FOREX fundamental analysis on August 31, 2022
A number of reputable banks believe that if it were not for the rising cost of gas, the position of the European currency would be quite stable, as the ECB is switching from a wait-and-see attitude to hawkish rhetoric. But forex trading rules out the subjunctive mood. Cost of energy plays a significant role in the euro quotes.
Over the past decade Europe has become very dependent on Russian oil and gas. Now it will take at least two years for the Old World to switch to other LNG suppliers. However, this year Europe benefited from the outbreak of coronavirus in China, which reduced the production activity in the Celestial Empire and, consequently, the consumption of fuel, which Beijing generously resells to European consumers. As a result, filling of Europe's gas storage facilities is happening faster than planned.
In addition, the reduced risk of an energy crisis reduces the likelihood of a recession in the Eurozone, which is likely to be taken into account by the EUR/USD quotations. Now if the threat of the economic recession has passed, maybe it's time to close the EUR selling? Moreover, the head of Bundesbank Joachim Nagel thinks that threat of recession should not prevent the ECB to tighten financial conditions. A number of members of the European Central Bank's Governing Council are calling for a September rate hike of 75 basis points at once. On the futures market the odds of this scenario rose to 60%.
So, the euro has a reason to resuscitate. Another thing is that the competitor of the single currency is much stronger and the energy crisis did not disappear overnight. Consequently, the potential of EUR/USD strengthening is limited.
The continuation of the rally in US bond yields and the decline in stock indices speaks in favor of the dollar. Besides the Fed doesn't leave the tightening of the monetary policy program and will raise the rate at September meeting. And the probability of its increase by 0.75% is already 73%. As representatives of the FRS state, the regulator has a lot of work ahead. It means the dollar is unlikely to cede its positions.
A good point to enter the shorts on EUR/USD is 1.025, but large players can start selling from the area of 1.0115-1.0165.
AUD/USD analysis on June 5, 2023On Monday AUD/USD does not show any clear trend and remains around the key level of 0.6600.Australia's service sector business activity index fell from 53.7 to 52.1p, which is the smallest value among the indexes of the world's leading economies. Gross profits of national companies in the first quarter fell markedly from 12.7% to 0.5%.The Reserve Bank of Australia will hold a monetary policy meeting tomorrow. Most experts do not expect the regulator to make any changes. The rate is likely to remain at 3.85%. The previous pause in monetary policy tightening caused inflation to rise from 7.4% to 7.8%.The US dollar index remains at 104.00. The US service sector business activity index will be released today. It is projected to rise from 53.6 to 55.1 p.On the Daily chart, the Rectangle pattern, through the lower boundary of which the price came out last week, is noticeable. Alligator indicator and awesome oscillator retain their sell signals.After the pair fixes below 0.6560, we will open a short position with Take Profit at 0.6460. Stop loss is set at 0.6600.In case the asset breaks above 0.6600, we start buying with a target of 0.6780. Stop-loss is set at 0.6600. 
Since the beginning of the week GBP/USD has not decided about the direction of the movement and traded near the key level of 1.2400. However the pair's dynamics after the US labor market report released last Friday shows a more bearish trend.Non-farm Payrolls showed 339 thousand new jobs against the forecast of 190 thousand. However, over the month the unemployment rate rose from 3.4% to 3.7% and the average wage growth slowed down from 4.4% to 4.3%.Reuters conducted a poll of British residents, according to which the majority of citizens expect house prices to fall by 3.0% in 2023. Previously, the figure was 2.4%.Today, the UK and the US will release business activity indexes whose values will influence the monetary policy of the central banks.Technical Analysis for GBP/USDBollinger Bands indicator on the chart of the day is in the horizontal plane. MACD indicator is almost at zero level and does not give out any signals. Stochastic Oscillator turned down and came out of the overbought area.After the pair has consolidated below 1.2390, consider an entry into short positions with Take Profit at 1.2307. Stop loss is set at 1.2450.If the GBP/USD strengthens above 1.2450 we start forming long positions with the target at 1.2550. We place a protective stop at 1.2390. 
FOREX Fundamental analysis for EURUSD on June 5, 2023The US labor market report once again confirmed the steady recovery of the American economy. Contrary to all expectations the employment growth amounted to 339K and the average wage growth slowed down to 4.3%. Even a cursory comparison with the Eurozone explains the sharp decline of EURUSD on Friday.In such a situation the Fed does not necessarily need to raise the rate in June, but the FOMC members are still divided on the issue. Of course, Friday's NFP will be a boon for the hawks who think a continuation of monetary tightening is necessary. Indeed, the U.S. economy added 1.5 million jobs in 2023 with an average monthly job gain of 314,000. This is well above the pre-pandemic 187,000 jobs. So the tightening of financial conditions by the regulator is not affecting the economic recovery as much as analysts had anticipated.Non-farm Payrolls was good news for both the dollar and the stock indices.At the same time, the doves will be nodding to an increase in unemployment from 3.4% to 3.7% and a slowdown in average wage growth.Derivatives are betting on a pause. The likelihood of a monetary restriction in June has fallen, but the odds of a July rate hike have risen from 54% to 68%.The Fed raised the cost of borrowing 10 times for a total of 500 points and brought the rate to 5.25%. It no longer makes sense for the regulator to move brashly forward now. Most likely, further movement will be varied, so investors do not rule out easing of the monetary policy in December-January.Certainly, the Fed will base its decisions on the inflation figure. It is unlikely that consumer prices will collapse as sharply as they have risen, but it is already clear that the Central Bank is up to the task.The labor market report showed that the EUR/USD downward movement remains in force. However, in the medium term we still expect the pair to consolidate. Our forex trading strategies consider both short-term selling towards 1.0655-1.0670 and 1.0670 and medium-term buying. 
FOREX Fundamental Analysis for EUR/USD on June 2, 2023Some investors think that interest in the dollar as a defensive asset is getting lower, when in fact the national debt story is long past and has no impact on the greenback. The preconditions for the EUR/USD rally were created before the deal between the Republicans and the Democrats, which made it possible to open long positions at an attractive price.Jerome Powell's new deputy Philip Jefferson spoke out about a pause in the rate hike cycle, which sent shockwaves through the financial markets. Investors even ignored the labor market report from ADP with 278 thousand new jobs.After the Fed Vice President's speech, forex trading changed positioning. It looks like only a very, very strong Non-farm Payrolls will force the Fed into an act of monetary restraint in June. The idea of a "dovish" reversal by the regulator is returning to the market.While the Fed takes a pause, the ECB decides to continue raising rates despite the CPI slowing in May from 7.0% to 6.1%. Christine Lagarde thinks it is too early to talk about a complete victory over inflation. The European regulator's policy supports buyers of the single currency.It is hard to say yet whether EUR/USD has gone into consolidation or whether the trend will change direction. We are waiting for the report on U.S. labor market, though chances for the dollar to strengthen are minimal. If the data is as forecasted, a little worse or a little better, we'll build up long positions. 
FOREX Fundamental analysis for EUR/USD on June 1, 2023Markets often run ahead of the news, which brings traders losses. Despite the lack of consensus in the FOMC on the rate hike in June, derivatives give over 60% probability of such a step, though the day before the Vice-President of the Fed Philip Jefferson quite clearly hinted at a pause in the cycle of monetary restriction, which cooled the fervor of the EUR/USD "bears" a bit.After the Eurozone inflation report showed a slowdown in prices and rising jobless rates in the U.S., the major currency risk tested a 9-week low.Pic. 1. Inflation trends in Italy and France.There is no point for the European Central Bank to depress the Eurozone economy with hawkish actions, so the regulator is likely to complete its monetary tightening cycle in July by raising the rate to 3.75%.In the United States, the number of job openings rose from 9.75 million to 10.1 million in April, which means there are 1.8 job openings per American unemployed. This is a very good number since 1951. In other words, the US labor market will not prevent the Fed from continuing to raise the federal funds rate.However, it is possible that in June the Fed will pause in its monetary restriction in order to get more data on the effectiveness of measures taken by the regulator. At any rate the Central Bank's management is in a mood to make a pause and look around, which lowers interest to the dollar in forex trading.Pic. 2. The dynamics of the supposed change of the Fed's rate.The positioning on the currency market has changed somewhat on the eve of the release of the US labor market report. While previously it was thought that a strong NFP would strengthen the dollar, now we are more expecting the pair to consolidate. We closed short positions on EUR/USD and we will look for an entry to buy at a breakout of resistances 1.0715 and 1.0735. 
On Thursday, USD/JPY is developing an upward correction of the two-day decline and is trading around 139.70.Today investors are waiting for the US labor market report from ADP, which is a forerunner of Non-farm Payrolls. It should be noted that these reports are not always 100% correlated, but there is usually some correlation between them. Analysts expect employment to fall from 296,000 to 170,000 for the month and the number of new jobs to fall from 253,000 to 190,000.The news about the problems with the U.S. national debt ceiling was overtaken by events, as the bill, negotiated by Democratic and Republican representatives, was approved in the House of Representatives and sent to the Senate for approval.Japan's manufacturing activity index was released this morning, slightly slipping from 50.8p to 50.6p in May.The Bank of Japan continues to test the digital yen and is considering switching from traditional banking to digital banking.Technical analysis for USD/JPY: Bollinger Bands, MACD and Stochastic OscillatorTechnical indicators and chart patterns do not show any clear-cut signals. The pair is in a correlation phase. Bollinger Bands are still directed upward while the MACD indicator is actively declining, but still in the positive range. The Stochastic Oscillator is also pointing down.If the price fixes below 138.90, we will open a short position with Take Profit at 137.50. Stop loss is set at 139.67.In case of a break above 139.67, we go long, aiming at 140.91. We place a stop loss at 138.90 
FOREX Fundamental Analysis for EURUSD on May 31, 2023The problem with the sovereign debt ceiling is resolved, the Fed plans to continue raising interest rates and rumors of a recession were exaggerated. At the same time, China's economy continues to disappoint investors and inflation in Spain has slowed to 2.9%, severely limiting the potential for ECB action. EURUSD, after a slight upward correction, returned to the downside.The head of the Federal Reserve Bank of Cleveland thinks there is no reason to pause in monetary easing, but there are enough arguments for it to continue. On the futures market, the probability of a rate hike in June has risen to 60%. Of course, some adjustment to the Fed's actions can be made by the US labor market report, but ING believes that the impact of Non-farm Payrolls on the dollar exchange rate will be minimal, unless the report is super screwed up.Pic. 1. Probability of Fed Funds Rate Change in June.Loretta Mester holds the same view. In May, the main reason for the pause in the rate hike cycle was the threat of default. Now that the potential threat has been leveled out, the Fed has no reason to change its positioning.Moreover, the agreement on the reduction of budget expenditures, according to the head of the Federal Reserve Bank of Cleveland, will eliminate a number of uncertainties and have a positive effect on GDP.Pic. 2. US Treasury bill yield dynamics.In China, the May Manufacturing Purchasing Managers Index unexpectedly collapsed from 49.2 to 48.8 pips and remains below the key level of 50 pips. China's economy is recovering at a different pace than analysts had forecast, which puts pressure on the single currency.The attention of the markets switches from the threat of default to the monetary policy of the central banks. In addition, investors are waiting for the report on Friday on the US labor market. On expectations EUR/USD may go down to 1.0665, which will be typical of the "sell on rumor, buy on news" strategy. Get ready to go short. 
FOREX Fundamental Analysis for EURUSD on May 30, 2023The problem with the US debt ceiling has again shaken the markets, as the bill has not yet been approved by Congress. Not all Republicans and Democrats were positive about the deal. Some of them believe that the amount of budget cuts is clearly insufficient, while others, on the contrary, claim too much change.But it is unlikely that this debate will have much of an impact on the market. The agreement is reached and it's time to put the news in the archives. The volume of liquidity is another matter. The United States Treasury account has shrunk to $39 billion, which is the lowest volume in 6 years.Dynamics of the US Treasury's cash balanceWithin 7 months, the Treasury should be issuing $1.1 trillion in notes and bonds, which will move cash from the secondary market to the primary market and support treasury yields. Of course, in the medium to long term this could have a negative impact on bank deposits, but it will support the dollar in the short term. In this regard, there is a 60% chance of a Fed rate hike at the June meeting.The Fed is once again between a hammer and anvil. If the monetary tightening cycle ends, inflation will quickly pick up and hurt the US economy. If monetary tightening continues, a recession could easily be triggered.In addition, according to the ECB study, the tightening of financial conditions in the United States is affecting the European bond market, because commodity assets are denominated in dollars, and their appreciation makes it difficult for the Eurozone economy to grow. But the policy of the European Central Bank has almost no effect on the economy of the United States.Talks about recession in Germany ruined any chance of a recovery of the EUR/USD uptrend. Now the pair's decline to 1.04 looks much more likely.The US labor market report may change the positioning in forex trading. Weak statistics will bring back optimism for the euro buyers. But it is still far away from Friday, so we keep short positions towards 1.0665.