FOREX Fundamental Analysis for EUR/USD on September 19
The EUR/USD downtrend continues, many negative factors have already been taken into account by prices, and targets for chart patterns have been worked out. Speculators are waiting for pullbacks to re-enter the trade. However, the situation is such that the collapse of the pair may continue without correction.
Hedge funds for the first time since March became buyers of the dollar against all major world currencies, as well as against the Brazilian real and Mexican peso. The exclusivity of the U.S. economy and the Fed's policies have served the dollar well. But will the greenback have enough strength to send EUR/USD to the parity level?
The divergence of economic growth between the US and the EU is one of the main trump cards of the dollar strengthening. The most negative scenario for the New World economy is a "soft" landing while the European economy is not getting out of stagflation. But on the eve of the recessions of 1990, 2001 and 2007, many analysts also envisioned a slight slowdown, which eventually turned into a major crisis.
Inflation is hard to beat, and there are always risks of a new spike while each new act of monetary restraint reduces consumer demand and raises unemployment. The Fed's victory may prove temporary and the recession deep. In 2024, the dollar is unlikely to retain its leading position in forex currency trading. Expectations of dollar weakness could lead to a EUR/USD recovery in the fourth quarter, unless, of course, the Eurozone adds new problems.
One of these could be duties on imports of European cars to China. Taking into account that Volkswagen sends 40% of its production to the Celestial Empire, Mercedes-Benz - 37%, and other concerns a little less, the customs barriers will be a strong blow to the economy of the Eurobloc.
In addition, the EUR/USD "bears" are supported by rising oil prices. Brent is approaching the $100 mark and puts pressure on European importers. However, the Fed remains in tension, as the rise in energy costs may cause a new round of inflation. But in this case, the regulator will tighten financial conditions even more, which will again support the dollar
This week the Fed meeting will take place and with such ambiguous dynamics of EUR/USD it is best to stay out of the market until the regulator's decision.