FOREX Fundamental analysis on August 30, 2022
EUR/USD has enough reasons to go down. The U.S. economy looks much stronger than the European one. The Fed is not bound by the energy crisis, so it can tighten its monetary policy by the most aggressive methods. The demand for the dollar is growing as a defensive asset. And, of course, the price of gas. In Europe, the cost of "blue fuel" has increased 7-fold over the year, and has doubled since July. But what will happen if the price of gas starts to fall?
The German natural gas storage facilities are filling up faster than they should. According to the plan 85% of the volume should be filled in October, in fact the target has already been reached at the beginning of September. The total EU fill rate is 79.4%, with a target of 80% as of November 1. The Europeans are being helped by China reselling LNG due to low demand within the Middle Kingdom. Futures on "blue fuel" are falling at the fastest rate since March of this year.
Gas price dynamics in Europe
However even with the tap completely shut off the EU can still satisfy 30% of its demand this winter. This is enough to avoid a recession. Moreover, a reduction in the cost of OPG will put pressure on inflation and untie the hands of the ECB.
Christine Lagarde can surprise markets with surprises. This became clear in July when the ECB unexpectedly raised its rate by 50 basis points. It is quite possible that the regulator will decide to take such a step in September as well, the more so because monetary authorities have repeatedly voiced their concerns over the weakness of the single currency.
The dynamics of expectations of the rates of the ECB and the Fed
The U.S. stock market crash is one of the factors supporting the dollar. But, as the recent correction shows, there are enough buyers there, and with a little fundamental reason, the stock market will quickly stabilize, depriving the greenback of one of its trump cards.
A decline in the price could trigger a EUR/USD correction. Fixing the pair above 1.0225 will be a signal for short-term longs.