FOREX Fundamental analysis for EUR/USD on August 1, 2024
The Fed is staying out of politics, which confirms the likelihood of a federal funds rate cut in September. Jerome Powell actively defends the independence of the Central Bank, emphasizing that all decisions of the regulator are made on data, not on political events. Donald Trump argues that easing monetary policy before the election is something the Fed should avoid. Economists from his administration believe that monetary expansion can wait until November. However, the Fed is following its course without regard to the shouts from the White House, and this is good news for EUR/USD.
Yesterday was a very stressful day. Forex trading on the news was nervous. Initially, the single currency received support from an unexpected acceleration in European inflation, disappointing employment statistics from ADP and lower labor costs, returning to the range of $1,083-1.09. However, the news about the growth of pending sales in the US real estate market increased the yield of treasury bonds, bringing EUR/USD to support by 1.079-1.08. Then it was Powell's time.
The markets wanted to hear some signals from the Fed, but not to this extent. The chairman of the Federal Reserve stressed three times that a rate cut in September is being discussed. He noted that there had already been a real discussion on this topic in July and that progress had been made in the fight against inflation. The FOMC's accompanying statement added wording on risk sensitivity for both sides of the Fed's mandate. According to JP Morgan, such a number of hints indicates that, unless something unforeseen happens, a rate cut in September is practically a settled issue.
In the futures market, the probability of this scenario reached 100%, which increased expectations of the extent of monetary policy easing in 2024 from 64% to 72%.
Why were investors so nervous? And how to explain the rapid rally of US stock indexes on the expected news?
Most likely, this indicates a lack of confidence. Unexpectedly strong statistics on GDP, business activity and the real estate market could keep the Fed from signals. On the other hand, there were calls for a rate cut as early as July, which stock indexes would perceive as a fear of recession.
The results of the FOMC meeting reassured investors. Now the market is waiting for data on American employment to predict the dynamics of the federal funds rate. It remains for us to hold purchases of EUR/USD from the area of 1.079-1.08 and be ready to increase longs on good news.
EUR/USD Technical analysis
EUR/USD is developing an upward short-term trend, which may change to a downward one in the near future. To change the direction, sellers need to break through the support area 1.0822 - 1.0809 and gain a foothold below. If successful, the first target for the bears will be the lower Target zone of 1.0696 - 1.0670.
However, for now, the key support is being held by buyers. Therefore, we can expect a rebound and growth of the pair. In this case, we will wait for confirmation signals to buy. When they appear, it will be possible to open a long position with the first target at 1.0878 and then at 1.0948.
In Tuesday's Asian trading, GBP/USD remains near the 1.2965 level. Pressure on the pound is exerted by statistics from the British Consortium of Retailers (BRC), where in October a decrease in the retail price index was recorded from -0.6% to -0.8% in annual terms, against analysts' expectations of -0.5%. This indicator hints at a weakening of inflation, which may allow the Bank of England to actively reduce interest rates.Today at 11:30 (GMT+2), data on consumer lending will be published in the UK. It is predicted that net consumer lending will decrease from 4.2 billion pounds to 4.1 billion, and approval of mortgage applications — from 64,858 thousand to 64,200 thousand. Additional pressure on the GBP/USD pair was exerted by business activity data for October: the index in manufacturing decreased from 51.5 to 50.3 points, in the services sector — from 52.4 to 51.8, and the composite index — from 52.6 to 51.7 points, which falls short of analysts' expectations.The head of the Bank of England, Andrew Bailey, stressed that the introduction of the digital currency (CBDC) "Britcoin" will not entail the abandonment of the use of cash. The Bank of England is already exploring the use of distributed ledger technology (DLT), noting the importance of adapting to innovations in the financial sector.On the daily GBP/USD chart, the Bollinger band indicator indicates a moderate narrowing of the range, reflecting short-term uncertainty. The MACD indicator shows a weak buy signal, and the Stochastic is approaching the overbought zone, signaling a possible short-term weakening of the pairSell deals can be opened when the price breaks below 1.2948 with a target of 1.2860 and a stop loss at 1.3000With a rebound from 1.2948 and an upward breakdown of the 1.3000 level, we will consider long positions with a target of 1.3100. We will set the stop loss at 1.2948. 
FOREX Fundamental analysis for EUR/USD on October 29, 2024In 2016, Donald Trump was treated with skepticism, but by 2024 his potential return raises serious concerns. The memories of how resolutely he fulfilled his election promises give investors a clear idea of his possible actions. And this is an increase in protectionism, a demographic shock and a significant expansion in the issuance of treasury bonds to cover fiscal policy flaws. These risks limit the growth of EUR/USD, as any attempts to lift the pair are immediately used for sales.The prospect of a new round of trade barriers and a long-term period of high rates when Trump returns to the White House raises concerns, especially in countries with vulnerable economies. Trump may impose tariffs of 60% on Chinese imports, which will be even more destructive than 10% tariffs for other countries. If trade restrictions are tightened, Beijing will redirect exports worth $420 billion to other regions, mainly to Europe, which could lead to a new trade war.The market has already reacted to this prospect. Since the beginning of the year, the European index of U.S. tariff-sensitive stocks has fallen 2%, despite an 8% rise in the broader stock index.The political background is also playing on Trump's side. Hurricanes such as the devastating Helen, as well as the subsequent Milton, along with strikes, may negatively affect employment in the United States in October. Experts expect an increase of 125 thousand, which is significantly less than the September increase of 254 thousand, and the actual data may be even lower. Republicans will seek to use weak statistics to highlight economic problems under Joe Biden's presidency.In case of weak data on non-farm payrolls, traders can quickly buy EUR/USD. Given the expectations of an acceleration in European inflation from 1.7% to 1.9%, a temporary rise in the pair is possible, but its chances of a trend reversal remain low. Trump's policy may raise the yield on 10-year U.S. Treasury bonds above 5%, which will strengthen the dollar.Trump's fiscal incentives could increase the national debt to 116% of GDP, whereas under Kamala Harris this figure will probably remain below 109%.The forex trading strategy assumes the consolidation of EURUSD within the range of 1.0745-1.0865, therefore, intraday transactions become relevant, taking into account the economic calendar.EUR/USD Technical analysisEUR/USD is trading in a short-term downtrend. Yesterday, sellers tried to break through the Target zone of 1.0794 - 1.0777, but without success. At the same time, one of the tenets of forex currency trading says that if an asset does not go in one direction, then it is highly likely that it will start moving in the opposite direction. Therefore, an upward correction may begin today.In case of an upward correction, the pair will probably try to test the resistance areas 1.0884 - 1.0873 and 1.0946 - 1.0929. From these levels, new sales can be considered with the main target at 1.0761. 
Fundamental analysis for USD/JPY on October 28, 2024The political situation threatens the stability of the Japanese yen. Since mid-September, the USDJPY pair has been steadily growing amid expectations of weak voting results for the ruling party in the parliamentary elections in Japan and the likely return of Donald Trump to the White House. The fears were justified: for the first time since 2009, the Liberal Democratic Party of Japan lost its majority in the lower house of parliament, gaining 215 seats with Komeito partners with the minimum required 233. Amid uncertainty around political leadership, investors are massively selling USDJPY.Among the first to react to the pair's fall were hedge funds and asset managers, who switched from net buying to actively selling the yen during the week. Political instability will complicate the Bank of Japan's plans to normalize monetary policy, and its silence at the next meeting on October 31 may become an obstacle to short-term bearish positions on USDJPY.At first glance, the difference in the approaches of the Fed and the Bank of Japan to monetary policy contributes to the strengthening of the yen against the dollar. Markets expect the US federal funds rate to drop from 5% to 3.4%, and the Japanese rate to rise by 50-75 bps by 2025, which supports interest in USDJPY sales. However, the time factor and the probability of failure also play a role.Forecasts by Bloomberg experts suggested that the Bank of Japan would continue to normalize monetary policy by December or January. But the weakening of inflation and the election result may push back the deadlines. The Fed may also be cautious if positive economic data from the United States continues to arrive.Trump's leading position in the presidential race adds to the uncertainty in forex currency trading. If he wins, a new spike in inflation is very likely due to protectionist tariffs, which will exacerbate problems in supply chains and provoke wage growth due to reduced migration. This will increase pressure on the Fed, forcing it to maintain high rates, which is likely to strengthen the dollar.In the coming months, the trend for USDJPY may change several times. For the bears, the key conditions remain the formation of a coalition in the Japanese parliament and the weakening of statistics on the American labor market for October. If these factors work, sales look attractive; otherwise, the chances of achieving the goals of 158 and 160 within the uptrend increase. 
On Monday, the NZD/USD is adjusted around the 0.5963 mark against the background of the growth of the US dollar. In New Zealand, meanwhile, the week will start with low volatility due to the lack of significant economic news and Labor Day celebrations, which left the stock market in Wellington closed.Investors are waiting for the Reserve Bank of New Zealand (RBNZ) to take additional measures to ease monetary policy. Speaking at the Peterson Institute, RBNZ head Adrian Orr said that inflation at 2.2% is within the target range of 1.0% to 3.0% and allows us to consider further interest rate cuts. However, this will only happen if absolutely necessary; if economic indicators do not deteriorate, the RBNZ may leave the rate at the current level of 4.75%. However, analysts believe that in November the rate may be reduced by 50 basis points, which will support the New Zealand dollar in forex currency trading.The US dollar index is holding near the level of 104.30, thanks to good economic statistics. In October, the University of Michigan recorded a decrease in expected inflation from 2.9% to 2.7%, while long-term inflation expectations for the next five years remained at 3.0%. The indicator of consumer expectations rose from 72.9 to 74.1 points, consumer sentiment — from 68.9 to 70.5 points, and the indicator of current conditions rose from 62.7 to 64.9 points.Currently, the NZD/USD pair is correcting near the lower line of the 0.6200–0.5850 range.Technical indicators strengthen the sell signal. The EMA on the alligator diverges from the signal line, and the awesome oscillator indicator shows descending bars below the transition line.We will open short positions when the pair decreases and strengthens below the level of 0.5940 with a target of 0.5850 and a stop loss of 0.6020.We consider purchases with an increase and consolidation of the price above 0.5980. The nearest target is 0.6060. We will set the stop loss at 0.5920. 
FOREX Fundamental analysis for EUR/USD on October 28, 2024The euro is considered to be the currency of optimists, and the dollar is the money of pessimists. Therefore, when Israel attacks Iran, and Donald Trump's protectionist policy plans can undermine the global economy, the EUR/USD exchange rate goes down. After a week-long bearish position on the dollar, hedge funds and asset managers set themselves up for growth again, which led to the pair's longest string of weekly losses in the last eight months.According to the IMF forecast, global GDP will grow by 3.2% next year. However, if Trump's plans in the field of customs tariffs are implemented, losses in global economic growth will reach 0.8% in 2025 and 1.3% in 2026. These measures will hit not only China and the export-oriented Eurozone, but also the US economy: Morgan Stanley expects that trade conflicts could reduce US GDP growth by 1.4% and accelerate inflation by 0.9%.According to Christine Lagarde, the Eurozone will face another economic blow as domestic demand remains low and inflation risks are rising. ECB research shows that new tariffs on strategic goods can reduce global GDP by 6% of potential growth, and in a pessimistic scenario, losses can reach 9%.Rising inflation in Europe should, in theory, dissuade the ECB from aggressively cutting rates. However, investors understand that prices grow more slowly in a weak economy than in a strong one. Thus, inflation risks are more likely in the United States, which will force the Fed to hold its key rate or even return to tightening policy, strengthening the dollar in forex currency trading.Right now, investors' main attention is focused on the US elections. Analysts at State Street Global Markets believe that whoever wins, the EUR/USD pair will remain under pressure. Differences in the pace of economic growth and monetary policy contribute to this downward movement. The futures market estimates the probability of a 50 bps ECB rate cut in December at 40%, while further Fed rate cuts are questionable.The EUR/USD exchange rate will also be affected by data on inflation in Europe and employment in the United States. Inflation in the Eurozone is expected to rise from 1.7% to 1.9%, and employment growth in the United States will slow from 254 thousand to 125 thousand. In such conditions, it is likely that EUR/USD may move to consolidation in the range of 1.073-1.084 by the end of October. We continue to hold the shorts formed at the levels of 1.12, 1.1045 and below. 
FOREX Fundamental analysis for EUR/USD on October 25, 2024Donald Trump has not yet won the US presidential election, information from Reuters about a possible acceleration of the ECB monetary easing cycle may turn out to be false, and the situation of the German economy is not as critical as it was thought. These factors prompted EUR/USD sellers to lock in profits before important events such as the publication of US employment data and the presidential election. EUR/USD has risen above the $1.0805 level, which may mean an upcoming consolidation, if not a correction.Against the background of an increase in the US business activity index to 54.3 points and a second consecutive decline in the Eurozone composite PMI below 50, talk about the "exclusivity" of the American economy and differences in growth rates is getting louder. The IMF improved the forecast for the United States and lowered it for the Eurozone, indicating that the gap will only grow due to differences in labor productivity.At the same time, investors' attention was attracted by positive developments in the German economy. Business activity exceeded expectations, and Deutsche Bank noted that the industry is not in a state of decline, and government warnings about a recession may be premature.The question is whether the ECB needs to accelerate the easing cycle if the Eurozone's largest economy is showing signs of stabilization. Joachim Nagel stressed that the Central Bank should not rush into monetary expansion. Pierre Wunsch questions the need to discuss their reduction by 50 bps in December, and Madis Muller believes that the ECB is not behind schedule. Gabriel Makhlouf noted that only very negative data can change his mind.Reuters insider information about the ECB's willingness to cut rates more actively pushed the EUR/USD exchange rate below 1.08, but if this is a rumor, maybe it's worth considering strengthening the euro in forex currency trading? The cost of hedging the risks of the euro's fall has risen to the highest since the French elections in 2017 and seems overstated.As soon as Trump began to gain points in the pre-election polls, investors rushed to assess the prospect of the so-called "Trump trade". According to Standard Chartered, it contributed 60% to the dollar's growth in October. The dollar was planning to end the month with the best dynamics in the last two years, but the fact that Trump has not yet won eased the pressure on EUR/USD.Now EUR/USD is recording profit on shorts, which creates opportunities for stabilization of the exchange rate or rollback. Sellers are likely to use any EUR/USD rally to the 1.0865 and 1.0905 levels to form short positions. 
During Thursday morning trading, the USD/CHF pair is consolidating near the peak values of August 16 - 0.8660, as market participants expect October data on business activity in the United States from S&P Global, which will be released at 15:45 (GMT+2).The index in the manufacturing sector is expected to grow from 47.3 to 47.5 points, while the index in the service sector will decrease slightly from 55.2 to 55.0 points. Investors also analyze changes in sales in the secondary housing market, which improved from -2.0% to -1.0%, and evaluate the monthly report of the US Federal Reserve — the so-called "Beige Book", which shows either the preservation of the current level of economic activity in the regions, or its moderate decline. In most districts, there is a decline in the manufacturing industry, while the banking sector is showing stability or even growth. There have been no changes in the real estate sector, but the shortage of affordable housing remains an urgent problem in a number of large cities.Swiss statistics did not provide significant data for the market this week, and traders are focused on October business activity indicators in the Eurozone, which will be published today at 10:00 (GMT+2). The index of the manufacturing sector is expected to grow slightly from 45.0 to 45.1 points, while the index in the service sector will increase from 51.4 to 51.6 points, and the composite indicator from 49.6 to 49.7 points.Technically, on the daily chart, the Bollinger band indicator continues to expand, reflecting the volatility of the market in the short term. The MACD indicator is slightly decreasing, indicating the possibility of a sell signal. Stochastic is moving away from the area of maximum values, which may signal the beginning of a short-term downtrend.The formation of short positions is possible when the level of 0.8641 breaks down with a target of 0.8600 and a stop loss at 0.8669.It is recommended to open purchases in the event of a rebound of the pair from the 0.8641 level and an upward breakdown of the 0.8669 resistance. The target is 0.8730. We will set the stop loss at 0.8641. 
FOREX Fundamental analysis for EUR/USD on October 24, 2024Almost two years have passed since the beginning of the energy crisis, but the Eurozone economy remains stagnant. This causes alarm among the members of the ECB's Governing Council, as they fear that the regulator is late in easing monetary policy. This may lead to a more drastic reduction in rates. Rumors spread by Reuters pushed the EUR/USD exchange rate to the lowest values since July.Within the ECB itself, the number of supporters of policy easing is growing. Fabio Panetta claims that inflation will return to the 2% target much earlier than the end of 2025, as previously expected. Mario Centeno announced the possibility of reducing the deposit rate at the December meeting by 50 basis points, and even such a "hawk" as Robert Holzmann admits large-scale expansion, although he would prefer a reduction of 25 bps.The futures market expects a quarter-point rate cut at each meeting of the Governing Council until June, which is in total more than the derivatives for the Fed suggest for this period. While the Eurozone is stagnating, the US economy continues to surprise with positive dynamics, which forces investors to revise forecasts for Fed rates. A month ago, a rate cut of 65 bps was expected until the end of 2024, but now this figure has decreased to 40 bps. In December, the Fed may suspend the cycle of monetary policy easing.The dollar is also supported by the so-called "Trump trade". If you are not hedging the forex risks of Donald Trump's return to the White House, this may be a mistake. The growth of the USD index reflects confidence in the relative safety of American assets, especially against the background of possible market shocks in the event of a Republican victory.The probability of Trump's victory is growing. According to the latest Wall Street Journal poll, Trump is beating Kamala Harris by 2 percentage points — 47% versus 45%. In August, Harris led by the same margin. A Financial Times poll showed that for the first time Trump was ahead of Harris in economic management, 44% of Americans trust him against 43% of the vice president.The difference in the approaches of the Fed and the ECB to monetary policy, as well as the possible return of Trump, will continue to put pressure on EUR/USD. The only thing that can help the euro is stronger, than expected data on Eurozone business activity. A breakout of the 1.0805 level may be a signal to close short positions, but will sellers go for it?EUR/USD Technical analysisEUR/USD is testing the Target zone of 1.0794 - 1.0777. If sellers can break lower, the short-term downtrend is likely to continue to the "Golden Zone" of 1.0682 - 1.0670. If the Target zone is held by buyers, then an upward correction to the resistance area (A) 1.0884 - 1.0873 will begin.After testing the resistance area (A), we will consider new sales with the first target at 1.0822 and the second at 1.0761. In case of a breakout of the pair above the resistance area (A), the upward correction will continue to the trend boundary – the resistance area (B) 1.0946 - 1.0929.