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market analysis
Before the 1.17 mark, who will blink first for EUR/USD?
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Hello everyone, today XM Forex will bring you "[XM Group]: Before the 1.17 mark, who blinked first for EUR/USD?". Hope this helps you! The original content is as follows:
On Monday (October 20), the EURUSD fluctuated around 1.1650 before the US market opened, and the short-term was still within the range of the previous trading day. The overall background is that risk appetite has been slightly restored, but the lack of new hard catalysts has allowed prices to continue to find direction within last Friday's volatility.
Fundamentals
Short-term drivers are "dislocated": On the one hand, external sentiment has improved marginally. Concerns about regional bank risks eased last weekend - financial reports from large banks showed that credit and revenue remained solid - the safe-haven US dollar gave up some of its gains, and risk appetite in the equity market was restored, which provided some support for the euro.
On the other hand, hard data from the core of the euro zone "sings the opposite tune." Germany's PPI in September was -0.1% month-on-month, and the market had previously expected +0.1%; this was the third consecutive month of month-on-month decline (-0.1% in July, -0.5% in August), and -1.7% year-on-year (previous value -2.2%). The continued weakness in industrial factory prices means that upstream price pressure is weak, suppressing the sustainability of the euro's rebound. European data during the week were relatively light, focusing on the strength and weakness of the speeches of the two European Central Bank executive members - Isabel Schnabel and Joachim Nagel - on inflation and policy outlook; if the words are more "symmetrical", it will be difficult to change the market consensus on "observe first and then act".
On the U.S. side, there will be no major data on Monday. More critical is the September CPI, which was postponed to Friday (postponed due to the government shutdown): this report will directly affect the tone of the Federal Open Market www.xmh100.committee's www.xmh100.communication. According to CMEFedWatch, the marketA 25 basis point rate cut at the October meeting has been “fully priced in”. If this bet is strengthened by CPI, the dollar may weaken further, which in turn will trigger repricing. The current macro picture therefore shows: Improved risk appetite supports the euro, but weak production data in the Eurozone and the "data forward-looking window" limit the rebound slope, making prices more likely to see-saw within the existing range.
Technical aspect:
The daily chart shows that the middle track of the Bollinger Bands is 1.1704, the upper track is 1.1859, and the lower track is 1.1549; the current exchange rate is below the middle track and above the lower track, which is a typical neutral-to-weak structure. The key highs in recent months are 1.1829 and 1.1918. After the two highs, no heavy-volume breakthrough was formed, forming a cumulative resistance above; the previous lows are 1.1391 and 1.1541, superimposed on the lower track 1.1549, forming a dense support band below.
MACD shows: DIFF-0.0020, DEA-0.0018, still running below the zero axis, the histogram -0.0004, the negative momentum has narrowed www.xmh100.compared with the previous period but has not yet turned positive, suggesting the nature of "weak rebound, momentum not confirmed". RSI (14) is around 47.7132, slightly lower than the 50 center, neither overbought nor oversold, which quantitatively corresponds to the mean reversion tendency of "consolidating the market".
Structurally, after falling back from the high point, the K-line entity shrinks, the upper and lower shadow lines alternate, and the Bollinger Bands bandwidth converges www.xmh100.compared with the previous period. There is a potential rhythm of "band mouth converging - directional breakthrough", but before it reaches 1.1704, the upward momentum is still in the observation stage; if it falls below 1.1549/1.1541, the downward target will naturally point to 1.1391, and in extreme cases, look back to the low of 1.1210. In terms of paths:
(1) Upward path: If the close returns and stabilizes above 1.1704, it is expected to backtest 1.1829 and further challenge the upper track of 1.1859 and the previous high of 1.1918 ;
(2) Downside path: If it falls below 1.16 and continues to be under pressure below the middle track, it will test the 1.1549-1.1541 support cluster, and the loss will trigger the "lower track-previous low" trend acceleration.
Outlook
Scenario 1: Bullish continuation (the probability increases with the lower CPI on Friday)
If the US CPI is moderate or lower than expected, in line with the market's existing pricing for the Federal Reserve to cut interest rates by 25bp in October, the US dollar will continue to be under pressure and the euro will get a tailwind. Technically, once 1.1704 is effectively recovered, the middle track will be transformed into dynamic support, with targets pointing to 1.1829 and 1.1859 in sequence; if the words of ECB officials emphasize "inflation stickiness" or "the need to maintain restrictive interest rates for a longer period of time," it is expected to further test 1.1918. What needs to be emphasized is that before MACD achieves the golden cross, the upward trend is more likely to be a "gradient backtest", mixed with retracement and backtest confirmation.
Scenario 2: Short sellers fight back (if US CPI is strong or interest rate cut expectations cool down)
If inflation readings push upActual interest rates are expected to cover the US dollar in stages, and the exchange rate may retest 1.16, and then point to the 1.1549/1.1541 support cluster; if this support is broken down by heavy volume, the daily structure will shift from "consolidating the market" to the early stage of the "downward channel", with the target naturally looking at 1.1391, and extreme circumstances will open up space to 1.1210. If the fundamentals are www.xmh100.combined with the continued weakening of production-side prices in the Eurozone, bears will gain a more solid narrative.
The above content is all about "[XM Group]: Before the 1.17 mark, who will blink first for EUR/USD?" It was carefully www.xmh100.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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