FOREX Fundamental analysis for EUR/USD on September 11, 2024
If someone believed that the US dollar would benefit from the presidential election, then the recent debate between Donald Trump and Kamala Harris showed the opposite. After discussions, Harris' chances of winning rose from 53% to 56%, and the Japanese yen and Swiss franc benefited from this. Forex currency trading favored risky assets, which allowed EUR/USD to strengthen, rebounding from the 1.1-1.1015 support area.
Despite Trump's rhetoric about the need to weaken the dollar to support American industry, his policies remain protectionist and pro-inflation. Trade wars and new tariffs may slow down global growth, which will negatively affect risky currencies such as the euro. In the event of an increase in inflation, the Fed may suspend monetary policy easing, which explains the recent growth of the EUR/USD pair against the background of Harris' success.
Although Trump blames Democrats for the weakness of the fight against inflation, the reason for its growth was mainly external factors such as disruptions in supply chains. With their normalization, Bloomberg forecasts a decrease in the consumer price index in August from 2.9% to 2.6%, while core inflation will remain at 3.2%.
These data alone are unlikely to determine the Fed's decision to cut rates in September, but combined with employment reports, they may affect expectations. The futures market assumes a rate cut of 150 basis points until January, which means a 50-point decrease at two of the four FOMC meetings.
However, such a sharp weakening of monetary policy may indicate an approaching recession, which will cause panic in the markets, adding losses to traders. Does the Fed need this? Unlikely.
The United States looks more economically stable compared to Europe, which is suffering from the war in Ukraine and the energy crisis. According to Morgan Stanley, the ECB has more reasons to aggressively ease monetary policy, and they predict a reduction in the deposit rate by 100 basis points during three meetings, including the September one. As a result, EUR/USD may fall to 1.02 by the end of the year, which is below the consensus of Bloomberg experts at 1.11.
Goldman Sachs also predicts a fall in EUR/USD, as synchronous monetary policy easing is usually favorable for the dollar. Against this background, the market's reassessment of the Fed's actions opens up the opportunity to sell EUR/USD with rebounds from the resistances of 1.1065 and 1.109.
EUR/USD Technical analysis
Yesterday, EUR/USD fulfilled all sales targets from the resistance area 1.1165 - 1.1152. The next target of sellers within the short-term downtrend is the lower target zone of 1.0949 - 1.0924. At the moment, the pair is going to work out an upward correction, during which we are waiting for testing of the resistance area 1.1107 - 1.1099. After that, we will consider new sales with the first target of 1.1061 and further - at the minimum of yesterday.
The trend boundary is shifting to the levels of 1.1153 - 1.1141. If the pair reaches it, it will also be possible to look for entry into short positions.