then rebounded to around 1.1740, and the volatility was suppressed. After France's sovereign rating was recently downgraded by Fitch to A+, the euro started with cautiousness; at the same time, the US dollar was restricted, and the market focused on the Fed's interest rate decision and dot chart that will be announced on Wednesday. The superposition impact of French political uncertainty and the expansion of fiscal deficit is still fermenting, but from the current pace, the Fed's interest rate outlook and forward guidance are the core variables that determine the short-term direction of the US dollar and the euro.
Brands:
Fitch recently lowered France's sovereignty rating to A+, reasons include unstable political situation (Macron appointed Sebastian Le Corne as his third prime minister last week) and the prospect of an expanded deficit. The immediate impact of rating news on the euro is limited as the market is more concerned about the Fed's results and forward guidance in Chairman Powell's press conference. The market generally includes the baseline scenario of "25 basis points for interest rate cuts", but what is more important is the interest rate path and www.xm-forex.communication tone: if the dot chart and wording are more dovish, the US dollar may continue to fall; if the tightening rate cut path of "slower and longer" is released, the US dollar may obtain phased support.
In terms of macro calendar, today is a light time: ECB President Lagarde will attend the roundtable forum in Paris, and Schnabel will speak in Luxembourg. Its www.xm-forex.comment on France's fiscal and the inflation path of the euro zone may provide marginal clues to the euro. In the United States, in the "silent period + key data window" before the Federal Reserve, the directional bets of the US dollar tend to be cautious, and transactions and volatility converge simultaneously.
The U.S. inflation www.xm-forex.combination was mild last week: CPI gains were moderate and PPI was weaker than expected, in line with the University of MichiganConsumer confidence fell sharply to a four-month low in September. Surveys showed that higher www.xm-forex.commodity prices caused by tariffs curbed consumption propensity and pressured growth momentum; this set of data as a whole "pave the way" for the interest rate cut this week and the more dovish monetary policy stance. In the European bond market, France's 10-year yield rose by about 5 basis points to above 3.5%, and the 30-year yield rose to 4.33%, which was lower than the high level when the euro was triggered in early September, but it still had a restraint on euro bulls. The equity market and www.xm-forex.commodity market also show a "waiting mode", and risk preferences have not changed in a trend.
Technical aspect:
In the daily chart: Bollinger upper rail 1.1763, middle rail 1.1678, lower rail 1.1592; the latest K-line entity is located between the middle rail and the upper rail, near the 1.1740 line, showing a "consolidation upward of the upper rail". Recently, Bollinger's bandwidth has been slightly opened after a period of convergence, indicating that the risk of fluctuation expansion driven by event is accumulating. Since the price rose from the low point of 1.1391, the price has www.xm-forex.completed a retracement-restart rhythm in the 1.1573 area. Currently, it has repeatedly tested the upper track 1.1763, and the previous significant swing high point is 1.1779; earlier, the high point of 1.1789 is also within the field of view, forming a dense resistance zone.
In terms of MACD, DIFF=0.0024 and DEA=0.0019 are located above the zero axis and DIFF is slightly higher than DEA. The bar chart is a weak positive value, and the kinetic energy is "moderate but not enlarged", indicating that the upward trend still needs catalyzing. RSI (14) is about 56.28, which is in the neutral and strong range and has not yet entered the overbought.
www.xm-forex.comprehensive judgment: The upper resistance is focused on 1.1763 (Boleiner's upper rail)-1.1779-1.1789 in turn; if it effectively breaks upward and increases in volume, the daily line may turn into the trend extension section of "strengthing the outer edge of the upper rail"; on the contrary, if it is repeatedly blocked near the upper rail and accompanied by a long upper shadow, you need to beware of false breakthroughs and fallbacks in the middle rail 1.1678; support is to look at the price range near 1.1700 integer mark and 1.1680, and then it is 1.1592 (Boleiner's lower rail). Before the lack of cooperation between large volume and strong momentum, the pattern is still dominated by repeated gameplay on the upper edge of the box, and event risks may become the "trigger" for direction selection.
Future Outlook:
Scenario 1 (doves are more dovish): If the Fed cut interest rates by 25bp as scheduled this week, and the dot chart will move overall downward, and the press conference emphasizes the lagging impact of growth and financial conditions on the real economy, the US dollar may be under pressure. At this time, if the exchange rate rises above 1.1763/1.1779 and stands firmly above it, it is expected to open the upward expansion of 1.1800-1.1830 (corresponding to the Bollinger band opening and MACD bar chart enlargement). The strategic meaning is a technical increase of "trend extension", but we still need to be wary of a pullback after a dense upper shadow line is formed near the upper edge - back-testing the middle track.
Scenario 2 (Partial Eagle Correction): If the rate cut rhythm and forward-looking are cautious, or the dot chart's downward revision of the number of interest rate cuts next year exceeds market expectations, the US dollar will stabilize and the euro will be at 1.176The probability of rising and falling in the 0-1.1780 area increases; the exchange rate may back-test the 1.1700 integer and 1.1680 near support. If it falls below and closes again with the Bollinger band, the daily line will return to the horizontal channel; further declines focus on 1.1678 (Ballinger middle track) and 1.1592 (lower track).
The above content is all about "[XM Foreign Exchange Decision Analysis]: The rating downgrade and the US interest rate cut expectations, the euro/dollar dilemma" is carefully www.xm-forex.compiled and edited by the XM Foreign Exchange editor. I hope it will be helpful to your trading! Thanks for the support!
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