FOREX Fundamental analysis for EUR/USD on April 19, 2024
It seems that Israel is not going to remain silent after the unprecedented rocket attack on its territory by Iran and has already warned the United States about possible retaliation measures, which has caused a significant increase in demand for protective assets. Together with the harsh statements of the FOMC members, we can say that the plans of the EURUSD bulls have come to an end. The main currency pair is in decline again, and rumors of parity testing no longer seem so odious.
In addition, investors are finally beginning to realize that defeating the inflationary dragon is not as easy as they expected at the end of 2023. Three pulses of inflation in the first three months of this year have changed the outlook not only of the major banks, but also of the Federal Reserve System (FRS). Bank of America postponed the forecast of the first interest rate cut from June to December, and Goldman Sachs, which previously counted on five acts of monetary expansion, now talks about two.
The statement by the president of the Federal Reserve Bank of New York, John Williams, that the re-launch of the monetary policy tightening cycle is not the main scenario of the Fed, but it may well be implemented, stimulated an increase in US Treasury bond yields. This provided support to the EURUSD bears. Besides, John Williams is not alone in his opinion. Rafael Bostic from Atlanta considers it advisable to start monetary expansion at the end of 2024, and Neil Kashkari from Minneapolis argues that the Fed can keep rates at the current level all year.
A slight decrease in the rates on treasuries does not change the methods of forex trading. This decline is associated with an increase in interest in safe assets, and not with a successful auction, as happened the day before. Is it possible to find a more reliable asset in the Forex market than the American dollar?
The statements of the ECB Governing Council members also cause nervousness among Forex traders. Boris Vuitich, for example, is surprised that markets are still too calm and underestimate the differences in monetary policy between the Fed and the ECB. Francois Villaroy de Galo believes that it is possible to reduce rates at every meeting of the regulator, and not once a quarter. Piero Cipollone, Giannis Stournaras and Gediminas Simkus hint that July may also become a month of monetary expansion after June
Interestingly, the US dollar is supported by oil. Its growth against the background of increasing geopolitical tensions in the Middle East increases interest in protective instruments. At the same time, the risks of accelerating inflation in the United States are growing, which forces the Fed to keep rates at the current high level.
Thus, differences in the approaches of the Fed and the ECB to monetary policy, increased interest in safe assets and rising oil prices speak in favor of continuing the downward trend in the EURUSD market. We continue to sell this pair, focusing on the levels of 1.06 and 1.05. And it seems that this is just the beginning.
EUR/USD Technical Analysis
EUR/USD is developing a downtrend. At the moment, sales are open from the resistance area (A) 1.0693 - 1.0685 with the expectation of reaching the minimum of April 16. If the pair fails and fixes below the minimum mark, then we move the target to area 2 in the range 1.0561 - 1.0544.
When EUR/USD moves to growth with a subsequent breakout of resistance (A), we are waiting for testing of the next benchmark - resistance (B) 1.0739 - 1.0727. There is also a trend boundary here, which increases the importance of resistance. From here, we will again look for an entry point into short positions with a target at the same minimum from April 16.