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The US dollar index is approaching its previous high, and the three major momentums and a variable are forming a new balance
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Official Website]: The US Index is approaching its previous high, and the three major momentums and a variable are forming a new balance." Hope it will be helpful to you! The original content is as follows:
On Tuesday (September 2), the U.S. Congress resumed its meeting, less than one month before the deadline for fiscal appropriation on September 30, and the risk of a government shutdown has increased. At the same time, the Federal Reserve is about to hold a September interest rate meeting. The market generally expects a rate cut, but inflation and employment data are contradictory, which puts decision-making in a dilemma. Against this background, the US dollar index shows obvious upward momentum, and the technical and fundamentals are intertwined, providing traders with a www.xmniubi.complex analytical perspective.
Fundamentals: The superposition of multiple positive factors supports the strengthening of the US dollar
The strength of the US dollar is not groundless, behind it is the resonance of multiple fundamental factors.
1. Potential risk of government shutdown: The U.S. Congress resumed, but the two parties still had serious differences on the issue of federal budget allocations, making the September 30 deadline imminent. Although historical experience shows that government shutdowns usually don’t last long, market risk aversion has heated up in the context of current tensions between the two parties. This uncertainty often drives capital into dollar assets seen as a “safe haven”, pushing up the dollar index. It is particularly worth noting that although the Republicans account for the majority in the House of Representatives, they need Democratic support in the Senate to pass the appropriation bill, which increases the www.xmniubi.complexity of the game and also increases market concerns.
2. Contradictions and outlooks of the Federal Reserve’s policy:
Although the market generally expects the Federal Reserve to cut interest rates by 25 basis points in September, the data behind the decision is full of contradictions. Although the recent employment growth in the United States has shown weakening, the unemployment rate remains at a low of 4.2%, and the wage growth rate remains at around 4%, which is enough to support consumption and offset some inflationary pressure. Analysts from well-known institutions are alsoThis view is different, forming two factions: one believes that the labor market may be on the verge of collapse, and the Federal Reserve should act in advance to cut interest rates to prevent risks; the other believes that in the context of continued wage growth and decreased labor supply, slow growth in the employment market may become the new normal, and inflation risk remains the primary concern.
This disagreement makes the Fed's decision-making full of uncertainty. Although Powell opened the door to a rate cut at the Jackson Hall meeting, he also stressed that one-time price increases will not evolve into a sustained inflation problem. Therefore, the upcoming August employment and inflation data will be crucial, and they will serve as a key reference for determining whether the Fed cuts interest rates in September and the direction of future policies. This uncertainty in the market has made traders more inclined to hold the dollar before the Fed meeting to hedge potential policy surprises.
3. Strong support of the bond market:
The strength of the US dollar has also been strongly supported by the U.S. Treasury yield. The recent jump in yields is particularly eye-catching: the 10-year U.S. Treasury yield rose to 4.287%, the 2-year U.S. Treasury yield reached 3.656%, and the 30-year U.S. Treasury yield rose to 4.980%, setting a new high since mid-July. The overall rise in U.S. Treasury yields, especially the soaring long-term yields, has enhanced the attractiveness of U.S. dollar assets. This not only reflects the market's confidence in the U.S. economy, but may also be a reaction to future inflation expectations.
In addition, in sharp contrast to the U.S. bond market, long-term Treasury yields in major European countries have also risen sharply due to investors' concerns about their fiscal health. For example, France's budget deficit concerns arising from its government facing a vote of no confidence have led to the 30-year treasury yields rising to its highest since 2009; Germany's long-term treasury yields also rose to its highest since 2011. This differentiated trend, especially as the European Central Bank may be forced to maintain high interest rates due to higher-than-expected inflation data, makes the dollar more advantageous www.xmniubi.compared to major currencies such as the euro.
Technical: The US dollar index has made a strong breakthrough, with significant bullish momentum
As shown in the 240-minute chart, the US dollar index is currently at 98.3949, up 0.74% during the day. This performance is supported by a series of technical indicators.
First of all, from the moving average system, the US dollar index has stood firm above all key short-term moving averages on the 240-minute chart. The 20-period simple moving average (SMA) is at 97.8576, the 50-period SMA is at 98.0926, and the 100-period SMA is at around 98.0964. These moving averages are forming a bullish arrangement, and the latest price has far exceeded all these support levels, showing a strong upward trend. It is particularly noteworthy that after the price hit a low of 97.1022 recently, it began to rebound steadily and broke through the previous high of 98.8290. Although it fell back, it rebounded rapidly. It has approached or even exceeded the short-term key resistance of 98.5197, which shows the market's view of the US dollar.The rise is strong, and the selling power is relatively weak.
Secondly, from the perspective of the relative strength index (RSI), the current RSI value is 63.5235. This value indicates that the U.S. dollar index is in a strong area but has not reached the extreme level of overbought (usually above 70), which provides potential room for subsequent gains. The steady rise of RSI is synchronized with the price trend, which also confirms the health of the current bullish trend.
The technical analysis of the US dollar index is clear: after breaking through multiple key resistance levels, the market has formed a new upward channel. Although a pullback may occur in the short term, as long as the price remains above the key moving average, especially above the level around 98.09, the bullish pattern will be difficult to change. The current price recovery seems to be testing the previous highs. If it can effectively break through and stand firm, it may open up space for further upward.
Future trend outlook
Looking forward, the trend of the US dollar index will still be deeply affected by the above multiple factors. From a technical perspective, the US dollar index has successfully broken through key resistance and established a solid long foundation. As long as the price remains above 98.09, the upward trend may continue, and the next goal will be to further test or even break through the previous highs.
From the fundamentals point of view, the biggest uncertainty in the short term www.xmniubi.comes from the Fed's policy direction and the upcoming economic data. If August employment and inflation data can provide a clear signal for the Fed's decision to cut interest rates, it may trigger severe market volatility. However, if the data remains contradictory and the debate within the Federal Reserve intensifies, the dollar's safe-haven attributes and interest rate advantages will continue to attract capital inflows and support its strength.
In addition, the political game within the US Congress will also be another major variable in the trend of the US dollar. Any positive progress on avoiding a government shutdown could ease market risk aversion in the short term, and any deadlock could exacerbate the safe-haven buying of the dollar.
To sum up, the US dollar index has shown a clear upward trend under the www.xmniubi.combined effect of technical and fundamentals. In the www.xmniubi.coming trading days, market focus will focus on progress in the U.S. Congressional appropriations negotiations and key economic data before the Federal Reserve meeting. Traders need to pay close attention to these dynamics to cope with potential market volatility.
The above content is all about "[XM Forex Official Website]: The US Index is approaching its previous high, and the three major momentums and a variable are forming a new balance". It is carefully www.xmniubi.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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