FOREX Fundamental analysis for EUR/USD on December 19, 2024
Trading is often compared to a race between the Fed and the markets, where the latter are usually ahead. However, this time the Federal Reserve surprised by causing sharp fluctuations in assets. The US dollar index has peaked since 2022, becoming the growth leader among other forex currency indices, stock markets have gone down, and treasury bond yields have declined. The reason was an unexpected revision of the Fed's plans. Instead of three stages of monetary easing in 2025, as market participants expected, the regulator laid down only two.
Monetary policy is like driving a car in a thick fog — visibility is almost nonexistent, and you have to act extremely carefully. With the labor market cooling and inflation accelerating, the Fed's actions look like an attempt to drive a car blindfolded and with faulty brakes. The only safe solution in such a situation is to stop, which the Central Bank intends to do. However, these signals came as a surprise to investors.
The markets expected that rates would decrease at every second meeting in 2025 — in March, June and September. In reality, only five of the nineteen FOMC representatives suggest more than two declines. In addition, the Fed's forecast for the Personal consumption Expenditure Index (PCE) was revised from 2.2% to 2.5%. Cleveland Fed President Beth Hammack even opposed the majority's decision to cut the rate by 25 basis points to 4.5%.
These changes led to the fact that the futures market revised its expectations. Now the probability that the Fed will not cut rates at all in 2025 or will do so only once has increased from 38% to 58%. This caused the collapse of the EUR/USD exchange rate.
Previously, it was believed that the neutral rate, which does not stimulate or restrain the economy, is below 3%. Now its level, according to Fed officials, is close to 4%. This means that the cycle of monetary policy easing is coming to an end.
Unlike the Fed, the European Central Bank does not intend to stop yet. At the next two meetings, the ECB is likely to lower the deposit rate, which will increase the gap between it and the US federal funds rate. This creates additional obstacles for EUR/USD, which explains the depreciation.
The previously designated target level for EUR/USD shorts at 1.03 is getting closer, and parity is already visible on the horizon. This is great news for those who sold the pair from the levels of 1.121 and 1.0615. The forex trading strategy leaves priority to short positions and assumes their strengthening on upward pullbacks and corrections.
EUR/USD Technical analysis
Yesterday, EUR/USD changed its short-term trend to a downward one. The support area (B) 1.0491 - 1.0478 was broken and the lower target zone 1.0353 - 1.0326 was reached. At the moment, the pair is correcting upwards. The probable target of the correction is the resistance (A) of 1.0445 - 1.0435. After testing this resistance, it will be possible to consider new sales with the main goal in the area of yesterday's minimum.
If the resistance area (A) is broken up during trading, the correction will continue to the resistance area 1.0495 - 1.0481. Sales of the instrument can also be considered from this zone.
During Asian trading on Thursday, the pound weakened against the US dollar, retreating to the level of 1.2208, after violent movements the day before.Investors are following the inflation data for December with interest. The monthly figures showed an increase from 0.1% to 0.3%, while the annual figures decreased from 2.6% to 2.5%, which turned out to be worse than expected at 0.4% and 2.6%, respectively. Core inflation rose from 0.0% to 0.3%, but decreased from 3.5% to 3.2% year-on-year. Experts warn that inflationary pressures may intensify in the coming months due to rising energy prices and tax indexation under the new Labor budget. In the first half of the year, inflation may reach 3.0%, which is significantly higher than the Bank of England's target of 2.0%.Economists polled by Reuters expect the Bank of England to cut rates four times this year to support the economy. However, the growth of inflationary risks may force the regulator to slow down the pace of monetary expansion. The majority of respondents predict a reduction in rates by 25 basis points, to the level of 3.75%.In the US, annual inflation accelerated from 2.7% to 2.9% in December, which confirms the validity of the Fed's cautious approach to lowering rates in 2025. Monthly CPI figures increased from 0.3% to 0.4%, while the base indicators slowed from 3.3% to 3.2% in annual terms and from 0.3% to 0.2% on a monthly basis. The index of business activity in the manufacturing sector of the Federal Reserve Bank of New York in January fell from 2.1 to -12.6 points, significantly worse than the forecast of 3.0 points.Today, the attention of British investors is focused on the GDP data for November. An increase of 0.2% is expected after a decrease of 0.1% in the previous month. Industrial production is projected to grow by 0.1% after falling by 0.6%, but the annual dynamics may worsen from -0.7% to -1.0%.On the daily chart of GBP/USD, the Bollinger Band indicator shows a downward trend with a slight narrowing of the range from above. The MACD warns of a possible upward reversal, while the Stochastic retains short-term growth potential.After breaking down the 1.2150 level, it is recommended to open short positions with a target of 1.2036 and a stop loss at 1.2200.For purchases, you should wait for the breakout of the 1.2261 level. The target is 1.2400. Stop loss at 1.2200. 
FOREX Fundamental analysis for EUR/USD on January 16, 2025The first public statement by Scott Bessent, a candidate for the post of treasury secretary, that the United States should preserve the dollar's status as the world's reserve currency, instantly reversed the growth of EUR/USD observed after the release of inflation data in the United States. It seems that the administration of Donald Trump does not plan to significantly weaken the dollar, which creates room for further depreciation of the main currency pair.At first glance, the data on the consumer price index (CPI) looked ambiguous. Annual inflation accelerated from 2.7% to 2.9%, while monthly inflation showed the best result in a year. However, the main contribution to the price increase was made by a 4% increase in gas prices. At the same time, core inflation decreased from 3.3% to 3.2% in annual terms and to 0.2% on a monthly basis, the slowest growth in the last six months.The markets immediately reacted to this data: Treasury bond yields declined, stock indexes showed the best dynamics since the election of Donald Trump, and forecasts for the Fed rate were revised. The probability that the rate will remain unchanged in 2025 has dropped from 26% to 16%, and the probability of more than one reduction has increased from 35% to 50%.Comments from FOMC representatives added volatility to currency pairs. John Williams, President of the Federal Reserve Bank of New York, confirmed the stability of the disinflationary trend. His colleague from the Federal Reserve Bank of Richmond, Thomas Barkin, said that the latest data confirms the movement of inflation towards the target level. Austan Goolsbee of the Federal Reserve Bank of Chicago noted that inflation dynamics continues to improve.Against this background, the EUR/USD rally seemed logical. An increase in global risk appetite, lower yields and an increased likelihood of a resumption of the Fed's easing cycle supported the euro. In addition, speculators, amid rumors of the gradual introduction of import tariffs, began to reduce long positions in the dollar.However, even if the Fed starts cutting rates, it will be slower than other central banks. ECB Chief Economist Philip Lane expressed concern about the possibility of deflation returning to the Eurozone, and ECB Vice President Luis de Guindos stated the priority of economic growth over the return of inflation to the target level, which indicates the continuation of the cycle of monetary policy easing by the European regulator.The trader's trading plan for EUR/USD assumes that both the dollar and the euro have their weaknesses, which increases the likelihood of consolidation of the pair. However, if Donald Trump starts actively implementing his election promises, the EUR/USD bulls will have to retreat. The strategy of selling EUR/USD on growth with targets around 1.012 and 1 remains relevant. 
GBP/USD trading idea on January 15, 2025On Wednesday in the Asian session, GBP/USD shows a slight decrease, trading near the level of 1.2200. The pound remains near multi-month lows, due to the fall in the value of British government bonds and weak macroeconomic statistics, which increase the likelihood of further monetary easing by the Bank of England.Investors are evaluating the UK inflation data released this morning. In December, the consumer price index increased by 2.5% year-on-year, which is lower than the forecast of analysts who expected growth to 2.7%, and lower than the November figure of 2.6%. On a monthly basis, inflation increased by 0.3% against 0.1% in November. Core inflation, excluding volatile categories such as food and energy, increased by 3.2% year-on-year compared with the previous value of 3.5%. These data may give the Bank of England grounds to resume interest rate cuts in order to stimulate the economy and mitigate the effects of the new government's tax reform. Sarah Breeden, Deputy Governor of the Bank of England, noted last week that current macroeconomic data support the idea of a gradual rate cut. In this regard, UBS analysts expect that in February the British regulator may continue the cycle of monetary expansion.Additional pressure on the pound is exerted by the crisis of the UK debt market. The yield on 30-year bonds has reached its highest in 26 years, raising concerns about the country's fiscal sustainability. Investors are actively selling off British bonds amid rising government debt, slowing economic growth and ongoing inflation risks. Rising yields have already increased the government's debt service costs, which may lead to the need for higher taxes and government spending cuts. This worsens the prospects for the British economy and increases pressure on the GBP/USD pair.Pending GBP/USD orders:Sell Stop at 1.2160 with a target at 1.1900 and a stop loss at 1.2250. 
AUD/USD analysis on January 15, 2025By the middle of the week, AUD/USD rose to 0.6192, reflecting cautious optimism in the market.At the same time, traders are cautious ahead of the publication of December inflation data in the United States, which may affect the prospects for interest rate cuts by the Federal Reserve in 2025.Earlier, the Australian dollar partially recovered its positions after the reaction of the US dollar to the statistics on the producer price index.Key events for AUDOn Thursday, Australia will publish an employment report, which is an important indicator of the state of the labor market. These data are crucial for adjusting the forecasts for interest rate dynamics of the Reserve Bank of Australia (RBA).At the end of the month, fresh inflation data for the fourth quarter of 2024 will be published. These indicators will play a key role in shaping expectations regarding the upcoming RBA meeting and its decisions on borrowing rates.Currently, investors estimate the probability of a rate cut at the February RBA meeting at 70%. In the case of such a scenario, the rate may decrease by 25 basis points from the current 4.35% per annum. The market has already taken this opportunity into account in prices.Nevertheless, the continuing uncertainty about the future policy of the RBA and the target rate level deters investors from taking active action, limiting the AUD's growth potential.AUD/USD technical analysis for todayOn the 4-hour chart, the AUD/USD pair is forming an upward wave with a target at 0.6211. It is expected that this level will be tested today, after which a decline to 0.6161 is possible. A consolidation zone is likely to form around this mark. If the pair breaks through this zone up, a correction to 0.6290 may begin. In case of a breakdown downwards, a new wave of decline is possible with a target of 0.6116. The MACD indicator supports this scenario, as its signal line is below the zero mark, but pointing upwards.On the hourly chart, the pair is forming a wave of growth towards 0.6211, which is expected to be reached today. Then a correction wave to 0.6161 is possible. The Stochastic oscillator confirms this scenario, as its signal line is above the 50 mark and is moving up to 80.ConclusionThe recent recovery of the Australian dollar is being held back by uncertainty surrounding the RBA's future decisions. Key internal data, including employment and inflation figures for the fourth quarter, significantly affect market expectations. The main forex indicators point to the short-term growth potential of AUD/USD, however, further success of buyers will depend on clarity regarding the RBA's policy and general economic conditions. 
During the Asian session on January 15, NZD/USD tends to stay above the 0.5600 mark, receiving moderate support from statistics on the New Zealand Institute of Economic Research (NZIER) business confidence index. In the fourth quarter, the indicator increased by 16.0% after the previous decrease of -1.0%.An additional growth factor for the New Zealand currency was data on the construction sector and China's foreign trade. The number of building permits issued increased by 5.3%, recovering from a decrease of 5.2% in the previous month. China's exports grew by 10.7% year-on-year after rising by 6.7%, exceeding the forecasted 7.3%, while imports increased by 1.0%, which also exceeded expectations. Against this background, China's trade surplus increased from $97.44 billion to $104.84 billion in December, which is higher than the projected $99.8 billion.The signing of the Comprehensive Economic Partnership Agreement between New Zealand and the UAE was also a significant event. This agreement is aimed at expanding trade and investment between the two countries, with a projected growth of up to 5.0 billion dollars by 2032.The pressure on the US dollar yesterday was exerted by data on industrial inflation, which caused a revision of expectations for the Fed rate. In December, the annual production price index rose to 3.3% from 3.0% in November, but was lower than the projected 3.4%. The monthly figure dropped to 0.2%, which is worse than expected at 0.3%.Today, investors' attention is focused on December data on inflation in the United States, where it is expected to rise from 2.7% to 2.9%, while the base index is projected to remain at 3.3%.On the daily chart, the Bollinger indicator shows sideways dynamics with a wide price range corresponding to the current market activity. The MACD and Stochastic give a steady buy signal, supporting bullish sentiment.The formation of long positions is recommended after the breakdown and consolidation of the price above the level of 0.5607 with a target of 0.5700 and a stop loss at 0.5571.A pullback from the 0.5607 level downwards, followed by a breakdown of the 0.5571 support, can serve as a signal for sales. The target will be 0.5511. We will place the stop loss at 0.5607. 
FOREX Fundamental analysis for EUR/USD on January 15, 2025Financial markets are gradually recovering from the initial shock caused by a series of unexpected events. The initial panic provoked by news of Trump's massive tariff plans, fears of the spread of the British debt crisis, and Bank of America's forecast of a possible Fed rate hike in 2025 is beginning to give way to a more balanced assessment of the situation. This is reflected in the corrective movement of the EUR/USD pair.Particular attention is drawn to the fact that Trump is in no hurry to refute Bloomberg's information about the phased introduction of tariffs, unlike his reaction to the Washington Post publication. Such silence is interpreted by the market as an indirect confirmation of information, encouraging speculators to reduce long positions in the dollar.On the British front, Rachel Reeves is trying to calm the markets by emphasizing that the sharp rise in government bond yields is not a direct result of government measures. Despite the increased volatility, the Treasury intends to adhere to the established rules of borrowing. This position contributed to the stabilization of the pound and, as a result, the euro.It is noteworthy that the so-called British debt crisis is largely a reflection of the rapid rise in yields on U.S. Treasury bonds. Analysts at State Street Global Advisors warn that overcoming the 5% barrier for 10-year treasuries could trigger a drop in EUR/USD to parity.Despite the stability of the American labor market, historical experience shows that the transition from easing to tightening monetary policy during the year is extremely rare. Since 1994, such a reversal has been observed only once, in 1998, when the Fed was forced to ease policy due to the collapse of Long-Term Capital Management, but then returned to tightening after the situation stabilized.The futures market is currently pricing in one Fed rate cut in 2025 with a second one less than 10% likely, while the ECB is expected to make three or four cuts. This divergence in expectations largely explains the current decline in EUR/USD.The publication of the December US CPI will be a key factor in determining the forex trading strategy. Analysts' forecasts are divided: 39 experts expect growth of 0.3% mom, 32 predict 0.2%. This uncertainty leaves room for both continued correction and resumption of the downtrend.In the short term, the resumption of disinflation may trigger a pullback of EUR/USD to the levels of 1.039 and 1.0445, creating the opportunity to form long positions. However, the loss of the 1.03 level, especially against the background of strong inflation data from the United States, will be a signal for the resumption of sales. 
During the Asian session on January 14, AUD/USD shows moderate strengthening, developing the bullish momentum of yesterday, when the pair was able to retreat from the lows of April 2020. AUD is supported by favorable macroeconomic statistics from Australia.The consumer sentiment index from Westpac Banking Corp., which evaluates the level of confidence in economic activity based on a survey of about 1.2 thousand respondents, decreased by only 0.7% in January compared with a drop of 2.0% a month earlier. In addition, China's strong foreign trade data continues to have a positive impact. China's exports increased from 6.7% to 10.7% year-on-year, beating forecasts of 7.3%, while imports increased by 1.0%, after a decrease of 3.9% earlier. This led to an increase in the trade surplus from 97.44 billion to 104.84 billion dollars, exceeding analysts' expectations of 99.8 billion dollars.Investors also paid attention to Australia's inflation data from TD Securities. On a monthly basis, the consumer price index accelerated from 0.2% to 0.6%, although the downward trend remains from 2.9% to 2.6% year-on-year. The annual consumer price index, published earlier, rose to 2.3% from 2.1% in October, partly due to government subsidies for electricity. The final decision of the Reserve Bank of Australia (RBA) on the interest rate, which will be made after the publication of the quarterly report on January 29, may affect the cost of borrowing in February and become an important factor before the federal elections.The main focus on Thursday will be on the December report on the Australian labor market, where employment is expected to increase by 15.0 thousand compared with 35.6 thousand in November and the unemployment rate will rise from 3.9% to 4.0%.Today, at 15:30 (GMT+2), a report on the US producer price index will be published. If the actual data coincide with the forecast of 0.4% growth in December, the statistics will support the annual growth rate to 3.4%. However, it is unlikely that this change will significantly affect the Fed's plans, which involve two interest rate cuts of 25 basis points each in 2025.AUD/USD technical analysis for todayOn the daily chart, the Bollinger Band indicator is trying to move to a flat state. The MACD indicator shows a confident buy signal, while Stochastic signals a possible oversold Australian dollar in the short term.Trading recommendationsWith a confident break above the 0.6200 level, it is recommended to open long positions with a target of 0.6250 and a stop loss at 0.6178.Short-term sales are possible with a rebound from the 0.6200 level, followed by a breakdown down to 0.6178, with a target of 0.6130 and a stop loss at 0.6200. 
FOREX fundamental analysis for EUR/USD on January 14, 2025Forewarned means armed. The events that unfolded around the publication of the Washington Post on January 6 set the tone for the whole year, charting a difficult path for EUR/USD to parity. Rumors that the new president's team is planning to phase in tariffs of 2-5% per month have seriously hit the US dollar, forcing speculators to get rid of the largest long positions since 2019.If in 2022 and early 2024 the attention of investors and traders in the Forex market was focused on inflation, by the end of last year the focus shifted to the labor market. Subsequent data demonstrating its resilience has re-energized hedge funds and asset managers. Speculators are trying to guess the trajectory of consumer prices, and Donald Trump's policies are a key element in these forecasts.According to economists from the Trump team, the gradual introduction of tariffs will have a lower inflationary effect than a one-time increase in duties on imports from China to 60%, and on goods from other countries to 10-20%. If the CPI and PCE inflation indicators remain stable, the Fed will be able to return to easing monetary policy, which will weaken the dollar. That is why the insiders from the Washington Post and Bloomberg caused such a strong reaction from the EUR/USD pair. According to forecasts by the Commonwealth Bank of Australia, if Trump does not refute these rumors on social media, as it was before, the dollar may continue to lose ground.Despite this, the idea of continuing the EUR/USD downtrend remains relevant on Wall Street, forex hedging is undergoing adjustments. Goldman Sachs predicts a 5% rise in the dollar in 2025 due to "American exceptionalism" and a slowdown in GDP growth outside the United States due to tariffs. The bank expects the euro to decline to $0.97 over the next six months. Deutsche Bank predicts fluctuations of the pair in the range of 0.95-1.05 this year.The path to parity can be different. This could be a rapid drop, as in the fourth quarter, or a trend with deep pullbacks caused by the Trump administration's attempts to balance the imposition of tariffs and inflation control.However, it is not a fact that the phased introduction of tariffs will solve the problem. According to Citi, this approach could lead to multiple disruptions in supply chains and increased inflationary pressures. In the case of an immediate tariff increase, the inflationary spike will be short-term, and its effect will disappear in a year.I remain of the opinion that the growth of EUR/USD in 2025 is inevitable, but it will be difficult to contain inflation in the United States. If the Fed's monetary expansion cycle ends earlier than expected, the pair's pullbacks should be used to sell with targets at 1.012 and 1.00.EUR/USD technical analysisEUR/USD is being adjusted upwards. The resistance area 1.0278 - 1.0269 was tested in the Asian trading session today. In the European trading session, market participants are likely to try to update the maximum of the day. If, after updating the maximum, a false breakdown pattern forms, then it will be possible to consider a short position with the first target at 1.0228, and the second target at 1.0177.If the pair gains a foothold above the Asian maximum during trading, the correction will continue to the trend line of 1.0329 - 1.0315. From this zone, it will also be possible to consider selling with the main goal at yesterday's low.