EUR/USD: dollar buyers have no reason to worry

EUR/USD, currency, EUR/USD: dollar buyers have no reason to worry

FOREX Fundamental Analysis for EURUSD on May 31, 2023

The 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.

Probability of Fed Funds Rate Change in June

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.

US Treasury bill yield dynamics

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.

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AUD/USD: the Australian economy is recovering steadily
AUD/USD, currency, AUD/USD: the Australian economy is recovering steadily AUD/USD analysis on July 15, 2024The AUD/USD pair is correcting upwards to the level of 0.6775. The strengthening is carried out against the background of the weakening of the US dollar, although the Australian currency remained almost at the same positions.In May, tourism in Australia showed growth for the first time in five months. The number of short-term arrivals reached 600.78 thousand, which is 17.3% more than last year, and the total number of arrivals of residents and non-residents amounted to 1.478 million, an increase of 14%. According to forecasts by the Australian Bureau of Statistics (ABS), the total number of arrivals may exceed 1.530 million in June. If this trend continues, the pressure on the economy will decrease by the end of the third quarter. Labor market data will be released on Thursday at 03:30 (GMT+2). According to forecasts, unemployment is expected to rise from 4.0% to 4.1% and full-time employment growth will slow from 39.7 thousand to 20.0 thousand. The stability of the sector in the context of tight monetary policy of the Reserve Bank of Australia (RBA) reduces the likelihood of interest rate changes this year.The US dollar is trading at 103.80 on the DXY index. In June, the producer price index increased by 0.2% month-on-month and from 2.4% to 2.6% year-on-year, which may contribute to an increase in consumer inflation. Additionally, data from the University of Michigan put pressure on the USD: in July, the consumer expectations index fell from 69.6 to 67.2 points, and the consumer sentiment index — from 68.2 to 66.0 points.AUD/USD Technical analysis for todayOn the daily chart, the pair is approaching the resistance line of the ascending channel with dynamic boundaries of 0.6870–0.6720.Technical indicators give buy signals: fast EMAs on the Alligator are moving away from the signal line, expanding the range of fluctuations, and the histogram of the awesome oscillator indicator is growing in the buy zone.Long positions can be opened when the price rises and fixes above the level of 0.6790 with a target of 0.6870. We recommend setting the stop loss at 0.6750.Sales are advisable when the price is reduced and fixed below the level of 0.6750. The nearest target is at 0.6680. We will place the stop loss at 0.6800.
Jul 15, 2024 Read
Forex analysis and forecast for USD/CAD for today, July 15, 2024
USD/CAD, currency, Forex analysis and forecast for USD/CAD for today, July 15, 2024 USD/CAD is testing the 1.3657 level to break down before the release of important macroeconomic data from Canada.Tomorrow at 14:30 (GMT+2), the June inflation report will be published, which will play a key role in the Bank of Canada's monetary policy decisions. The annual consumer price index is expected to decrease from 2.9% to 2.6%, and the monthly indicator will accelerate from 0.1% to 0.3%. Core inflation is projected to decrease from 1.8% to 1.6% on a monthly basis and from 0.6% to 0.4% on an annual basis. This may allow the Bank of Canada to move to a more lenient policy, which will support the economic recovery by lowering interest rates, stimulating consumer spending and investment. On the same day, data on the volume of new home construction will be published, the indicator of which is likely to decrease from 264.5 thousand to 260.0 thousand, which may put pressure on the Canadian dollar.Analysts believe that the Bank of Canada will act more decisively than the US Federal Reserve on the issue of lowering rates. The Fed is expected to start cutting rates in September, with two adjustments before the end of the year, while the Canadian regulator will reach the level of 3.00% by the end of next year, while in the United States only by the beginning of 2026.On the daily chart, technical indicators give preference to sales. The Alligator indicator turns the moving averages down. Awesome oscillator forms descending bars in a negative rangeShort positions can be opened with a confident breakdown down to the 1.3600 level with a target of 1.3480. We will place the stop loss at 1.3680.Purchases will be relevant when the 1.3680 level breaks up. The target is -1.3780. We will make a stop loss of 1.3620.
Jul 15, 2024 Read
EUR/USD: an attempt on Trump could strengthen the dollar
EUR/USD, currency, EUR/USD: an attempt on Trump could strengthen the dollar FOREX Fundamental analysis for EUR/USD on July 15, 2024The question of whether EURUSD buyers have time is becoming relevant. While they are wondering why the Fed is waiting until September, the assassination attempt on Donald Trump is making adjustments to forex currency trading it was assumed that political instability would begin in the fall, but shots at the Republican and Trump's spectacular behavior at the time of the assassination could revive the US dollar much earlier.Donald Trump is showing excellent political form. Not many 78-year-old men would be able to get out of the situation so effectively after being injured. His ratings are rising, and with them the yield of Treasury bonds is strengthening, and the dollar Market reaction resembles the situation after the first presidential debate.The prospects of a November Trump victory and possible Republican dominance could accelerate inflation. New tariffs and trade wars will disrupt supply chains and, for sure, raise prices. Additional fiscal incentives, likely approved by the Republican Congress, will also contribute to this scenario. Rising inflation will keep the Fed from cutting rates, which will raise Treasury yields and strengthen the dollar's position.The situation was going well for the Fed. The cooling of the labor market and the reduction of inflation to the lowest levels of the last three years opened the way for monetary policy easing. The probability of a rate cut in September is 92%, and investors are wondering why they have to wait so long? This is reminiscent of the end of 2023, when the Fed's "dovish" reversal with the projected three acts of monetary expansion in 2024 collapsed the dollar.The EURUSD's rise to 1.091 in recent weeks has been supported by expectations of a rate cut. The statement by the president of the Federal Reserve Bank of Chicago, Austan Goolsby, that the Fed has waited too long, underscores the need to normalize monetary policy.If the ECB does not hint at a reduction in the deposit rate in September at the July meeting, and American retail sales disappoint, EURUSD may soar to 1.1. But! The Trump factor remains a key obstacle for dollar sellers. Increased volatility awaits the main currency pair, and testing previously set targets at 1.09 and 1.0935 may be a signal for profit-taking.US retail sales data and Canadian inflation report (Tuesday, 15:30). UK Inflation Report (Wednesday, 09:00). The Australian Labor Market report and the European Central Bank meeting (Thursday, 04:30 and 15:15).
Jul 15, 2024 Read
Forex analysis and forecast for GBP/USD for today, July 12, 2024
GBP/USD, currency, Forex analysis and forecast for GBP/USD for today, July 12, 2024 On Friday, GBP/USD was trading steadily near the 1.2915 mark, consolidating after testing annual highs. The strengthening of the pair takes place against the background of the publication of inflation data in the United States, which increased expectations of an early Fed interest rate cut. The consumer price index in June slowed from 3.3% to 3.0% in annual terms, which was below forecasts of 3.1%. On a monthly basis, the indicator decreased by 0.1% after zero dynamics in the previous month, contrary to expectations of an increase of 0.1%. Core inflation also decreased, which disappointed investors along with the revision of the number of new jobs in May. Fed Chairman Jerome Powell stressed the need to take into account the overall economic situation, not just inflation, which increased the likelihood of a rate cut in September and expectations of two cuts by 25 basis points in 2024.Technical analysis for GBP/USD for todayData from the UK showed GDP growth of 0.4% in May after zero dynamics in April, which exceeded forecasts of 0.2%. Industrial production expanded by 0.4% year-on-year after declining by 0.7% a month earlier, with a forecast of 0.6%. On a monthly basis, the growth was 0.2%, as expected, after a decrease of 0.9%. The news reduces the likelihood of a rate cut by the Bank of England in August. Representatives of the regulator, including Catherine Mann and Hugh Pill, point to the persistence of price pressure and wage growth, which makes a change in monetary policy unlikely.On the daily chart, the Bollinger Bands indicator shows steady growth with an expanding price range. The MACD indicator retains a strong buy signal. Stochastic, which had previously declined from the maximum values, is turning up again, indicating the risk of overbought pound in the short term.Long positions can be opened after a confident breakdown and consolidation of the pair above the 1.2948 level with a target of 1.3050 and a stop loss at 1.2900.The breakdown and consolidation of the price below the 1.2900 level will indicate a return to the "bearish" dynamics. In this case, we get a sales signal with a target of 1.2817. We will put the stop loss at 1.2948.
Jul 12, 2024 Read
EURUSD: the market is talking about three Fed rate cuts
EUR/USD, currency, EURUSD: the market is talking about three Fed rate cuts FOREX Fundamental analysis for EUR/USD on July 12, 2024US economic data shows signs of cooling, which gives the Fed grounds for a possible cut in the federal funds rate in September. The slowdown in the labor market and inflation that occurred in June increased the probability of monetary policy easing in early autumn to 93%. This led to a drop in Treasury bond yields and, through currency correlation, to a weakening of the US dollar. However, the sell-off of shares of technology companies to redistribute portfolios kept the EURUSD from reaching the level of 1.09.Jerome Powell noted that the Fed does not have to wait for the 2% inflation target. If you wait too long, you can miss the right moment. He called the May CPI and PCE data good, and the June data even better. For the first time since the pandemic, consumer prices fell on a monthly basis and showed the smallest annual growth of 3% since March 2021. Only 4 out of 71 Bloomberg experts predicted that core inflation would rise by 0.1% per month, the rest expected more.The June statistics were the last before the FOMC meeting on July 30-31 and may be a signal for the beginning of monetary policy easing in September. Cooling inflation has brought back the likelihood of three federal funds rate cuts at the last three Fed meetings in 2024. This may lead to a sell-off of the US dollar, although at the beginning of the year the market expected six acts of monetary expansion.I believe that the issue of the September rate cut has already been resolved. If inflation in the United States continues to decline, the Fed will cut the rate to 5%, and possibly to 4.75%. If not, the Fed may pause, which will be beneficial for the dollar.The slowdown in consumer price growth in June is not the final blow to the US dollar. According to HSBC, the dollar will end 2025 at approximately current levels, as the US economy will outperform global counterparts, and Treasury bond yields will remain high even if the Fed cuts rates. HSBC believes that the dollar will remain influenced by American exceptionalism, and whether the rest of the world will be able to catch up with the United States is a big question.In my opinion, the EURUSD pair may continue to grow to 1.1-1.11 in the short term. However, the growing likelihood of Donald Trump's return to the White House with his pro-inflationary policies could weaken the euro. Currently, it makes sense to keep and periodically increase long positions on the pair, formed from the levels of 1,071-1,072 and 1.0835.EUR/USD Technical analysisThe short-term uptrend of EURUSD continued yesterday. The pair has approached the target zone of 1.0943 - 1.0918, but is currently correcting downwards. If the correction develops today, we will wait for testing of the support area (A) 1.0816 - 1.0807. From here, we plan to look for an entry into purchases with a goal at yesterday's maximum.If the support (A) is broken down, the correction will continue to the support area (B) 1.0774 - 1.0761. This is a stronger zone, as the trend line runs here. From here we also plan to form long positions.
Jul 12, 2024 Read
AUD/USD: RBA makes no sense to cut the rate
AUD/USD, currency, AUD/USD: RBA makes no sense to cut the rate AUD/USD review on July 11, 2024AUD/USD is showing active growth, updating the local highs of the beginning of the year and is striving to break through the level of 0.6760. This is happening against the background of the weakening of the US dollar due to the likely reduction in interest rates by the Fed in September.On July 9, Fed Chairman Jerome Powell spoke in the Senate, stressing that the adjustment of monetary policy should take into account not only inflation. He noted a significant slowdown in the labor market in June, which increases the chances of a monetary easing by the Fed in September. Two rate adjustments are expected in 2024 of 25 basis points each.Today, investors are waiting for inflation data from the United States, which may affect the market in the coming days. The core consumer price index is projected to remain at 0.2% on a monthly basis and 3.4% on an annual basis, while the overall index will slow from 3.3% to 3.1% and grow by 0.1% after zero change last month.The Australian currency is under some pressure due to data on inflation expectations from the Melbourne Institute, which fell from 4.4% to 4.3%. The volume of construction permits issued in May increased from 1.9% to 5.5%, and permits for new homes — from -3.0% to 2.1%. However, the sector remains under pressure due to the high cost of borrowing from the Reserve Bank of Australia, and a significant recovery is expected only after the easing of the monetary policy of the regulator, which may not happen this year.AUD/USD Technical analysis for todayThe main forex indicators on the daily chart indicate a purchase. Bollinger bands are expanding, which indicates strong growth and a path to new highs. The MACD is rising, confirming the buy signal. Stochastic, approaching the 80 mark, signals the risks of overbought Australian dollar in the short term.It is recommended to open long positions after the breakdown and consolidation of the pair above the level of 0.6775. The target is 0.6825. We will set the stop loss at 0.6750.If the 0.6775 level is not broken, and the price bounces down, then we will wait for a breakdown and consolidation below the 0.6750 mark. In this scenario, we get a sell signal with a target of 0.6700. We will place the stop loss at 0.6775.
Jul 11, 2024 Read
Forex analysis and forecast for USD/JPY for today, July 11, 2024
USD/JPY, currency, Forex analysis and forecast for USD/JPY for today, July 11, 2024 USD/JPY demonstrates multidirectional movements, testing the level of 161.70 again. Yesterday, growth attempts failed due to a lack of drivers for significant movement.Investors are closely following the statements of the head of the US Federal Reserve, Jerome Powell, who spoke to members of the House of Representatives of Congress the day before. Powell stated his readiness to continue reducing the Fed's surplus balance, which increased significantly during the coronavirus pandemic. However, in his opinion, the regulator will not rush to avoid speculation in the market. US inflation data for June will be released today at 14:30 (GMT+2). Analysts expect a decrease in the annual consumer price index from 3.3% to 3.1%, which may increase the likelihood of monetary policy easing by the end of the year. On a monthly basis, the indicator is expected to grow to 0.1% after the zero dynamics in May.Japanese statistics published today showed an annual increase in orders for engineering products in May by 10.8%, which significantly exceeded forecasts of 7.2%. On a monthly basis, there was a decrease of 3.2%, with a growth forecast of 0.8%. The price index for corporate goods in June decreased from 0.7% to 0.2% on a monthly basis, which was lower than the predicted 0.4%, but in annual terms the indicator increased from 2.6% to 2.9%, in line with expectations. These data, along with the strengthening of the yen and rising prices for imported raw materials, strengthen investors' confidence that the Bank of Japan can begin to tighten monetary policy. According to Reuters sources, the regulator may adjust economic growth forecasts and confirm that inflation has reached 2.0%.The Bollinger Band indicator on the daily chart shows moderate growth, although the price range between the lines is narrowing, which indicates mixed dynamics in the short term. The MACD indicator is trying to turn up, forming a buy signal. Stochastic is also growing, but is rapidly approaching maximum values.It is recommended to open long positions after a confident breakdown up to the level of 162.00 with a target of 163.00. We put the stop loss at 161.30.When bouncing down from the level of 162.00, followed by a breakdown and consolidation of the price below the level of 161.30, we regard it as a signal to form sales with a target of 159.92. We place a stop loss at 162.00.
Jul 11, 2024 Read
EURUSD: ECB may refuse to cut rates
EUR/USD, currency, EURUSD: ECB may refuse to cut rates FOREX Fundamental analysis for EUR/USD on July 11, 2024If you get burned twice, then the third time you will blow on the water. In December, the Fed confidently announced a rate cut by mid-2024, and in March Jerome Powell confirmed that this was possible. However, the first quarter of the year showed an increase in inflation, and the regulator's plans have changed. In June, the head of the Federal Reserve announced the need for additional data for decision-making, which caused a weak reaction of the EURUSD.Although it seemed to many investors that Powell had said nothing new, attentive observers noticed a change in the Fed's position. The statement that the labor market is no longer a source of inflationary pressure and its further cooling is undesirable hints at a possible reduction in the federal funds rate. This is unlikely to happen in July, but inflation data for June may strengthen the Central Bank's confidence in the need for a September decline.According to the forecast, consumer prices will rise by 0.1% and core inflation by 0.2% on a monthly basis, which will give the Fed the opportunity to prepare for monetary expansion in early autumn. Powell stressed that this decision is not related to politics, although the Central Bank takes into account many factors. The main task is to make the right choice between slowing inflation and cooling the economy.If the Fed believes that the labor market is no longer exerting inflationary pressure, then this is not the case for the ECB. According to Indeed, wages in the Eurozone rose to 4.2% in June, which increases inflation risks with record low unemployment of 6.4%. This may force the ECB to postpone a reduction in the deposit rate.While derivatives are awaiting further steps by the Fed in September, the ECB's unwillingness to cut rates will support the EURUSD. In the United States, unemployment has been rising for the third month in a row, and wage growth has slowed to 3.9%, which highlights the difference in the economic situation and a possible divergence in monetary policy.However, all attention is now focused on the US inflation data for June. If they confirm the change in the Fed's position, then the bullish trend for EURUSD will continue. The slowdown in the CPI will be a strong argument for increasing purchases opened from the level of 1,071-1,072.EUR/USD Technical analysis EUR/USD is growing and is preparing to update the maximum from July 8th. If this happens, the target zone 1.0943 - 1.0918 will be the next target for buyers. Also, when updating the maximum on July 8, the strong support zones should be adjusted.If the price fails to update and consolidate above the maximum level on July 8, then the pair is likely to go into a downward correction, within which we will wait for a test of the support area (A) 1.0761 - 1.0752 or even the support area (B) 1.0719 - 1.0706. After testing these zones, we suggest looking for an entry into purchases with the first target at 1.0799.
Jul 11, 2024 Read
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