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.
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.
At the Asian session of Wednesday USD/CHF has not decided on the direction of movement. and continues to consolidate around the level of 0.9200. This Friday, the report on the labor market in the United States will be released, so investors are not in a hurry to form new positions, and the volatility of currency pairs on Forex is low.On Thursday will be published indexes of business activity in the U.S. service sector for September. According to the forecast, the index is expected to decrease from 54.5 to 53.6 ppts. There will also be a report on private sector employment from ADP. It is also expected to decrease from 177.0 thousand to 153 thousand jobs.On Tuesday, the Swiss inflation report for September was released. The consumer price index rose from 1.6% to 1.7%, while the forecast was 1.8%, which puts pressure on the franc.Technical Analysis and trading signals for USD/CHFThe Bollinger Bands and MACD on the daily formation chart are steadily rising, keeping the buyers' advantage. The Stochastic oscillator was declining, but after leaving the oversold area, it turned upward again and is testing the breakdown of the 80% level from below.Long positions will be considered after price consolidation above the level of 0.9224. The target is the key resistance at 0.9300. Pillar-loss placement is 0.9180.In case of a confident breakthrough of the support at 0.9175, we move to sales with the target mark at 0.9100. Stop-loss will be set at 0.9224. 
FOREX Fundamental Analysis for EUR/USD on October 4Despite the prolonged cycle of the Fed tightening financial conditions, the United States economy continues to please investors with positive macro reports. Treasury bond yields have reached a 2007 high of 4.85% and 5% is not far off, so a test of EUR/USD parity looks quite realistic.It is quite possible that the slowdown in inflation will allow the Fed to dispense with an additional act of monetary restriction. But the labor market statistics and other economic indicators allow for a high level of rates for a long period of time. Under such conditions, the dollar is simply obliged to grow, which, in fact, it is doing.Moreover, the statistics of the labor market in the United States keeps investors in suspense, as it allows further increase in rates. On the futures market, the probability of another act of monetary restriction by 25 basis points to 5.75% for the week rose from 38% to 45%.In addition, the strong economy, the budget deficit requiring new issues and the sell-off of US debt bonds by non-residents remain the factors of dollar strengthening.The single currency certainly has no such support. Investors are unlikely to buy up the euro after the statement of ECB Chief Economist Philip Lane that the regulator is not finished fighting high inflation. Judging by the negative dynamics of EUR/USD, traders did not even pay attention to the official's comments.Bloomberg forecasts employment growth in September - 170 thousand with a simultaneous decline in unemployment from 3.8% to 3.7%. Such indicators will allow the Fed to continue the cycle of tightening financial conditions in the future. However, it is quite possible that when the figures are close to the expected ones, the "buy on rumors, sell on facts" forex trading strategy will work, and traders will start to take profits in shorts. Most likely, this will happen near the target of 1.042, which will allow us to get a piece of profit. 
Fundamental analysis of FOREX for EUR/USD on October 3The "bears" of EUR/USD interpret any news in their favor. Whether there will be a pause in the work of the American government or not, the yield of treasuries is growing, and the dollar is following it.It should be noted that the legislators of the United States could not find a solution to the problem for a long time and limited it to postponing it for 45 days, which only increased interest in the greenback as a protective asset. In addition, the financing of the government will continue with the exclusion of assistance to Ukraine. In this regard, an additional burden will fall on the European Union. Will the Eurozone economy withstand such pressure? Investors are doubtful, as can be seen from the dynamics of EUR/USD.Jefferies believes that if the yield of US bonds reaches 5%, the pair will test the parity level. Actually, this is where everything is going, just look at the growing correlation of the rates of treasuries and US stock indices.In addition, the growth of business activity indices of the US manufacturing sector and Michelle Bowman's statement that rising energy prices will bring down the Fed's efforts to combat inflation, and the regulator should continue the rate hike cycle, added to the bond yield rate.If we recall the negative impact of the strengthening of the greenback on the global economy, then the pivot level in the area of parity looks even more realistic, since high oil prices, hawkish Central Bank rates and the volume of dollar debt will slow down global GDP, which will affect the single currency.However, JP Morgan finds the strengthening of the yield of treasuries excessively prolonged and does not correspond to economic data.Most likely, only a reduction in US debt bond rates can stop the dollar. The reason for this may be disappointing labor market statistics. But while EUR/USD is approaching the next target at 1.042, we keep short positions in priority. 
On Monday, NZD/USD is declining as buyers did not have enough strength to break above the key resistance of 0.6000 at the end of the week.The "kiwi" is supported by the macroeconomic statistics of New Zealand. In particular, the consumer confidence index for September rose from 85.0 to 86.4 pp.At the same time, investors at the end of the week actively fixed profits in the logjams, fearing the U.S. shutdown and the associated strengthening of the U.S. dollar. In the end, the United States legislative authorities found a solution to the budget dispute, postponing the problem until November 17.Also supporting the buyers of NZD/USD is the statistics from China, where the index of business activity in the manufacturing sector according to the Federation of Logistics and Purchasing of China in August rose from 49.7 to 50.2 ppts, and in services from 51.0 to 51.7 ppts. At the same time, the Caixin index of business activity in the manufacturing sector sagged from 51.0 to 50.6 pp, and in services from 51.8 to 50.2 pp.Technical analysis for NZD/USDOn the NZD/USD daily time frame, the Bollinger Bands indicator is moderately rising, as well as the MACD indicator crossing the zero line from below upwards. The Stochastic oscillator is steadily rising, alternating between a rising wave and a declining wave.If the sellers are able to stay below 0.5976 as a result of the decline, we will move to short positions with take profit at 0.5920. Stop-loss is set at 0.6000.If the price fixes above 0.6000, we continue to open long positions with the target of 0.6047. Stop-loss will be set at 0.5976. 
FOREX Fundamental Analysis for EUR/USD on October 2What makes the US dollar strengthen for 11 weeks if the economy is giving alarming signals and the core PCE has fallen to 3.9%? Of course, FOMC officials can talk all they want about continuing the monetary restriction cycle, but the market doesn't believe them. Nevertheless, EUR/USD continues to update local lows.There is an opinion that investors' attention from inflation has shifted to economic indicators. And even though the U.S. has frankly disappointing reports, things are much worse in the Eurozone.True, the 4th quarter for the U.S. promises to be not as optimistic as the third quarter, and Europe continues to hope for rapid growth of the Chinese economy, which will be broken, but will fulfill the government's goal to add 5% in 2023. If Beijing's plans come true, the divergence between the US and Euro bloc economies will narrow, which could signal an upward correction in EUR/USD.But there is another strong factor supporting the dollar - bond yields. And the fact that the US budget crisis, as usual, was resolved in the last hours before the shutdown, gave a new impetus to the treasury rates. Now we are waiting for history to repeat itself in 45 days, and during this time the Fed may raise rates by another 25 basis points at its November meeting. Here comes a new trump card for the greenback.As of today, the dollar has no competitors in forex currency trading. Of course, not everything is cloudless, but the outperformance is strong compared to other countries. We are waiting for the EUR/USD correction to complete and we will consider a downside break of the 1.055 support as a signal to enter short positions. 
Fundamental analysis of FOREX for EUR/USD on September 22Everything is changing in forex currency trading. An increase in interest rates no longer leads to a rotation of the monetary asset. Investors are more interested in how long the rates will remain at maximum values. The statements of the ECB's "centrists" about the end of the monetary policy tightening cycle, oddly enough, but helped the euro to find the ground under its feet. It's all about the growth of German bond yields to the maximum of 2011.But the decision of the Bank of England to pause in monetary restriction further aggravated the situation of sterling.In the United States, the rates on 10-year treasuries are at the peak of 2007, and 2-year–old - 2006. But this is no longer enough for EUR/USD sellers, since many factors are taken into account by asset prices.Investors understand that high rates are serious and for a long time. In the FOMC, the value of the neutral rate has been increased by a majority of votes from 2.5% to 3.0%.An increase in the yield of US debt bonds with a decline in stock indices will support the dollar in the medium term. But in the short term, everything is possible, including buying EUR/USD at a break above 1.067 against the background of fixing speculative sales. 
FOREX Fundamental Analysis for EUR/USD on September 28EUR/USD in the decline fulfilled another target at 1.051 and there are no visible reasons to stop the "bears" offensive at the moment.Even a rise in oil prices will not be able to negatively affect the economy of the United States, as the U.S., unlike the Eurozone, is an oil exporting country. In addition, the risks of a new round of inflation, caused by rising energy prices, will force the Fed to continue tightening monetary policy, and this is again a plus for the dollar. There is a 40% chance that the Fed funds rate will rise to 5.75% by the end of the year.Now investors are interested in the maximum point of increase in the yield of 10-year US bonds - 4.75% or 5%? The August data on durable goods orders published the day before showed the best dynamics since the beginning of the year, which surprised analysts. The US economy continues to grow steadily and is in no hurry to fall into recession.Meanwhile, the debate in the US Congress on the government shutdown is gaining momentum. The House of Representatives rejected the Senate's proposed plan to end the impasse. October 1 is just around the corner, and the United States may well lose its rating from Mood`s. This will further inflate the treasures rates and strengthen the dollar's position in forex trading.At the same time, analysts Societe Generale believe that the government crisis may hit the United States economy, which will weaken the dollar by the end of the year by 3%, and the Fed will have to think about a "dovish" reversal at the beginning of next year.There is no doubt about the strength of the EUR/USD downtrend. But investors, most likely, have already taken into account in prices the decline in German inflation. However, if the forecasts do not come true and consumer prices are higher than expected, euro buyers may become more active. On the technical side, the basis for short-term purchases will be the consolidation of the pair above 1.052. 
Trading idea for USD/JPY on September 27USD/JPY maintains its uptrend and is testing the upside resistance at 149.00 on Wednesday. The pair is updating the October 2022 highs on the back of a stronger dollar.Despite the fact that the Fed decided not to raise the rate in September, the regulator made it clear that until inflation reaches the target level of 2%, the "hawkish" course of monetary policy will be maintained. Moreover, the majority of the members of the Federal Open Market Committee (FOMC) adhere to this position. In particular, the head of FRB Minneapolis Neel Kashkari notes the stability of the national economy and considers it necessary to hold another rate hike of 25 basis points this year. Head of FRB Chicago Austan Goolsbee calls inflation the most serious problem for the Fed.At the same time, the Bank of Japan maintains a soft monetary policy stance, ignoring rising inflation. The fact that negative interest rates will be maintained was announced last week by the head of the regulator Kazuo Ueda. At the same time, he did not rule out the possibility of currency intervention in case of further weakening of the yen.Earlier analysts predicted that the Bank of Japan will intervene in forex trading once USD/JPY reaches 145.00. Now they consider the 150.00 level as a new boundary.As long as USD/JPY has not reached the critical mark, the growth will continue. In this regard, we propose to place a buy order on USD/JPYBuy-limit 148.50 take-profit 150.50 stop-loss 147.80