Fundamental analysis of FOREX for EUR/USD on February 28, 2023
Reduced risks of a recession in the U.S. economy have returned fears of a pause in the Federal Reserve's tightening of monetary policy to the market. Investors are fixing shorts on EUR/USD, which allowed the pair to rise from local lows. However, it is unlikely that big players will step up before the release of the US labor market report (March 10) and inflation data (March 14).
Also, the Durable Goods Orders report that showed a 4.5% (m/m) decline in January and also progress on the UK-EU trade issue in Northern Ireland played against the dollar. This news made sterling quite strong which helped the single currency to rise.
At the same time I think that investors were a bit biased on Durable Goods Orders data in the US. If we exclude defense and aircraft orders, the volume growth was 0.8%, which is the best figure in five months. And if we add last week's positive statistics, the U.S. economy is recovering at an impressive pace.
Economic resilience in the face of aggressive monetary policy tightening has brought out a new and old term - sticky inflation. This brings the Fed back to the 1970s, when a premature end to tight policy quickly brought old problems back to the markets, and in large amounts. In this regard, recalling the idea of a "dovish" reversal makes no sense.
At the same time, the profit taking on EUR/USD seems to be logical, as investors considered the old drivers as worked out and the new ones will come out later. The markets will use them to try to figure out how high the Fed will raise interest rates in March.
In such an environment, it is unlikely that EUR/USD will move out of the 1.048 -.1.068 range. We give preference to trading on Forex according to the news, which, however, will not appear soon.