FOREX Fundamental analysis for EUR/USD on April 10, 2024
Where are you going, brave souls? Such thoughts come to mind when looking at the gratuitous rise of the EURUSD before the release of an important report on American inflation. The situation would be understandable if consumer prices really slowed down. However, the attempt by euro buyers to push the main currency pair to 1.09, based on ambiguous forecasts, seems at least bold. Actually, the result for the couple turned out to be expected. The European currency has taken a hit. Couldn't it have been different?
The five-day rise of the EURUSD over the past six daily sessions looked, to put it mildly, strange. The American labor market is stronger than ever, the economy is even overheated somewhere, which, combined with a serious increase in commodity prices, accelerates the risks of inflation. And no one wants to go back to the 1970s, when the euphoria of winning over high prices ended in a double recession. The dollar is strong, but forex currency trading follows a strange scenario
Will the Fed even want to cut rates in 2024? The question remains open. The president of the Federal Reserve Bank of Atlanta, Rafael Bostic, said that in March he supported one act of monetary expansion, but is ready to change his position and abandon easing altogether if the labor market and the US economy continue to demonstrate their strength.
The futures market assumes a 50% probability of an easing cycle starting in June and expects a rate cut of 65 basis points in 2024. This is less than the FOMC forecast in March. But in early spring, the Fed made a statement based on the "if". The regulator is ready to cut rates three times this year if inflation and the economy remain at certain levels. Unfortunately, both of these conditions are not met.
A rise in the EURUSD to 1.09 would seem even more illogical against the background of market estimates of the scale of the ECB's monetary expansion in 2024. The European regulator is expected to cut the rate by 85 basis points. Investors expect more cuts from the European Central Bank than from the Fed. Moreover, the first of them may happen as early as April 11. And what is the point of buying euros?
The winner is not the one who moves with the crowd, but the one who knows that the crowd is wrong. If it were not for the proximity of the release of inflation statistics in the United States, EURUSD could be safely sold on every wave of growth. However, when monetary policy depends on data, the actual CPI values can affect assets in either direction. No wonder the market is so nervous before this important event.
Atlanta Fed President Rafael Bostic will be glad to see figures close to forecasts. However, he prefers to pay attention to details. Previously, investors tried to calculate PCE based on CPI. I think they are not going to give up on this idea now. In any case, strong statistics on US inflation for March will be a strong argument in favor of selling EURUSD with targets of 1.08 and 1.07. A break in the support level at 1.0845 will also be a signal for sellers of the euro. If the statistics are worse than expected, buyers will remain in favor.