FOREX Fundamental analysis on August 25, 2022.
On the eve of Jerome Powell's speech at the symposium in Jackson Hole, EUR/USD buyers are trying to drive the pair's quote to the parity area. But everyone knows how the games against the Fed end. In fact, whatever the head of the Federal Reserve says, the regulator will not change the course of monetary policy. This means that the bears will get deals at a better price.
No matter how much the futures market predicted the rate hike at the September FOMC meeting, the Open Market Committee will make the final decision based on inflation data for August. So it is unlikely that Jerome Powell will act as a visionary tomorrow and give a clear signal to investors to buy or sell the dollar.
As for the long-term prospects, Central banks understand that inflation will not be temporary, so rates will rise and remain at high levels for quite a long time. In this regard, the scenario of changing the course of the Fed's monetary policy to "dovish" in 2023 looks rather strange
Now buyers are playing back rumors that the ECB will raise the rate by 100 basis points at the September meeting. But here again, the ceiling of rate increases is important, which each regulator has its own. It is unlikely that the ECB will exceed 2% while the Fed plans to increase the rate to 4%. In other words, the differential of the monetary rates of Central Banks is obvious, and it is not in favor of the Old World. Capitals are looking for more favorable investment conditions, so they will choose the United States, strengthening the dollar exchange rate along the way.
Of course, the appreciation of the dollar when the euro falls adds headaches to the European authorities, since all commodities are denominated in USD, so their value increases along with the greenback. This, in turn, continues to accelerate inflation and slows down the economy.
In the medium term, the EUR/USD downtrend persists. However, most of the negative factors for the euro have already been taken into account by prices, so any positive is perceived by buyers with a bang. But, there is no reason to change the direction of the trend. According to the rules of trading from the forex levels, we will consider short positions from the resistances of 1.002 and 1.008 or at the breakdown of the support of 0.995.