EUR/USD: Fed cuts the rate, perhaps for the last time

On Thursday, GBP/USD shows steady growth and is trading around 1.2927, recovering losses from the previous session, when the dollar strengthened after the victory of Republican Donald Trump in the US presidential election. Earlier, Trump promised to tighten trade policy, including a significant increase in duties on imports from the EU and China. The Federal Reserve is expected to cut rates less aggressively compared to the European Central Bank (ECB) and the Bank of England, where the economic slowdown is more noticeable.Investors are focused today on the meetings of the Fed and the Bank of England, which are expected to reduce rates by 25 basis points to 4.75%. In the UK, the current rate is 5.00% after a 25—point cut in August - the first since 2020. After inflation fell to 1.7% in September, a level not seen since April 2021, further easing was expected, especially against the background of falling gasoline and airline ticket prices. However, the increase in expenses and debt obligations announced recently in the budget caused a revision of analysts' forecasts. Additionally, the slowdown in business activity in October, according to S&P Global UK, reduces the confidence of British companies. The corresponding index dropped to 51.8 points, the lowest value since November last year.Additional pressure on the pound was exerted by data on the UK construction sector. In October, the business activity index fell to 54.3 points against the projected 56.0. At the same time, the services sector showed a slight increase to 52.0 points, and retail sales, according to the British Consortium of Retailers (BRC), slowed to 0.3%, although expectations were at 1.4%.On the daily chart, according to the Bollinger band indicator, a slight decrease is noticeable, indicating a moderate expansion of the price range, but trading activity does not keep pace with this movement. The MACD indicator is also declining, maintaining a weak sell signal. Stochastic shows similar dynamics, turning downwards in the middle area.We are considering long positions when the level of 1.2948 breaks up with a target of 1.3050 and a stop loss at 1.2900.If the 1.2948 level turns out to be a strong resistance and a breakdown occurs down from the 1.2900 mark, this may be a signal for short positions with a target of 1.2817 and a stop loss at 1.2948.

FOREX Fundamental analysis for EUR/USD on November 7, 2024Donald Trump is back in the White House, and with him his famous slogan "America first!" returns. In such circumstances, the United States is increasing the rate of inflation, while economic growth is slowing in other developed countries. As a result, debt rates in the United States are rising faster than abroad. The widening of the difference in US and German bond yields caused the worst daily dynamics of EUR/USD since 2016.On the background of Trump's victory, the American stock market added $1.62 trillion in capitalization, which became one of the largest jumps in history. Meanwhile, Germany and the entire Eurozone, heavily dependent on exports, are at risk of recession due to possible increases in US import tariffs and cuts in military aid to allies. Unlike in Europe, American stock indexes are counting on growth due to deregulation and fiscal incentives. Trump plans to reduce corporate tax from 21% to 15% for US resident enterprises, which, as in his first term, will boost the budget deficit, which already amounts to 5.5% of GDP.Trump's plan to reduce taxes, introduce anti-immigration measures and raise tariffs contributes to higher inflation, which may force the Fed to slow down monetary policy easing by supporting the dollar in forex currency trading. Already, derivatives markets are reviewing the scale of future monetary expansion to 100 bps by September 2025.The situation in Europe looks different. The region's economy is already on edge, and new trade barriers or cuts in military aid will further weaken it. The ECB will probably have to cut rates more actively than planned. It is not surprising that the futures market expects monetary incentives to grow to 130 bps by September 2025, and Lombard Odier predicts the final deposit rate at 1.5%, or maybe lower, unlike the 3.5% federal funds rate in the United States.If the ECB accelerates easing, and the Fed, on the contrary, slows down, the EUR/USD pair will be under pressure. Analysts at Mizuho Financial Group and Deutsche Bank predict a drop in EUR/USD to 1.03 and 1.05, and ING calls the level of 1.05 the nearest target, not excluding a decrease to parity by the end of the year. The same opinion is shared by ABN Amro Bank and Manulife.The fall in EUR/USD may accelerate if the Fed gives a signal to suspend monetary expansion. In this regard, it is advisable to keep the shorts open from the 1.0905 level and increase sales with each upward pullback.EUR/USD Technical analysisYesterday, the target zone of 1.0794 - 1.0777 was broken through with a decrease in EUR/USD. Then, during the European trading session, the pair reached the "golden zone" of 1.0682 - 1.0670. After that, an upward correction began, which has continued to the present dayIf the corrective movement continues, we will wait for the EUR/USD quotes in the resistance area (A) 1.0805 - 1.0794. After testing this zone, it will be possible to consider new sales of the instrument with the first target at 1.0744 and the second at yesterday's low of 1.0682.If the resistance area (A) is broken up during trading, then the correction will continue to the resistance area (B) 1.0867 - 1.0850. This zone is the boundary of a short-term downtrend. Therefore, we will also consider sales from here.

FOREX Fundamental analysis for EUR/USD on November 5, 2024Market reversals begin to form when investors close their positions. In October, traders focused on the so-called "Trump trade" — predictions of a victory for Donald Trump and the Republicans, which would lead to a political change in the White House and Congress. In this situation, investors expected that the policy of the 45th president would affect the global economy, bring chaos to the markets, and the US dollar would receive support. It seemed that the EUR/USD bulls had no chance left, but they still appeared.Unexpectedly for many, Kamala Harris's chances began to rise when investors almost turned their backs on her. The reason is either the mistakes made by the Republicans, or the successful actions of the Democrats to attract voters. The drop in the probability of a "red wave" strengthened the euro and allowed the EUR/USD pair to partially recover losses.Goldman Sachs experts believe that Kamala Harris's victory can only temporarily weaken the dollar, but fundamental factors such as a strong US economy and the suspension of monetary easing by the Fed should eventually support the US currency.Another reason for the EUR/USD growth was the presentation by the Labour Party of the pro-inflationary budget in the UK, which reduced expectations for further acts of monetary expansion by the Bank of England. In addition, the strong economic indicators of the Eurozone have given reason to believe that the ECB will not rush to cut rates. And this is also a factor in supporting the euro.If Kamala Harris wins the election, Forex currency trading will again follow the monetary policy of the Fed and other Central Banks. However, other scenarios remain. Research shows that despite the drop in support for Trump in some states, according to NBC News, the election race remains at 49% versus 49%. This creates the risk of a repeat of the situation in 2020, when Trump refused to recognize the election results. Such a scenario would be shocking for the markets.On the other hand, a Trump victory could strengthen the dollar again. Potential new tariffs and fiscal incentives will cause inflation to rise, which may prompt the Fed to suspend policy easing. Out of habit, Trump may try to put pressure on Fed Chairman Jerome Powell, but he is unlikely to make concessions.In this situation, selling EUR/USD at 1.0905 can be risky and bring losses to traders. The pair is most likely to fluctuate in the range from 1.07 to 1.1, depending on the election results. The decision whether to hold short positions or stay out of the market is made by each investor independently.EUR/USD Technical analysisEUR/USD is developing a correction of the short-term downtrend. On Monday, buyers tested the resistance area 1.0884 - 1.0873. During the European trading session, the pair broke through this range, but in the American session it returned to the area of 1.0884 - 1.0873.Today, it is necessary to continue monitoring near strong resistance areas in order to find profitable entry points for sale. If the resistance area (A) is broken up during trading, the correction will continue to the resistance area 1.0946 - 1.0929. From this zone, it will be possible to consider sales with the first target at 1.0853 and the second at 1.0761.At the same time, the US presidential election can disperse the volatility of currency pairs in the market and cancel the postulates of technical analysis. Traders who prefer less risky trading are better off staying out of the market on such days.

USD/JPY Fundamental analysis on November 4, 2024Look for someone who benefits from it. Japan does not need either a strong or a weak yen. In the first case, exporters face difficulties, in the second, inflation is rising, making imports more expensive, which is extremely undesirable for a country dependent on energy resources. Japan is striving for a stable currency, and the verbal interventions of the government of the land of the Rising Sun, together with the moderately hawkish position of the Bank of Japan, helped to contain the growth of USD/JPY.Although on paper, the yen may seem strong due to the rate hike by the Bank of Japan. Of course, the speed of monetary restriction has a decisive effect on USD/JPY, but the Central Bank is in no hurry to strengthen the course of monetary policy. If the rate increase is slow, the difference in Japanese and US bond yields is still significant, money continues to flow from Asia to North America, weakening the yen in forex currency trading. The uncertainty of the political situation caused by the loss of the parliamentary majority by the Liberal Democratic Party led to an increase in the dollar exchange rate above 153.8.Nevertheless, Kazuo Ueda was able to calm the excitement of speculators, saying that political changes would not affect the Bank of Japan's policy on the overnight rate. The Bank will continue to make decisions based on wage growth and inflation forecasts, which they expect to reach 2.5% in the 2024/2025 financial year and 1.9% in the next two years. These indicators indicate the intention to continue the normalization of monetary policy.The futures market has raised the probability of the BoJ's next move in January from 63% to 69%, although it is possible that the cost of borrowing will rise in December. Ueda noted that the Bank of Japan needs less time to assess the economic outlook than expected. At the same time, strong indicators in the United States are pushing the BoJ to take more active action. If the Fed suspends easing in January, Japan will probably raise rates too, without fear of strengthening the yen's position.Thus, the verbal interventions of the Japanese government and signals from the BoJ about the imminent tightening of monetary policy helped stabilize USD/JPY. However, the effect may be temporary. If Donald Trump wins the presidential election, the yield on US Treasury bonds will increase, which will strengthen the dollar.The rise in popularity of Kamala Harris before the elections plays into the hands of Japan, as speculators take profits on the dollar, keeping USD/JPY from further growth.In my opinion, the fate of the yen largely depends on the outcome of the US presidential election. If the Republicans occupy the White House, USD/JPY may reach the level of 155.5, which will create conditions for purchases. The victory of the Democrats, on the contrary, will signal the sale of EUR/JPY with targets at the levels of 163.2 and 161.

FOREX Fundamental analysis for EUR/USD on November 4, 2024Investors ignored the weak October US employment report, but were alarmed by the uncertainty of pre-election polls. After a weak job growth of 12 thousand and a short-term rise, the EUR/USD pair fell sharply, starting an important trading week with a gap. Kamala Harris, who was considered a loser by many, surprised analysts, and the likelihood of her victory reduced interest in the dollar.As the election approached, U.S. bond yields and demand for the dollar grew, and by October 29, hedge funds and asset managers had increased their net long positions on the dollar from $8 billion to $17.8 billion. The market, confident of Trump's victory, was disappointed.ABC News and Ipsos polls showed Kamala Harris with a 49% advantage versus 46% nationally, and a New York Times/Siena poll confirmed her lead in five of the seven key states. The Des Moines Register study came as a surprise: in Iowa, traditionally supportive of Trump. The Democrat was also in the lead here.The weakening of confidence in Trump's return forced traders to reconsider their positions, which was reflected in the opening of the week with a gap on EUR/USD. A possible Trump presidency, according to many, could strengthen the dollar due to potential protectionism and economic incentives leading to inflationary growth.In addition, Trump erred in interpreting the employment report as the collapse of the economy due to Harris' policies. Job growth was temporarily limited by hurricanes and strikes, which explains investors' disregard for the report, one of the weakest since 2020.The Fed's interest rate forecasts remain restrained: derivatives indicate a decrease of 44 bps by the end of 2024, which indicates a likely pause in the cycle of monetary expansion.The logic of such forecasts is clear: with a strong economy and uncertain inflation. The new White House administration will definitely affect inflation expectations.Most likely, we are seeing a scenario where Kamala Harris' victory will lead to EUR/USD rising above 1.1, weakening dollar support, and Trump's victory could push the euro to 1.07. Uncertainty is keeping traders out of the game for now.EUR/USD Technical analysisLast week, an upward correction to a short-term downward trend developed for EUR/USD. As part of the corrective recovery, the pair reached the resistance area (A) 1.0884 - 1.0873. The zone was held by sellers, which led to a decrease in the asset to the level of 1.0833. However, today the markets opened with a gap, and the price broke through the resistance area (A).In this regard, EUR/USD may reach the resistance area (B) 1.0946 - 1.0929, the trend boundary. After testing this zone, we will again consider short positions with the first target at 1.0853 and the second at 1.0761

FOREX Fundamental analysis for EUR/USD on November 1, 2024Whatever the outcome of the US elections, the new president will get the economy on the rise. Artificial intelligence and rising productivity are contributing to accelerated GDP growth, and inflation has almost reached the 2% target. The Democrats began their rule with a recession, and they risk ending up with weak employment figures. Does this mean that it will be more difficult for the EUR/USD bears?Bloomberg experts take into account the impact of hurricanes and strikes and predict that employment in the United States will grow by 110 thousand in October, while forecasts range from a reduction of 10 thousand to an increase of 180 thousand. The labor market has been a strength of the Kamala Harris administration, but natural disasters and labor protests can make a difference.Weak statistics will strengthen expectations of easing the Fed's monetary policy. Derivatives markets forecast a rate cut of 117 basis points next year, which is less than the 184 bps expected in early October. That is why the dollar in October showed the best result in the last two years, supported by an increase in the yield of treasuries. The "bears" in EUR/USD made an impressive breakthrough, but by the end of the month, the "bulls" began to regain the positions lost in forex currency trading.Although the volatility of the euro has increased against the background of the presidential election, the chances of a reversal have shifted in its favor, albeit remaining under pressure. Favorable news from Europe and China helped the euro strengthen. But how long will it last?The eurozone economy grew by 0.4% in the third quarter, and inflation returned to 2% in October. This reduced the probability of a December cut in the ECB deposit rate from 50% to 20%. The strengthening statistics contribute to a gradual easing of policy, allowing the ECB to maintain a tough approach, which is favorable for the euro. However, both currencies affect the dynamics of the pair: the publication of data on the American labor market and the upcoming elections may strengthen the dollar again, returning it to previous levels.The volatility of currency pairs on Forex is rising more strongly than in the last US election, due to the uncertainty of the outcome and concerns about Donald Trump's policies. Investors are watching the elections no less than they are watching the reports on the labor market, and they have good reason to do so.Strong US labor market statistics will create an opportunity to sell EUR/USD in the range of 1.076-1.0865. Weak data will give rise to short positions when rebounding from resistance levels at 1.0905 and 1.0930. But regardless of the employment figures, an event looms on the horizon that could change the global economic picture.

USD/JPY analysis for October 31, 2024On Thursday, USD/JPY is weakening, moving away from local highs on July 31, and is already testing the level of 152.90 for a breakdown downwards. Traders are waiting for the release of weighting statistics on the labor market in the United States.Experts' forecasts indicate a sharp slowdown in job growth in the non–agricultural sector - from 254 thousand to 115 thousand. The average hourly wage growth is also expected to slow down from 0.4% to 0.3%, with an annual increase of 4.0%. The unemployment rate is expected to remain at 4.1%. At the moment, investors are relying on the October report from ADP, which showed an increase in employment in the private sector to 233 thousand, which is significantly higher than forecasts. However, on the eve of the pressure on the dollar was exerted by data on the reduction of US GDP in the third quarter from 3.0% to 2.8%.Today, investors' attention is focused on the results of the Bank of Japan meeting. As expected, the regulator left the rate unchanged at 0.25%, considering that there is no reason to tighten policy. The head of the Central Bank, Kazuo Ueda, has previously stressed that any policy adjustments will be based on the dynamics of inflation and economic growth. Analysts suggest that the US presidential election on November 5 may increase anxiety in the markets, which, in turn, may affect Japanese assets. The Bank of Japan predicts that in the current fiscal year, the consumer price index will stop at 2.5%, and next year it will drop to 1.9%, below the target level of 2.0%. GDP is projected to grow by 0.6%. Domestic political factors are also putting pressure on the Bank of Japan. The ruling parliamentary coalition weakened its position in the October 27 elections, and now it has to find new allies.The situation for the yen is aggravated by weak retail sales data in Japan. In September, their annual growth decreased from 2.8% to 0.5%, and on a monthly basis, the indicator fell by 2.3% after an increase of 1.0% a month earlier.The main forex indicators on the daily chart do not give unambiguous signals. Bollinger bands continue to grow, although the price range is narrowing, which indicates short-term fluctuations. The MACD signals a downward trend, and the Stochastic indicates a decline, moving away from the overbought zone.It is recommended to open short positions with a confident breakdown down to the level of 152.50. The first target becomes 150.50. We take out the stop loss at 153.50.If the 152.50 level acts as a powerful support, the pair will bounce off it and break through the 153.50 mark, then we will get a signal to form purchases with a target of 155.50 and a stop loss at 152.50.

During Thursday's Asian session, the AUD/USD pair shows an unstable movement near the 0.6570 mark. Pressure on the asset is exerted by data on the Australian economy.September retail sales showed a slowdown to 0.1% instead of the expected 0.3%. In the third quarter, sales increased by 0.5% after a decrease of 0.3%. The number of construction permits issued increased by 4.4% in September, offsetting a 3.9% drop a month earlier. In annual terms, the indicator accelerated to 6.8%. Investors also drew attention to statistics from China, where business activity in the service sector rose to 50.2 points against expectations of 50.4, and the manufacturing sector slightly exceeded forecasts, strengthening from 49.8 to 50.1 points.Earlier, AUD/USD was under pressure from Australian inflation data, which increased expectations of monetary policy easing by the Reserve Bank of Australia (RBA). Consumer prices in September slowed from 2.7% to 2.1% (against the forecast of 2.3%), and the quarterly increase was only 0.2%. Lower prices for electricity and fuel have allowed to reach a three-year low, but the high cost of services remains, preventing the Central Bank from relaxing its hawkish policy.The US dollar, despite the decline in US GDP from 3.0% to 2.8%, strengthened its position thanks to the ADP report on private sector employment. In October, this figure rose to 233.0 thousand jobs, although a decrease to 115.0 thousand was expected. A strong labor market and stable GDP do not contribute to monetary policy easing by the Fed, which supports the dollar.On the daily AUD/USD chart, the Bollinger bands indicator narrows, showing a decrease, but remains wide enough for current market activity. The MACD indicator turns up, but retains a sell signal. Stochastic, having retreated from the minimum values, indicates a possible corrective growth.Short positions can be opened after a confident breakdown down to the level of 0.6536 with a target mark of 0.6456. We will place the stop loss at 0.6590.If the AUD/USD pair bounces off the 0.6536 support and breaks through the 0.6600 resistance, we will get a buy signal with a target at 0.6700. We will place the stop loss at 0.6536.