FOREX Fundamental analysis for EUR/USD on March 2, 2023
Strong business activity indexes in China, inflation growth in Germany and "hawkish" comments from ECB representatives allowed euro buyers to launch a counterattack. However, the pair's appreciation continued until the release of the US manufacturing purchasing managers' index, which boosted the yields on treasuries and brought the pair back down.
Last October the yield on 10-year U.S. government bonds was at 4.23%, which was the highest since 2008 and allowed the dollar index to reach the highest level in 20 years. Now the yield remains around 4% and the market expects its further increase.
Against this backdrop, the greenback is feeling great, especially since comments from FOMC members allowed investors to forget about the "dovish" reversal. The markets have returned to the dynamics of the last year, where the dollar was the sole leader in forex trading. But we should admit that now the Euro zone does not look so helpless, as on the eve of the winter. The energy crisis bypassed Europe, greatly reducing the risk of recession. The economy is stable and is beginning to accelerate with the opening of China. Inflation is rising, loosening the hands of the regulator.
The futures market predicts a rate hike in the Eurozone to 4%, with the head of the French central bank believing the rate should peak by summer, the deadline being September.
The high speed of monetary restriction against the background of the global economic recovery allows us to expect the return of EUR/USD to the uptrend from the support area 1.05-1.06. The pair is likely to remain in the range of 1.053-1.073 until the release of the US labor market report. We will sell on the rise in the short term and buy on the decline in the asset in the long term.