FOREX Fundamental analysis for EUR/USD on September 6, 2024
The US economy now resembles a glass of hot water that has been placed in a freezer, and this freezer is the strict policy of the Federal Reserve System. When the economy was booming, capital actively flocked to the American stock market, which spurred the strengthening of the dollar. However, at the first signs of a slowdown, stocks began to fall, investors lost interest in US securities, and the dollar was under pressure from sales. Now everyone is waiting to see if the August labor market report can show that not everything is so bad in the American economy and correct the attitude towards the greenback?
For the first time in six months, speculators took purely "bearish" positions on the US dollar. Shorts came out in the amount of $8.8 billion, while back in May, $32.6 billion worth of "longs" were observed on the market. The rejection of the dollar is associated with a cooling economy, an increase in the likelihood of recession and a fall in stock indices. For the S&P 500 index, negative statistics on the US economy are becoming really bad news, since despite the easing of the Fed's policy, investors do not want to see a "hard landing".
The yield curve, which came out of a multi-month inversion, indicates the approach of a recession. In the previous four cases, this invariably led to an economic downturn. This is also evidenced by the increase in unemployment. It seems that both investors and the Fed understand that the inflection point, after which unemployment may jump sharply, is already on the horizon. Jerome Powell promised to do everything possible to prevent a serious cooling of the labor market.
However, signals of a slowdown are coming more often. After a reduction in the number of vacancies and an increase in layoffs, bad news also came from the ADP report, which showed employment growth in August by only 99 thousand — this is the slowest pace since the beginning of 2021. This figure was lower than even the most pessimistic forecasts of Bloomberg. In addition, the data for July were revised downwards.
These factors, together with positive news from Europe, helped the EURUSD rise above the 1.11 mark. The unexpected 2.9% increase in orders in German industry in July, which is significantly better than forecasts (-1%), showed that the German economy is not as weak as expected.
In France, political tensions have decreased after the appointment of a new prime minister, Michel Barnier, who was previously involved in the Brexit negotiations. This had a positive effect on French bond yields, reducing the spread with German counterparts, which also supported the single currency.
EURUSD trading strategy for today. Despite the recent rise in the euro, this victory of the bulls may be short-lived. If the US labor market has recovered after Hurricane Beryl, then we get a reason to sell EURUSD in the direction of 1.1. Otherwise, weak employment data will increase the risks of recession, which may push the Fed to aggressively lower the rate and return the pair to 1.12.
EUR/USD Technical analysis
Yesterday, EUR/USD strengthened towards the resistance area (A) 1.1118 - 1.1110. But, the zone was held by sellers. The bulls could not break through higher, so today we will look for an entry into the pair's sales near this zone with the first target of 1.1072 and further - 1.1026.
However, if the resistance area (A) is broken up during trading, the upward correction will continue to the resistance area (B) 1.1165 - 1.1152. This zone is the boundary of a short-term downtrend. After testing it, you will also be able to search for entry into sales.
To change the trend and buy EUR/USD, you need to break through the level of 1.1165 and consolidate above.
At the same time, do not forget that today at 12:30 GMT, the US labor market report is released, which can disperse the volatility of currency pairs and lead to chaotic price outbursts.