FOREX Fundamental analysis for EUR/USD on June 6, 2024
82 experts polled by Reuters predict that the ECB will reduce the deposit rate from 4% to 3.75% at its meeting on June 6. However, not everyone considers this decision to be successful. Algebris Investments calls it a political mistake, and JP Morgan calls the actions of the Central Bank too hasty. The ECB joins the regulators of Switzerland, Sweden and Canada, which have already begun cycles of monetary expansion. However, unlike the Swiss franc and the Swedish krona, the euro continues to strengthen against the dollar.
The history of rate cuts by Central banks is most often triggered by a slowdown in the economy. After the collapse of Lehman Brothers in 2008, the ECB eased monetary policy to prevent the outbreak of the crisis. In 2011, when Greece was on the verge of bankruptcy and in 2019, rates were lowered due to slowing GDP growth and falling inflation. But the situation in 2024 is different — the Eurozone economy is showing growth.
Analysts believe that the ECB is lowering rates mainly because of the promise made at the previous meeting, where a compromise was reached between the "doves" and "hawks" on the June easing of monetary policy. This promise, together with a strong labor market and rising real incomes, has become one of the factors driving the rise in Eurozone GDP. It has also helped to reduce the cost of mortgage and corporate loans.
It is logical that Bloomberg predicts a revision of forecasts for eurozone GDP at the June ECB meeting with an increase. If the Central Bank adjusts the forecast for core inflation in the same direction, we will receive a signal that a further reduction in the deposit rate is unlikely. And this is already a catalyst for the growth of EUR/USD.
Christine Lagarde's team contributed to the improvement of the Eurozone economy, which had a positive effect on the euro exchange rate. In 2023, European GDP grew by 0.4%, while American GDP increased by 2.5%. According to purchasing managers' indices, both indicators may strengthen by 1.3% in the second quarter. BNP Paribas believes that the peak of the discrepancy in growth rates between the United States and Europe is already over. This means that EUR/USD is unlikely to return to the 1.06 mark in the coming months, if not years.
The 25th record high of the S&P 500 and the fall in US Treasury bond yields to the lowest values in two months create favorable conditions for the growth of EUR/USD. However, forex currency trading is not without its shocks. Thus, political events, including the US presidential election, can change the balance of power. Nevertheless, investors' attention is focused on the rhetoric of Christine Lagarde, who is expected to hint at future ECB actions.
Taking into account the improvement in forecasts for GDP and inflation in the Eurozone, as well as statements about a gradual easing of the ECB's monetary policy, EUR/USD is likely to continue its rally towards 1.108. A break in the resistance at 1.0905 and 1.0915 will be a reason to build up long positions.
EUR/USD Technical analysis for EUR/USD
Yesterday, EUR/USD tried to break through the support area of 1.0874 - 1.0869, but the attempts of the "bears" were unsuccessful. Buyers were able to defend the area, after which the short-term uptrend continued. Buyers have worked out the first target in the area of the 1.0893 level. The next target for the pair is the maximum from June 4th. If the asset manages to break through the resistance and gain a foothold higher, then the target moves to the "Golden Zone" in the range of 1.0945 - 1.0937.
However, if the support area 1.0874 - 1.0869 is broken down on Thursday, the correction will continue to the support range 1.0832 - 1.0823. This zone is one of the key levels, so after testing it, it will be possible to start forming long positions.
USD/CAD analysis on October 22, 2024In the Asian session on Tuesday, USD/CAD is being adjusted and is now at the level of 1.3829. The recovery of the asset is facilitated by the strengthening of the US dollar and the ambiguous macroeconomic indicators of Canada.A series of September data will be released in Canada today at 14:30 (GMT+2). It is expected that the commodity price index will remain in the negative zone, but will rise from -3.1% to -1.7% compared to last month, which may strengthen the annual decline to -2.5%. This will have a negative impact on the Canadian economy, as the export of raw materials, including energy, plays a significant role. The price index for manufactured goods is likely to adjust from -0.8% to -0.4%, which could potentially stimulate domestic sales by lowering prices.The US dollar index is holding at 103.70. Investors are now focused on the statements of the Fed's representatives on monetary policy. Speaking about cryptocurrencies, the head of the Federal Reserve Bank of Minneapolis, Neil Kashkari, stressed that he continues to support further interest rate cuts amid an improving economic situation.On the daily chart, the USD/CAD pair is adjusted within the ascending channel with a range of 1.4040–1.3700.Technical indicators confirm the buy signal. The range of moving averages on the alligator indicator is expanding, and the fast EMA lines are diverging. The awesome oscillator histogram indicates growth, moving away from the transition line up.For long positions, it is recommended to wait for the breakdown up to the level of 1.3870 with a target of 1.4070. We will set the stop loss at 1.3800.Sales can be considered when breaking down the 1.3790 level. Here we consider 1.3610 as the target. We will place the stop loss at 1.3860. 
USD/JPY shows versatile fluctuations near the 150.90 mark of the local high of the end of July. The volatility of currency pairs in the market remains low due to a lack of fresh macroeconomic data. The main attention of the participants is focused on the upcoming speeches by representatives of the US Federal Reserve.Analysts expect the Fed to lower the interest rate by 25 basis points in November, and are now revising their forecasts for the December meeting, taking into account the possible consequences of the US presidential election. If Donald Trump wins, experts predict a tightening of the Fed's monetary policy and an intensification of the "tariff wars", especially with China and the European Union.In Japan, investors are analyzing inflation data released on Friday. The consumer price index slowed from 3.0% to 2.5% in September, while the index excluding food and energy prices rose from 2.0% to 2.1%. The data showed a decrease in inflation, which may affect further actions of the Bank of Japan.In addition, Friday's statistics from the United States indicated a decline in the construction sector. The number of building permits issued decreased by 2.9%, and the laying of new houses decreased by 0.5%.Technical analysis by John Murphy gives an ambiguous picture. The Bollinger bands are narrowing, which indicates possible price fluctuations, the MACD continues to give a buy signal, and the Stochastic, testing the "80" level, indicates that the dollar is overbought in the short termWe will open long positions after a confident breakdown above the level of 151.50 with a target of 153.50. We will set a stop loss at 150.50.An alternative scenario is selling after a rebound from the level of 151.50 and a breakdown down to the level of 150.50. The nearest target is 148.24. In this case, the stop loss will be at 151.50. 
FOREX Fundamental analysis for EUR/USD on October 22, 2024Europe's main fear is the presidency of Donald Trump. For EUR/USD bulls, the greatest threat is the pair's fall to the parity level. These two risks are linked, as Trump promises to impose 10% tariffs on imports. According to ABN Amro forecasts, this could lead to a reduction in exports from Europe to the United States by almost a third (€460 billion), which would lead to a 1.5% drop in European industrial production. The eurozone, already weakened, risks falling into recession, which will put the euro on the edge of the abyss.Europe has already faced Trump's policies when he was president for the first time. But now his ambitions for trade duties have grown significantly, and the Eurozone economy is weakened by the pandemic, the war in Ukraine and the energy crisis. Today, European exports are threatened by American protectionism, slowing Chinese growth and a weakening global economy, which makes the situation extremely dangerous for the region.It is not surprising that investors choosing between the US dollar and the euro in the last three weeks have made a clear choice in favor of the greenback. In early October, speculators reduced their "bearish" positions on the dollar from $13 billion to a neutral level. JP Morgan believes that the demand for hedging forex risks related to the US presidential election will continue to grow, which will support the USD index.The fall in EUR/USD is associated not only with worries about the possible return of Trump and new trade wars, but also with a reassessment of the prospects for easing the Fed's policy. In September, the Fed stepped up, but after positive economic data, such as GDP growth of 3.4% for the third quarter and good indicators on employment and retail sales, doubts arose about the need for such a rapid rate cut.Differences in the economic growth rates of the United States and the Eurozone, which may intensify with the resumption of trade wars, along with differences in the approaches of the Fed and the ECB to monetary policy, indicate the priority of selling EUR/USD with targets of 1.071 and 1.06. We continue to hold short positions open at 1.0865.EUR/USD Technical analysisSince the beginning of the week, the short-term downward trend of EUR/USD has continued. Sellers repeated testing the low on October 17th. If the fall continues, the pair will reach the Target zone of 1.0794 - 1.0777.If an upward correction starts from current prices, then we can wait for the asset to recover to the resistance area 1.0916 - 1.0907. After testing this zone, we will consider selling EUR/USD with the first target at 1.0863 and the second at 1.0811. 
USD/CAD analysis for October 18, 2024On Friday, USD/CAD shows mixed movements, consolidating around the 1.3800 mark, without moving much away from the local highs on October 15. The volatility of currency pairs in the market remains low by the end of the week, as there is little significant macroeconomic data. Investors are analyzing already published statistics and preparing for the upcoming US presidential elections in early November.This week, data on retail sales in the United States were released. In September, they increased by 0.4% (against 0.1% in August), which exceeded analysts' forecasts of 0.3%. Industrial production, on the contrary, decreased by 0.3% after rising by 0.3% a month earlier, which is slightly worse than expected. The index of business activity in the manufacturing sector of the Federal Reserve Bank of Philadelphia in October increased from 1.7 to 10.3 points, and the number of applications for unemployment benefits fell sharply — from 260 thousand to 241 thousand in the week of October 11.In Canada, inflation statistics were published this week, which may affect future decisions of the Bank of Canada. The core consumer price index in September showed zero dynamics in monthly terms after a decrease of 0.1% in August, and in annual terms it increased from 1.5% to 1.6%. However, the overall inflation rate fell to 1.6% year-on-year, which was lower than preliminary estimates.A steady upward trend is visible on the chart of days. The Bollinger bands remain wide despite a slight narrowing, which indicates the possibility of further activity. The MACD indicator supports a weak buy signal, and the Stochastic indicates a downward trend, ignoring corrective movements.In case of a confident breakdown up to the 1.3800 level, we will open long positions with a target of 1.3900 and a stop loss at 1.3750.If the pair bounces off this level and breaks down to 1.3765, then we get a sales signal with a target of 1.3700. We will set the stop loss at 1.3800. 
AUD/USD ends the week with unstable dynamics, trading near the key level of 0.6700. The Australian dollar is trying to continue its upward movement, which began with a rebound from the lows on September 12 after the publication of positive economic data.In September, Australia recorded an increase in the number of employed by 64.1 thousand people, which significantly exceeded the expectations of analysts who predicted 25 thousand. Full—time employment increased by 51.6 thousand, and part-time employment by 12.5 thousand. The unemployment rate remained at 4.1%, while a slight increase to 4.2% was expected. The labor force participation rate increased from 67.1% to 67.2%.Positive statistics from China also support the Australian dollar. In September, industrial production in China increased to 5.4% against the projected 4.6%, and retail sales increased to 3.2%, exceeding expectations of 2.5%. China's GDP for the third quarter grew by 0.9% compared to the previous quarter and by 4.6% year-on-year, which is in line with experts' forecasts.Today, the market's attention will be focused on data on the US housing market, which may affect the further dynamics of the pair. Analysts expect a slight decrease in the number of construction permits issued from 1.47 million to 1.46 million, and construction may decrease to 1.35 million.Technical analysis on the daily AUD/USD chart gives a contradictory picture. The Bollinger band indicator indicates the possibility of corrective growth in the near future, despite the current downtrend. The MACD retains a sell signal, although it is trying to turn up. Stochastic signals a possible oversold pair, which indicates the likelihood of a short-term upward reversal.It is recommended to open long positions after the 0.6732 level is broken up. The target is 0.6800. We set the stop loss at 0.6700.An alternative scenario is that when the 0.6675 level breaks down, we open sales with a target of 0.6622. We will put the stop loss at 0.6700. 
FOREX Fundamental analysis for EUR/USD on October 18, 2024Economies behave unpredictably, like wild animals that cannot be controlled, even when central banks are trying to stabilize them. In 2021, the Fed claimed that inflation growth would be temporary, but the PCE level remained above 3% until November 2023. Last March, when the US banking crisis broke out, many predicted a recession, but the economy unexpectedly grew by 3%. At the same time, the European economy, which showed positive results in the first half of the year, found itself in a more difficult situation in the second half. This forced the ECB to step up monetary policy easing measures, which led to a decrease in the EURUSD rate to the level of 1.08.ECB President Christine Lagarde tried to inspire optimism, stating the prospects for a "soft landing" of the economy. However, this caused alarm among investors, who considered that the reduction in the deposit rate by 25 basis points to 3.25% was undertaken solely to avoid panic. A more significant decline could be seen as a sign of concern about an impending recession or deflation in the region. But even such a small decrease was enough for the EURUSD rate to decrease even more.The ECB unanimously decided to leave the door open for further monetary easing, which led to an increase in expectations of a rate cut by another 50 basis points in December. Now investors are predicting acts of monetary expansion at each subsequent ECB meeting, including April. Previously, it was assumed that this process would be completed in March. The ECB's rhetoric seemed softer than expected.Now futures markets expect the same amount of stimulus from the Fed and the ECB – about 140 basis points by the end of the current cycle. However, against the background of more confident growth of the US economy (about 3%) compared to the Eurozone, which is showing modest growth of 0.2% and faces a risk of falling, this looks illogical.The European Central Bank needs more decisive action, while the Fed can afford to act more cautiously due to an acceleration in retail sales (by 0.4% in September) and a decrease in the number of applications for unemployment benefits. These indicators confirm the stability of the US economy.The forex trading strategy "buy and hold" is still relevant, only now, in relation to EUR /USD, it is called "sell and hold". Successful entries into short positions above 1.12 and 1.1045 confirm the correctness of this approach. It is only important to build up positions on trend corrections in time, which may occur when major players start taking profits. Any market movement needs rollbacks.EUR/USD Technical analysisYesterday, EUR/USD broke through the "Golden Zone" of 1.0878 - 1.0869. The next target of sellers is the Target zone 1.0794 - 1.0777. We will consider new sales to complete an upward correction from the resistance areas 1.0916 - 1.0907 and 1.0969 - 1.0955. The main target of the bears will be the minimum of yesterday.To change the direction of the trend to an upward one and switch to purchases, the pair should break through the level of 1.0969 and consolidate higher. 
On Thursday, USD/JPY shows multidirectional dynamics, consolidating near the level of 149.50, close to the highs of early August. Investors prefer to refrain from active actions in anticipation of the publication of US retail sales data for September. Sales are projected to accelerate to 0.3% (from 0.1%), and excluding cars, they will remain at 0.1%. Data on the production activity of the Philadelphia Federal Reserve is also expected, where analysts predict an increase in the index from 1.7 to 3.0 points. Earlier, the index of production activity of the Federal Reserve Bank of New York fell sharply from 11.5 to -11.9 points, which turned out to be significantly lower than forecasts.Today, data on industrial production in the United States will also be released, where a decrease of 0.2% is forecast after an increase of 0.8% in the previous month.The published data from Japan put additional pressure on the yen. In September, exports fell by 1.7% after an increase of 5.5% in August, while imports fell to 2.1%, missing expectations for growth to 3.2%. This led to a reduction in Japan's trade deficit from 703.2 to 294.3 billion yen. Additionally, the index of activity in the service sector decreased by 1.1%, while analysts expected a fall of only 0.2%.Technical indicators on the daily chart indicate uncertainty. The Bollinger Band indicator indicates a possible narrowing of the range, which reflects the short-term mixed dynamics. The MACD is trying to turn downwards, forming a sell signal. Stochastic also indicates a possible continuation of the downtrend in the near term.It is recommended to open short positions when the price is fixed below the level of 149.12 with a target of 147.00. We will set the stop loss at the level of 150.00.If the pair breaks above the 150.00 level, we will receive a buy signal with a target of 151.50 and a stop loss at 149.12. 
FOREX Fundamental analysis for EUR/USD on October 17, 2024The economic problems of the Eurozone continue to intensify. But, trouble does not come alone. Adding to the expectations of a rate cut by the European Central Bank are the risks of a revival of Trump's trade policy and an unexpected drop in UK inflation below the 2% target. This led to a drop in British bond yields, which pulled down German yields. As a result, the EUR/USD pair has almost reached the sellers' target level at 1.085.Theoretically, a rate cut by the US Federal Reserve should weaken the dollar. However, in practice, everything depends on how fast and synchronously monetary expansion takes place in other central banks. Given the weakening Eurozone economy and the possible return of the region to deflation, the ECB is likely to accelerate the pace of monetary policy easing. Especially considering that inflation is slowing down not only in individual countries, but throughout Europe.Bloomberg experts expect that on October 17, the ECB will reduce the deposit rate by 25 basis points, and predict that by the end of 2025 the rate may fall to 2%.In contrast, the U.S. economy remains relatively stable. According to forecasts by the Wall Street Journal, by the end of 2024, unemployment in the United States will rise slightly – from the current 4.1% to 4.2%, and next year the average monthly job growth will be about 130 thousand. This allows the Fed to take its time with aggressive rate cuts. The federal funds rate is expected to drop to 4.4% by the end of 2024 and to 3.5% by the end of 2025, and then it may start to rise.If Donald Trump returns to power, protectionist policies and fiscal incentives could accelerate inflation, forcing the Fed to hold down rates first and then possibly raise them again. This is favorable for the dollar, and Deutsche Bank analysts recommend buying the dollar against the euro, the Mexican peso and the South Korean won. If Kamala Harris wins, on the contrary, the dollar may weaken against the Japanese yen.Today is the day of forex trading on the news. Thursday's main event for EUR/USD will be the meeting of the European Central Bank and Christine Lagarde's press conference. If the ECB reduces the deposit rate by 25 basis points to 3.25%, investors will most likely not be surprised, since such a maneuver has already been taken into account in current quotes. Without further signals of policy easing from Christine Lagarde, the news may cause EUR/USD to rise to 1.0905 and 1.0955. If the ECB decides to cut the rate by 50 basis points, the pair is likely to fall below $1.08. In the first case, it is worth considering short—term purchases, and in the second case, strengthen short positions.EUR/USD Technical analysisEUR/USD continues to trade in a short-term downtrend. In the decline, the pair broke through the "golden zone" of 1.0878 - 1.0869. The next target of sellers is the Target zone 2 1.0794 - 1.0777. We will consider new sales at the end of the upward correction in the area of strong resistance levels, which are the following areas: resistance (A) 1.0956 - 1.0947 and (B) 1.1009 - 1.0995.The first sales target from the resistance (A) will be the 1.0904 level. The second target will be today's minimum.