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The shutdown crisis rekinds the foreign exchange market! The euro rebounds continuously, the dollar collapses
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Analysis]: The shutdown crisis rekinds the foreign exchange market! The euro rebounds continuously, and the US dollar collapses." Hope it will be helpful to you! The original content is as follows:
On Monday (September 29), the euro opened with a moderate upward trend, continuing the rebound trend, and is now trading around 1.1720. The market's concerns about the likely shutdown of the US government this week, coupled with expectations of the Federal Reserve's continuous interest rate cuts, have jointly pushed the US Treasury yields and the US dollar to fall across the board.
Today's market focus is on US President Trump. In order to avoid a government shutdown by Wednesday (first day of fiscal year 2026), he will hold final consultations with lawmakers from both parties. However, given the huge differences in positions between the two parties, the possibility of reaching a buzzer-beating agreement is slim. Although the impact of the government shutdown is usually controllable, if it lasts too long, it may lead to a delay in the release of key non-farm reports on Friday. If the data cannot be released before the Fed's interest rate meeting on October 28, it will seriously interfere with the Fed's interest rate decision.
In terms of macro data, the euro zone consumer confidence index and speeches from several European Central Bank officials will provide fundamental guidance for the euro, and the speeches of many Federal Reserve officials in the future may provide new clues to the Federal Reserve's recent monetary policy.
The shadow of the government shutdown is shrouded, and the US dollar continues to be under pressure
The market focus on Monday was on the risk of the US government shutdown, and the US dollar continues to face selling pressure. In the absence of important macroeconomic data, all eyes are on Trump’s emergency talks with congressional leaders from both parties.
U.S. Treasury yields are falling from recent highs. The benchmark 10-year Treasury yield fell 5 basis points from its 4.2% high last week, and the 2-year Treasury also fell from its high of 3.67% on Friday to 3.63% in early trading on Monday.
In terms of macroeconomic data,The final value of the euro zone's September consumer confidence index is expected to confirm a moderate improvement in the initial value, rising to -9 from -15.5 in August. Nevertheless, the value is still well below the historical average, reflecting on the ongoing concerns about the economic outlook.
After a later period, ECB members Nagar, Schnabel and Liane will make speeches one after another, and are expected to emphasize that the central bank is fully prepared to deal with uncertainty and will take corresponding actions based on the data performance.
During the US market period, speeches by Fed Director Waller, Cleveland Fed Chairman Hamack, St. Louis Fed Chairman Muselem, New York Fed Chairman Williams and Atlanta Fed Chairman Bostic will become the focus of market attention.
The US PCE price index released last Friday confirmed the market expectations of stable inflation pressure, and retained the possibility of continuous interest rate cuts in September and October. Data from the U.S. Bureau of Economic Analysis showed that overall inflation in August rose slightly to 2.7% year-on-year from 2.6% in July, and core inflation stabilized at 2.9% year-on-year, both in line with market expectations.
Technical Analysis: Euro vs. the U.S. dollar is in a key trend change period
Euro vs. the U.S. dollar rose on Monday (September 29), but the technical indicators on the 4-hour chart are mixed. The moving average convergence-divergence indicator (MACD) shows a bullish crossover, but the relative strength index (RSI) is difficult to break through the key 50 level, indicating that the upward trend is fragile. The pair fell below the uptrend line last week, highlighting a potential trend shift that could be in a correctional rebound before further depreciation.
In the upward trend, the high of 1.1742 on August 22-23 and the current reverse trend line of 1.1765 form a resistance barrier. The exchange rate needs to effectively break through this area to break the short-term bearish structure, and then re-hit the high of 1.1820 on September 23-24.
Downward direction, the 1.1645-1.1655 support area remains firm after multiple tests last week and September 11. If it is lost, it will further fall to the low of September 2-3 1.1610 and the low of August 27 1.1575.
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