Trusted by over 15 Million Traders
The Most Awarded Broker
for a Reason
CATEGORIES
News
- 【XM Forex】--USD/CAD Forecast: Is the Dam About to Break in the Canadian Dollar?
- 【XM Market Review】--WTI Crude Oil Weekly Forecast: Speculative Prices and Intrig
- 【XM Decision Analysis】--EUR/USD Weekly Forecast: Full Volumes and Nervous Values
- 【XM Decision Analysis】--USD/CAD Forecast: Pulls Back Against Canadian Dollar
- 【XM Decision Analysis】--EUR/USD Forex Signal: Bearish Sentiment as Risks Rise
market news
History may repeat itself, false signals may prompt a rebound
Wonderful introduction:
Since ancient times, there have been joys and sorrows, and since ancient times, there have been sorrowful moon and songs. But we never understood it, and we thought everything was just a distant memory. Because there is no real experience, there is no deep feeling in the heart.
Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Analysis]: History may repeat, false signals may promote rebound again." Hope it will be helpful to you! The original content is as follows:
The US dollar decline in the past two months may be difficult to last in the future. This scenario is exactly the same as the false signals caused by last year's non-agricultural data. The US dollar fell significantly after the Fed's interest rate meeting on Wednesday (September 17), and soon rebounded after Powell's press conference. Given that the overall data still shows economic resilience and concerns about the Fed's independence seem to be over-exact, the market may correct its interest rate cut expectations again, thereby injecting new upward momentum into the US dollar.
Dollar trend seems familiar?
Recalling the same period in 2024, the US dollar index bottomed out and rebounded, followed by a 10% surge in the months following a major correction of the market's expectations for the Fed's interest rate cut. The weakness in summer non-farm reports ultimately proved to be a huge false signal to the labor market. Looking at the current trend, the US dollar trend is likely to be about to repeat history.
There are also differences - for example, there were no concerns about the independence of the Federal Reserve at this time last year, and there was no need to deal with the presidential election factors this time - but the background pattern was surprisingly similar. A year ago, the market expected a rate cut of nearly 250 basis points by September 2025, while the actual rate cut was 125 basis points, and the labor market situation continued to be firmer than expected.
Beware of false summer non-agricultural signals
The market's interest rate pricing as of September 2026 has eliminated the expectation of interest rate cuts of more than 100 basis points (excluding the rate cut this week). The current pricing logic is once again based on a concern that a low recruitment, low firing environment will eventually drive up unemployment.
This is indeed possible, but assuming you have no access to non-farm reports but have access to all other economic data, would this strongly suggest a significant rate cut? Perhaps there is this demand in the real estate sector, but what about other sectors? Just look at this week's data: Retail sales are boomingGrowth; unemployment benefits have hit a record low in years.
We (including the Fed, of course) seem to rely too much on a job report that has only sent false signals over the years. The total number of jobs has been revised down by 1.7 million in the past two years, and the significant downward revisions already exist in monthly data is enough to prove that this report is not trustworthy. The only thing that is consistent is unemployment and application data, which convey a very different message: the labor market remains stable, not stagnant.
As 12 months ago, if the slowdown in employment fails to push up the unemployment rate, the market may need to sharply correct its expectations for the scale of interest rate cuts again—especially as inflation continues to deviate from the 2% target. If full employment is maintained, the Fed will find it difficult to view the impact of tariffs on xn--xm-6d1dw86k.commodity prices as a temporary factor, as this may exacerbate wage pressure.
Controversy over Fed's independence
Of course, the recent rise in interest rate cuts is not only due to concerns about the labor market, but also concerns about the weakening of the Fed's government's independence. Unlike Trump's wanton slammed by social media during his first term, his second term's push for rate cuts is more strategic—by appointing xn--xm-6d1dw86k.committee members who match the president's will, it naturally leads to believe that interest rates may be significantly lower than they should have been.
Risks do exist, but if the signs of this week are used as reference, the risks that may be posed by the loss of Fed’s independence may be avoided, which means that policies will not be automatically set to extreme easing to ensure that the economy is overheated. It is true that new director Stephen Milan voted against the 50 basis points rate cut and was likely the FOMC member who predicted that he would need to cut 150 basis points this year, but he is obviously an extreme exception.
Importantly, other Trump-appointed directors—Christopher Waller and Michelle Bowman—were unanimously voted with the rest of the xn--xm-6d1dw86k.committee to cut interest rates by 25 points, avoiding the situation where three policymakers support a larger rate cut along the political line. Although this is only a meeting, it should at least alleviate concerns that future policies will be based on non-economic factors.
Even if Milan is appointed as the next Fed chairman, a sharp rate cut will be difficult to achieve unless he can convince the rest of the xn--xm-6d1dw86k.committee to follow his claims. Although his forecast for the end of the year is low, it is worth noting that the median federal funds rate expectation this week is only an additional rate cut xn--xm-6d1dw86k.compared to the forecast three months ago. If the market is looking forward to finding evidence that the Fed's independence has been significantly damaged, unfortunately this meeting did not provide it.
The surge in the rebound momentum of the US dollar?
For the US dollar, xn--xm-6d1dw86k.combined with evidence of economic resilience beyond the non-agricultural report, this inevitably raises doubts whether the downward trend since the turbulent "Liberation Day tariffs" will continue to expand. From a technical point of view, recent price trends suggest that the US dollar index may have formed a short-term bottom.
From the daily chart, the "piercing pattern" formed on Wednesday (September 17) after the Fed meeting is a classic reversal signal - this pattern sets a new low with a gap low, but in the futureThe trading period was strongly reversed. Thursday's follow-up buying strengthened this signal, and the price is currently testing short-term downtrend resistance (near 97.50).
The momentum index also shows signs of turning: the relative strength index RSI (14) breaks through the downward trend line and rebounds to a neutral level; although the MACD has not confirmed the steering, its regression to the signal line at least indicates that the downward pressure is easing.
Although it is necessary to remind that the market on Friday has not yet settled, as far as the current trend is concerned, the "hammer line" of the weekly chart also constitutes a classic reversal pattern. Historical experience shows that various patterns on the weekly chart of the US dollar index (both bullish or bearish) often provide reliable forward signals.
While there are not many investors who directly trade the U.S. dollar index, the signal can be used to evaluate the trends of other currency pairs, especially the EUR/USD and U.S. dollar/JPY – two currencies that hold an absolute dominant weight in the U.S. dollar index.
The above content is all about "[XM Foreign Exchange Market Analysis]: History may repeat, false signals may promote rebound again". It was carefully xn--xm-6d1dw86k.compiled and edited by the XM Foreign Exchange editor. I hope it will be helpful to your trading! Thanks for the support!
Only the strong know how to fight; the weak are not qualified to fail, but are born to be conquered. Step up to learn the next article!
Disclaimers: XM Group only provides execution services and access permissions for online trading platforms, and allows individuals to view and/or use the website or the content provided on the website, but has no intention of making any changes or extensions, nor will it change or extend its services and access permissions. All access and usage permissions will be subject to the following terms and conditions: (i) Terms and conditions; (ii) Risk warning; And (iii) a complete disclaimer. Please note that all information provided on the website is for general informational purposes only. In addition, the content of all XM online trading platforms does not constitute, and cannot be used for any unauthorized financial market trading invitations and/or invitations. Financial market transactions pose significant risks to your investment capital.
All materials published on online trading platforms are only intended for educational/informational purposes and do not include or should be considered for financial, investment tax, or trading related consulting and advice, or transaction price records, or any financial product or non invitation related trading offers or invitations.
All content provided by XM and third-party suppliers on this website, including opinions, news, research, analysis, prices, other information, and third-party website links, remains unchanged and is provided as general market commentary rather than investment advice. All materials published on online trading platforms are only for educational/informational purposes and do not include or should be considered as applicable to financial, investment tax, or trading related advice and recommendations, or transaction price records, or any financial product or non invitation related financial offers or invitations. Please ensure that you have read and fully understood the information on XM's non independent investment research tips and risk warnings. For more details, please click here