FOREX Fundamental analysis for EUR/USD on October 31, 2024
In FOREX currency trading, unexpected data leads to sharp fluctuations. When central banks make decisions based on statistics, any surprises can be a strong catalyst. Thus, favorable data from Europe spurred the "bulls" in EUR/USD, especially against the background of news from the United States.
The Eurozone economy unexpectedly grew by 0.4% in the third quarter, double the forecasts of Bloomberg. In addition, Germany avoided the expected recession by increasing GDP by 0.2%. This, along with an increase in inflation from 1.8% to 2.4%, inspired the ECB's hawks to make active statements.
Joachim Nagel, the head of the Bundesbank, warned of the potential risks of a sharp easing of policy, and Isabelle Schnabel stressed the need for a cautious approach in combating inflation. The officials' comments reduced the probability of a December cut in the ECB deposit rate by 50 basis points from 50% to 25%, which gave support to the euro.
In addition, the growth gap between the United States and Europe is narrowing. The U.S. economy slowed to 2.8% in the third quarter, falling short of expectations of 3.1%.
European economic growth was partly driven by one-off factors such as the Olympic Games in France. The fact that Germany avoided recession does not guarantee stable growth, as its GDP decreased by 0.3% in the second quarter, and the current growth of 0.2% only confirms stagnation.
The United States economy, thanks to advances in AI and productivity growth, is maintaining a higher pace. For the period from 2009 to 2019, U.S. GDP increased by 2.5% and long-term growth of the fed's estimates of 1.8%. Against the background of employment growth, which in the private sector added 233 thousand jobs in October, the labor market remains strong.
These data became the basis for traders to revise their trading plans on the eve of important events, including the October report on the US labor market and the presidential election, which will set the direction for dollar pairs for several weeks ahead. This increase in uncertainty has caused the cost of hedging against dollar fluctuations to rise to a two-year high.
The EUR/USD pair reached the upper limit of the consolidation range at 1.076-1.0865. Rollback attempts have led to sales, but so far short positions remain unstable. If the repeated test of the 1.0865 level does not end with a breakthrough, you can consider selling after unsuccessfully testing the resistance at 1.0905.
EUR/USD Technical analysis
Yesterday, the EUR/USD correction continued. As a result, the pair approached the resistance area 1.0884 - 1.0873. If buyers test this zone, and sellers do not let the bulls go higher, then it will be possible to form new sales of the asset with the first target at 1.0822 and the second at 1.0761.
If the resistance area (A) is broken up during trading, the upward correction will continue to the resistance area 1.0946 - 1.0929.