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Is the fragile rebound just an illusion? There are three major mysteries hidden in the euro, and short sellers may be "forced into a corner"!
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Hello everyone, today XM Forex will bring you "[XM Forex]: Is the fragile rebound just an illusion? There are three major mysteries hidden in the euro, and short sellers should be careful about being "forced into a corner"!". Hope this helps you! The original content is as follows:
The euro continued to rebound against the US dollar on Tuesday (October 28). The exchange rate has risen for the fifth consecutive trading day, climbing from the low of 1.1580 last week to around 1.1650. The euro continued to appreciate, once breaking through 1.1650, setting a new high in a week. Although the upward momentum is still fragile and faces resistance at 1.1670 and 1.1730, signs of easing in U.S.-China trade relations, an agreement between the United States and Japan, and market expectations for further interest rate cuts by the Federal Reserve on Wednesday have jointly pushed up risk appetite, putting pressure on the safe-haven dollar and supporting the euro.
The euro rose against the U.S. dollar, boosted by risk sentiment, and the central bank's decision became a key focus
Based on the current global risk environment, the performance of the euro against the U.S. dollar may have been stronger. Chris Turner, a foreign exchange analyst at ING, pointed out that the easing of U.S.-China trade issues will be good news for global trade and help continue the emerging optimism in business sentiment.
The Eurozone Purchasing Managers Index (PMI) unexpectedly rebounded last Friday, a phenomenon that is in sharp contrast to the pessimism that has gradually developed among economists this summer. Today, the European Central Bank (ECB) will also release a survey of consumer inflation expectations. The market expects three-year inflation expectations to remain at 2.5%. This result may give this Thursday's ECB meeting a very neutral tone.
The more critical debate may have to be left to the central bank meeting in December - when the 2028 Consumer Price Index (CPI) forecast will be released. If the value is lower than 2.05, it will open up space for a dovish stance.
At the same time this Thursday, the interest rate decisions of the three central banks of the United States, Japan and the Eurozone will be announced.If there is an unexpected result, there will be a huge shock in the foreign exchange market.
The trade and mineral agreement boosted market sentiment and limited the strength of the dollar
During his trip to Asia, U.S. President Donald Trump met with Japanese Prime Minister Sanae Takaichi and signed a framework agreement with Japan on the mining and processing of rare earths and other critical minerals. This news helped boost investor sentiment.
At the same time, Trump has maintained a positive attitude towards China. Earlier this week, US Treasury Secretary Scott Bessant confirmed that the threat of 100% tariffs had been shelved after China agreed to postpone the implementation of rare earth restrictions during talks in Malaysia over the weekend.
Affected by this, the US dollar, which has been favored by safe-haven funds recently, has fallen into a correction.
The short-term weakness of the U.S. dollar is dominated by expectations of a rate cut by the Federal Reserve
At the same time, U.S. inflation data released last week were weaker than expected, which basically confirmed that the Federal Reserve will cut the federal funds rate by 25 basis points on Wednesday. As the U.S. government shutdown enters its fifth week, the Federal Reserve lacks key macroeconomic data to support its decision-making. However, the market expects the central bank to signal that it may cut interest rates three times before December this year. If this signal is not released, the dollar may rebound.
Prior to this, the US house price index and consumer confidence data may provide certain guidance for the US dollar-related currency pairs. However, as long as investor risk appetite persists, a sharp recovery in the U.S. dollar seems unlikely.
Positive risk sentiment supports the trend of the euro
Positive market sentiment continues to support the strength of the euro and suppresses the safe-haven dollar. This impact offsets the impact of bleak economic data in the euro zone. For example, the German GFK consumer confidence index deteriorated more than expected in November.
Data released by the German GFK Research Institute showed that the German consumer confidence index fell to -24.1 in November from -22.3 in September, the worst level in the past seven months, and improved slightly to -22.0 below market expectations.
U.S. Treasury Secretary Bessent called on Japan to implement a "sound monetary policy," which puts some pressure on the Bank of Japan and may prompt it to continue its monetary tightening cycle.
Technical analysis:
As can be seen from the daily chart of EURUSD, the 20- and 30-day moving averages are still pointing downward, suppressing the euro's rebound.
What needs to be observed here is that the euro's range oscillation will accelerate the downward movement and turning point of the euro's moving average, so that the resistance of the moving average can be transformed into support.
Since 1.1600-1.1700 is a long-term transaction-intensive area and the euro is at a high level at the beginning of the month, as long as the exchange rate can stabilize, the 20- and 30-day moving averages will quickly repair, fall quickly, and turn around to become the technical support for the exchange rate.
The current support level is still the area surrounded by 1.1600 and the upward trend line, and the pressure level is around 1.1718.
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