FOREX Fundamental analysis for EUR/USD on July 30, 2024
Descending from the top is just as difficult as climbing it, especially if you go down in a group. Several key central banks have already lowered rates, and the Fed is keen to avoid a repeat of inflation cheating, as happened at the beginning of the year. The verdict of the Bank of Japan remains uncertain and may cause significant turmoil in forex currency trading, which is already beginning to be felt. An example of this is the sharp drop in the EURUSD.
Differences in the monetary policy of the Fed and the Bank of Japan lead not only to the strengthening of the yen, but also to the movement of capital from other regions to Asia. Japanese investors invested heavily in shares of American companies, and one of the reasons for the fall of the S&P 500 is the repatriation of this capital to their homeland. As a result, global risk appetite is declining, which strengthens the US dollar against major world currencies, and the euro is no exception.
The situation is exacerbated by investor concerns about weak corporate reports from large US companies. After the unpleasant surprises from Tesla and Alphabet, investors are worried that the tech giants need to show incredibly high profits to justify their high stock prices. If this does not happen, the S&P 500 will continue to fall, dragging down the EURUSD.
The fundamental principle of "a strong economy is a strong currency" also plays into the hands of the bears. Leading indicators show that Germany, previously the undisputed leader of the Eurozone, is now barely afloat. This increases the risks of a more aggressive monetary expansion by the ECB and puts pressure on the euro. According to Reuters experts, the Fed and the Bank of England will cut rates at two meetings in 2024, and the ECB at three.
Do not forget about the factor of Trump's presence. The Republican's protectionist policy and his slogan "America first!" can significantly slow down the global economy, which will negatively affect pro-cyclical currencies such as the euro and the pound.
Nevertheless, if the Bank of Japan's decisions do not cause serious shocks in the financial markets, EURUSD will have a chance to grow due to expectations of a reduction in the federal funds rate. The Fed is aware that it is taking the right measures to combat inflation, and based on the latest data, it may hint at an imminent easing of monetary policy.
In such a situation, the return of EURUSD to the range of 1.083-1.09 followed by a rise above 1.085 or a rebound from support at 1.079-1.08 may be good grounds for purchases.
EUR/USD Technical analysis
EUR/USD is testing the key support area of the short-term uptrend 1.0822 - 1.0809. The zone is quite strong, and it is unlikely that sellers will be able to break through it the first time, so from here we will consider purchases with the first target at 1.0878. The second target of the bulls will be the maximum on July 17 at 1.0948.
An alternative scenario will be worked out when the price breaks and fixes below the support area (B). In this case, the short-term trend will change to a downward one, and the target for sellers will be the range 1.0696 - 1.0670.