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Powell presses the "slow release button", will the US dollar break 98 before PCE?
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Hello everyone, today XM Forex will bring you "[XM Forex]: Powell presses the "Slow-Release Key", will the US dollar break 98 before PCE?". Hope it will be helpful to you! The original content is as follows:
Before the US market on Wednesday (September 24), the US dollar index was tug-of-war around 97.70; continuing the retracement-rebound rhythm after Powell's press conference last week. The 38.2% retracement level near the 97.20 rebound last week has been briefly broken and quickly recovered. The price has once again "returned to buying" and repeatedly tested the 97.80 line; if it effectively recovers 97.80, it is expected to point to 98.30 in theory.
Fundamentals: Interest rate path and pull of growth/inflation
The US early September PMI shows momentum cooling: the service industry fell from 54.5 in August to 53.9, and the manufacturing industry fell from 53 to 52, both of which are consistent with market expectations, but there is a lack of positive surprises and limited marginal support for the US dollar. At the same time, Powell emphasized that the policy faces a "challenging situation" and further interest rate cuts are not a foregone conclusion; he reiterated that the current interest rate range is the appropriate position for the central bank to "retain marching space." In contrast, director Michelle Bowman's statement: If demand has not recovered for a long time, employment may be under pressure, and the "urgency of interest rate cuts" has increased.
New Fed Director Miran this week raised the view that "neutral interest rates are nearly zero and current interest rates are extremely tight", but this judgment does not form a consensus. Many officials believe that the policy is "only a little tight", while the U.S. growth rate is still higher than the non-inflation potential level. Miran attributes the rise in nearly monthly inflation in part to the tariff shock and regards it as a "one-off", but this transmission chain remains to be verified.
At the interest rate trading level, the auction of two-year Treasury bonds of US$69 billion was mediocre; today, the two-year floating rate and US$70 billion five-year notes continued to be issued, and the supply pressure short-term impact on the US Treasury yields, which in turn affects the pricing of the US dollar interest rate spread.
Looking forward in the next few days, durable goods orders and core PCE will be launched one after another, followed by GDP updates. If the "scissors gap" between inflation and growth continues to widen, the Fed's "gradual" interest rate cut path will take precedence over the "steep drop" concept. On the medium-term framework, the Federal Reserve has lowered 25bp on September 17 and tends to continue to cut interest rates in the next quarter. The policy ceiling may slowly fall from 4.25% to a neutral level closer to 3%. However, if the relaxation is too fast, in addition to the one-time impact induced by tariffs, the demand side will be ignited again, which may also lead to a rise in secondary inflation. In Europe, the European Central Bank is seen as "close to the target", and the fluctuations in the gap in power between France and Germany have exacerbated uncertainty in the European bond market, intermittently pushing up safe-haven and dollar demand.
xn--xm-6d1dw86k.comprehensively, the basic situation faces the impact of the US dollar index, three main lines are presented: 1) The path of "refunding interest rates - but not aggressive" brings support to the US dollar for time and space; 2) The marginal slowdown in growth and softening of employment constitutes an upper limit constraint on the US dollar; 3) The fluctuations in global interest rate spreads and European debt risks have phased strengthened the safe-haven premium of the US dollar.
Technical aspect:
Four-hour K-line (240 minutes) shows that the upper, middle and lower rails of the Bollinger band are located at 97.7905/97.4454/97.1003 respectively. The price is currently running above the Bollinger middle rail and approaching the upper rail, indicating that the short-term trend is relatively strong but is facing track suppression. Since the long lower shadow rebound (low point 96.2109), triggered in mid-September, the price has built a higher step around 97.1820, and has once again risen to 97.7479 and 97.8179 areas to form a double resistance zone.
In terms of momentum, the MACD indicators DIFF=0.0330 and DEA=0.0178, the bar chart is positive and slightly narrowing, showing a "high-level slowdown", implying that the upward action energy is still there but the propulsion efficiency is declining, and new catalysis (such as PCE) is needed to effectively break through. The relative strength index RSI (14) is 62.2320, which is in a range that is relatively strong but not overheated, and is a typical "strong oscillation" structure.
Support-resistance structure is clear: the first support is at 97.4454, and the second support is back at 97.20 Fibonacci's 38.2% retracement level; the first resistance above is 97.7479-97.8179 range. If the positive line of the large volume reaches 97.80, the technical target will naturally look at 98.30. If the surge is blocked and falls below 97.45, the box oscillation will be turned into the short-term box between the middle rail and the lower rail (97.10).
Future Outlook:
Short-term (1-3 days): Event-driven forward tends to trade sideways at a high level between 97.45-97.80; if the data gives a xn--xm-6d1dw86k.combination of "inflation resilience + growth is acceptable", the US dollar index has the opportunity to cross 97.80 and point to 98.30 in a "volume breakthrough" way; on the contrary, if PCE weakens simultaneously with demand, it is not surprising to pull back 97.45 or even test 97.20 again.
Middle line (1-4 weeks): Under the policy anchor of "gradual interest rate cuts", the US dollar's medium-term logic relies more on the global relative prosperity and interest rate spread structure. If the interest rate spreads continue to fluctuate in Europe and the growth of the United States only falls moderately, the US dollar is easy to defend and difficult to attack, and it will show a pattern of "high consolidation - trading on data pulses"; if employment significantly falls and inflation falls rapidly, the upward trend of the US dollar will give way to a deeper mean return, and then 97.10-96.80 (near the Bollinger lower track and above the previous low) below 97.20 will become a key observation area.
The above content is all about "[XM Forex]: If Powell presses "Slow-Release Key", will the US dollar break 98 before PCE?", which is carefully xn--xm-6d1dw86k.compiled and edited by the editor of XM Forex. I hope it will be helpful to your trading! Thanks for the support!
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