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market analysis
Preparing for geopolitics and a dense Fed signal-intensive week
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Hello everyone, today XM Forex will bring you "【XM Group】: A Week of Preparation for Geopolitics and Fed Signals". Hope it will be helpful to you! The original content is as follows:
The US dollar performed hesitant on Monday (August 18). Investors closely monitored the upcoming Kansas City Fed Jackson Hall Seminar (August 21-23). Looking forward to Fed Chairman Jerome Powell's speech on the economic outlook and policy framework to provide clues to future monetary policy.
Federal Policy Outlook
The U.S. dollar index rebounded slightly to 97.85 after falling 0.4% last week. Market expectations for the Fed's 25 basis points cut rate next month fell to 84% from 98% last week, as recent rises in U.S. wholesale prices and strong retail sales data in July weakened the possibility of a 50 basis point sharp rate cut.
xmh100.comericaBank chief economist Bill Adams said: "Although the data is not xmh100.completely consistent, the U.S. economy performed well in the third quarter. The Federal Reserve may cut interest rates by the end of the year, or in September - the market's current rate cut, or in a few months - the forecast time for xmh100.comerica."
The data schedule this week is relatively light, but the Federal Reserve's policy has attracted much attention. The minutes of July FOMC meeting will be released on Wednesday, with two members opposing a 25 basis point cut.
Joseph Capsuo, head of international and sustainable economics at the xmh100.commonwealth Bank of Australia, pointed out: "Powell may discuss the current economic situation in the United States, which is more policy-related to the market. Given the high expectations for a rate cut in September, Powell may be regarded as a hawk if he gives a balanced economic view."
ING analyst James Smith added: "It may be too early to confirm the rate cut in September, but if labor market data changes, Powell will have to admit it."
There are other US before FridayFed officials spoke, but Christopher Waller's speech on Wednesday focused on the payment system of blockchain conferences, not the economic outlook.
The market generally expects the Federal Reserve to cut interest rates two to three times this year, supporting investors to continue to hold risky assets, asset class volatility is low, credit spreads are narrowing, and emerging market demand is strong.
Geopolitical Impact
Investors focused on Monday on the meeting between U.S. President Trump and Ukrainian President Zelensky, with some European leaders also participating, and Washington is pushing Ukraine to accept a rapid peace deal to end Europe's deadliest war in 80 years.
After meeting with Russian President Putin in Alaska, Trump prefers to seek a peace agreement rather than just a ceasefire, putting pressure on Zelensky to reach an agreement.
Western media believe that Trump and Putin's summit failed to promote a ceasefire and restore sanctions against Russia, which was regarded as a failure. However, the financial market response was relatively modest, with the euro/CHF maintaining its gains last week, oil and gas prices sluggish, and European and American stock index futures rose slightly after Asian stock markets performed well.
The remarks of U.S. envoy Steve Witkov brought a hint of optimism to the market, saying that Russia may accept NATO-like U.S. security assurances to Ukraine, which are seen by Ukraine and Europe as the core of the path to peace. If the geopolitical situation becomes clearer today, the market may usher in a positive reaction, although the territorial problem is still difficult to resolve.
Market Outlook
In the context of the global financial market, investors' confidence in the Fed's interest rate cuts drives demand for risky assets, and the Chinese stock market hits a decade-long high. Investors ignore the impact of tariffs and expect interest rate cuts and loose fiscal policies to drive global demand.
ING analyst Chris Turner predicts: "The dollar will maintain a moderate selling trend this week. Risk assets are sought after, energy prices are sluggish, U.S. dollar investors continue to invest, the dollar may trade in a narrow range and may fall below 97.00/97.10 on Friday."
The interweaving of geopolitics and Fed signals will make the dollar trend this week full of variables, and investors need to pay close attention to the further impact of Powell's speech and geopolitical progress on the market.
Technical Analysis
The US dollar index (DXY) will continue to move towards the median line of the downward channel.
As of August 18, the US dollar index is currently trading near the channel median and is forming a contraction triangle (blue). The relative strength index (RSI) is still close to the neutral 50 level, which indicates that the market supply and demand are in a equilibrium state.
Party participants need to be alert to rising volatility, and prices may fluctuate in either direction.
DXY will test a certain "quarterly line" (QL/QH, that is, the quarterly low/quarterly high line) in the downward channel. This scenario is consistent with the general trend of the overall weakening of the US dollar since January 2025. If the price breaks through the QL line or QH line and continues to deviate from the median line of the channel, it indicates that the market sentiment has changed and the index is expected to break through.The current oscillation structure opens up directional trends.
The above content is all about "【XM Group】: Preparing for Geopolitics and the Fed's Signal-intensive Week". It was carefully xmh100.compiled and edited by the XM Forex editor. I hope it will be helpful to your transactions! Thanks for the support!
Due to the author's limited ability and time constraints, some content in the article still needs to be discussed and studied in depth. Therefore, in the future, the author will conduct extended research and discussion on the following issues:
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