FOREX Fundamental analysis for EUR/USD on September 24, 2024
The trader's trading plan, which provides for the purchase of EUR/USD after the release of weak data on business activity in Europe, initially seemed attractive, since the Fed began to lower interest rates, which usually negatively affects the US dollar. However, given the weakness of European economies, doubts arise – is it worth getting rid of the dollar?
Business activity data in Germany and France turned out to be disappointing: the indices fell to the lowest levels in seven months, which sharply collapsed the euro exchange rate. Export-oriented Germany is suffering due to China's weak economy, while France has faced political instability since the end of the Olympic Games. Michel Barnier's new government, consisting of conservatives and centrists, is facing the threat of a vote of no confidence, which increases pressure on French bonds and reduces confidence in the euro.
These problems are reflected throughout the Eurozone, where the economic recovery is slowing, increasing the chances of a deposit rate cut in October. Derivatives estimate the probability of a 25 basis point decline, which could send the rate to 3.31%. At the same time, it is assumed that the Fed may cut rates by 175 basis points, which is higher than the expected level of cuts from the ECB. This allows us to predict the growth of EUR/USD to 1.15. However, the Fed's rate cuts do not always lead to a weakening of the dollar in forex currency trading. In 2001, the greenback strengthened against the background of growing demand for safe assets after the events of September 11.
The situation may repeat itself against the background of political and military conflicts in the world and the upcoming presidential elections in the United States, which supports the dollar as a safe haven currency. At the same time, the weakness of the global economy is putting pressure on the euro.
The decline in the EUR/USD exchange rate below 1.11 has opened up an opportunity to buy, but it is risky to hold long positions. In case of a further fall below 1.108, the longs will have to be closed. It is better to increase purchases when growing above the levels of 1.1145 and 1.118.
EUR/USD technical analysis
EUR/USD continues to trade in correction to the short-term uptrend. At the moment, market participants are testing the support area (A) 1.1105 - 1.1096. If this area is held by buyers, then growth will resume with a target at a maximum on September 18. If the support (A) is broken down, the correction will continue to the support area (B) 1.1063 - 1.1050.
The 1.1063 - 1.1050 area is a key trend support. Therefore, if the price decreases towards it, then it will be possible to look for a purchase entry with the first target at 1.1120. The second target is around 1.1189. To sell and change the direction of the trend, the pair needs to break through the 1.1050 level and consolidate below.