FOREX Fundamental Analysis for November 21, 2023
The sole leader in forex currency trading has not yet been determined, but investors already realize that it will not be the dollar. Speculators are hastily closing long positions on the greenback, which helped EUR/USD rise to three-month highs. The fundamental backdrop and stock indices are helping the European currency to recover.
The United States Treasury successfully auctioned $16 bln of bonds. The yield on the treasuries does not exceed 4.78%, which indicates a high demand for securities amid deteriorating macro statistical reports. Apparently, the economic potential of the United States is significantly overestimated, and the risks of recession, on the contrary, are underestimated.
Dynamics of bond yields and the U.S. Economic Surprise Index
The probability of the first Fed rate cut next March has risen to 30%, while the odds of a monetary expansion in May have risen to 59%. With a 55% probability, the derivatives market predicts a 100 basis point rate cut in 2024.
As a rule, Central Banks pursue a unified policy, so the ECB will decide to change the course of monetary policy after the Fed. The ECB is expected to cut rates by 90 bps during 2024. The transition to a soft policy of the Central Bank supports risky assets and has an impact on the dollar.
At the same time, some representatives of the monetary authorities, such as the head of the Central Bank of France Villarois de Galo, believe that investors have moved very quickly to the idea of a "dovish" reversal, forgetting about the long plateau of high rates.
I believe the financier is right. The market has quickly forgotten about the tremendous work of the central banks to curb inflation, especially since the last stage of this work is rightly considered the most difficult. It is easier to bring inflation down from 10% to 3% than from 3% to 2%. And as soon as investors remember this, EUR/USD will go into a pullback. On, and as long as the pair holds above the 1.094 pivot level, we will emphasize buying towards 1.12.
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. 
An impressive sight is unfolding in the foreign exchange market: the British pound, which had recently shown signs of strength, is now rapidly losing ground. After reaching local highs on January 7, the GBP/USD pair is steadily moving down, approaching the critical mark of 1.2140, where a real battle of bulls and bears may unfold.The catalyst for the current movement is the American economy, which has once again surprised the markets with its resilience. The December labor market data turned out to be truly impressive: the US economy created 256 thousand new jobs, which exceeded the most optimistic forecasts of analysts by almost a hundred thousand. At the same time, even the November figures were revised only slightly – from 227 to 212 thousand, which indicates the stability of the positive trend.The dynamics of wages also paints an interesting picture: despite a slight slowdown in growth – from 4.0% to 3.9% year–on-year and from 0.4% to 0.3% month-on-month - the indicators remain at levels comfortable for the economy. The unemployment rate also pleased investors, dropping from 4.2% to 4.1%.Such strong statistics significantly change expectations regarding the actions of the Federal Reserve System. Previously, the market actively priced in aggressive monetary policy easing, but now forecasts have become much more restrained: only two rate cuts of 25 basis points in the second half of the year. The Fed seems to have taken a pause to assess the potential impact of the new administration's policies on inflationary processes.On the British side of the Atlantic, investors froze in anticipation of important statistics. On Wednesday, the market will closely monitor inflation indicators. Analysts predict a slight decrease in the core consumer price index from the current 3.5% in annual terms. Thursday will bring data on GDP and industrial production for November, where a moderate recovery is expected: by 0.2% and 0.1%, respectively.Of particular interest is the position of the Bank of England, voiced by the deputy head of the regulator, Sarah Breeden. Her recent comments indicate a willingness to gradually reduce interest rates, although the exact pace of this process remains a matter of debate. It is noteworthy that the regulator is already detecting signs of a slowdown in economic activity, which may intensify against the background of tax initiatives of the Labor government.Technical analysis for GBP/USD for todayTechnical analysis paints a bearish picture. The Bollinger Band indicator is expanding, showing an increasing downward momentum. The MACD is confidently signaling sales, and the stochastic oscillator is approaching the oversold zone, hinting at a possible short-term correction.Under these conditions, traders should closely monitor the 1.2100 level: its confident breakdown can open the way to 1.1950, while a rebound and an upward break of the 1.2200 resistance can reverse the trend towards 1.2350. 
Upcoming eventsThis week promises to be full of macroeconomic publications, where the inflation indicators of key economies will take the central place.:- Wednesday: publication of the US consumer price index for December, accompanied by inflation statistics from Sweden, France, Spain and the UK- Thursday: German inflation data- Friday: publication of the harmonized eurozone consumer price index for December and a block of Chinese statistics (GDP, real estate market, retail sales)The key events of the past week and their impact on the marketsChinese foreign trade: unexpected growthChina's December foreign trade statistics exceeded analysts' expectations:- Exports: 10.7% YoY growth (November: +6.7%)- Imports: 1.0% YoY increase (November: -3.9%)It is noteworthy that the export growth may be partly due to the acceleration of purchases ahead of the expected tariff increase.US labor market: unexpectedly strong dataFriday's US employment report significantly exceeded forecasts:- 256 thousand new jobs were created (forecast: +160 thousand)- Unemployment decreased to 4.1% from the previous 4.2%- Wage growth slowed to 0.3% (previously: 0.4%)The data indicate a suspension of the cooling of the labor market, which reduces the likelihood of an early easing of the Fed's monetary policy. The market's reaction was reflected in the strengthening of the dollar and rising interest rates in both the United States and Europe.Inflationary dynamics in ScandinaviaNorway: core inflation dropped to 2.7% (forecast: 2.8%), confirming the disinflationary trend and increasing the likelihood of a rate cut in March.Denmark: inflation rose to 1.9% from 1.6%, mainly due to the underlying effect in the energy sector.Market dynamicsStock marketsGlobal indexes ended Friday with a decline amid rising bond yields:- Dow Jones: -1,6%- S&P 500: -1,5%- Nasdaq: -1,6%- Russell 2000: -2,2%Debt marketStrong data on the US labor market triggered an increase in yields. The yield on 10-year US Treasury bonds rose by 10 bps to 4.76%, exceeding the September lows by 110 bps.Forex market- USD: strengthening amid rising rates- JPY: growth leader despite higher yields- GBP: pressure remains, the EUR/GBP pair is testing the level of 0.84- NOK and SEK: volatile trades with neutral outcome 
FOREX Fundamental analysis for EUR/USD on January 13, 2025The FOREX market is entering a period of increased volatility of currency pairs, provoked by serious macroeconomic imbalances. The key catalyst for the current tension is the exceptionally stable US labor market, which is significantly exceeding forecast values.The December employment statistics brought a serious surprise to the markets. 256 thousand new jobs with a decrease in the unemployment rate to 4.1% refuted previous expectations of a cooling labor market. Moreover, the cumulative employment growth of 2.2 million positions in 2024 was twice the initial forecasts of analysts. This radically changes the perception of market dynamics. Instead of the expected slowdown, we are seeing signs of possible overheating.Reassessment of the Fed's monetary policyThis situation makes significant adjustments to expectations regarding the trajectory of the Fed's monetary policy. Previously, the derivatives market had predicted a high probability of a rate cut to 4.5% by June, but now the consensus has shifted to September 2025, with the probability of a second reduction by the end of the year estimated at only 20%.Special attention should be paid to the position of Bank of America, whose analysts hypothesize a possible end to the cycle of monetary policy easing. With inflationary pressures continuing (growth is projected from 2.7% to 2.8% with stable core inflation at 3.3%), even a return to a tightening of the exchange rate is not excluded.The combination of strong U.S. economic dynamics with potential protectionist measures creates the prerequisites for sustained inflationary pressures, which is reflected in rising yields across the entire range of debt instruments. The situation in the European debt markets is particularly indicative, where British bonds have reached 27-year high yields, and French sovereign debt is now trading at a premium to the traditionally riskier Greek securities.In these circumstances, the ECB finds itself in an extremely difficult position. Philip Lane, the regulator's chief economist, openly declares the need to continue easing monetary policy in order to achieve the 2% inflation target, demonstrating clear concern about the risk of a deflationary scenario.The emerging divergence of monetary policies (a pause or potential tightening by the Fed against the inevitable easing by the ECB) creates fundamental prerequisites for the continuation of the downward trend in the EUR/USD pair. Monex analysts predict an accelerated movement towards parity, recommending holding short positions with an interim target at 1.012 and a strategic target at parity.EUR/USD technical analysisEUR/USD continues to show a pronounced downward trend. The pair has gained a foothold in the "bearish" zone below the pivot level of 1.0450.Analysis of the four-hour chart EUR/USD reveals the formation of a stable technical picture characterized by the breakdown of a number of significant support levels, which leaves priority to salesCurrent technical situationThe pair confidently gained a foothold below the key level of 1.0320, and also broke through both significant moving averages 100-period SMA and 200-period SMA.During the last wave of decline, the quotes tested the 1.0215 area, where consolidation is currently observed, indicating a possible upward correction. 
GBP/USD analysis for GBP/USD on January 10, 2025The GBP/USD pair remains in correction and is trading around 1.2294 in Friday morning trading. The pair's dynamics are developing against the background of a stable US dollar exchange rate and active sales in the UK debt market. Investors are concerned about the growth of government borrowing and the possible consequences of the first decrees of US President Donald Trump after his inauguration on January 20.The yield on 30-year UK bonds reached its highest in 26 years, reaching 5.455%, and 10-year bonds - 4.921%. However, the UK Treasury says that intervention in the current situation is not yet required. The plans include the issuance of debt securities worth about 300 billion pounds in 2025. The acceleration of bond issuance is expected to stabilize the capital market. Rising yields can stimulate investment, and a short-term increase in interest rates can help reduce inflation.The US dollar index continues to strengthen and has already reached the level of 109.0. In anticipation of the report on the US labor market, which will be published at 15:30 (GMT+2), 154 thousand new jobs are projected to be created outside the agricultural sector, which is lower than November's 227 thousand. The average hourly wage is expected to decrease from 0.4% to 0.3% on a monthly basis, while the unemployment rate remains at 4.2%. If the data is confirmed, it may slow down the adjustment of the Fed's monetary policy. According to the CME FedWatch Tool, 93.1% of investors expect the interest rate to remain in the range of 4.25%-4.50%. The minutes of the Fed's last meeting also point to policy uncertainty ahead of Trump's second term and possible risks of rising inflation due to his foreign trade and immigration policies.Technical analysis for GBP/USD for todayOn the daily chart, GBP/USD is trading near the support line of the descending channel with dynamic boundaries of 1.2430–1.2100. Technical indicators maintain a long-term sell signal: the fast EMAS of the alligator indicator are moving away from the signal line, and the awesome Ascillator Oscillator (AO) continues to form corrective bars in the sell zone.Trading recommendations- Entry into short positions is recommended after the price has consolidated below the support level of 1.2230 with a target of 1.2000. The stop loss is placed at 1.2300.- Purchases after the price has consolidated above the resistance level of 1.2380 with a target of 1.2610. The stop loss is 1.2300. 
During Friday morning trading, USD/CAD continues to develop an uptrend and demonstrates moderate growth, approaching the level of 1.4410. Nevertheless, the pair remains under pressure after a significant decline on Monday. Investors are cautious about forming new positions, waiting for the publication of key data on the US and Canadian labor markets at 15:30 (GMT+2).Analysts' forecasts suggest the creation of 154 thousand new jobs in the US non-agricultural sector, which is lower than November's 227 thousand. It is also expected that the growth of the average hourly wage will slow from 0.4% to 0.3% on a monthly basis, while unemployment will remain at 4.2%. The latest data from ADP, reflecting employment in the private sector, indicates a decrease in the number of new jobs from 146 thousand to 122 thousand, which is also lower than the projected 140 thousand. In light of these indicators, it is unlikely that the labor market will have a significant impact on the Fed. Fed officials, including Lisa Cook, are taking a cautious approach, emphasizing the resilience of inflation and the strength of the labor market, which allows us to consider the possibility of slowing the pace of rate cuts.The situation is complicated by expectations of the actions of the new administration of Donald Trump, including the possible imposition of customs duties on imports from China, Mexico and Canada, which may force the Fed to adhere to a more stringent monetary policy.Forecasts for Canada suggest a reduction in employment growth in December to 25,000 from the previous 50,500, while the unemployment rate may rise slightly to 6.9%. Additionally, attention will be drawn to data on the number of building permits, which are expected to show an increase of 1.8% after falling by 3.1% in the previous month.Political uncertainty in Canada has intensified after Prime Minister Justin Trudeau announced his intention to resign. The possible strengthening of the Conservative Party's position under the leadership of Pierre Pouillevre may lead to changes in fiscal policy and affect the strategy of the Bank of Canada.Technical indicators on the daily chart signal a possible overbought US dollar. The Bollinger Band indicator remains in the horizontal position, and the MACD is preparing to form a buy signal. Stochastic is approaching the overbought level, which may increase the risks of correction.Trading recommendations- It is recommended to open long positions with a confident breakdown of the 1.4435 level with a target of 1.4500. We put the stop loss at 1.4400.- Sales can be considered with a rebound from the 1.4435 level and a subsequent breakdown of the key support at 1.4400 with a target of 1.4300. The stop loss is 1.4450. 
FOREX fundamental analysis for EUR/USD on January 10, 2025The market always reflects all events. The refusal of US stock indexes to continue growing against the background of a rapid increase in treasury bond yields signals that the American economy has reached a peak level of development. Attempts to further stimulate the economy may lead to higher inflation, which will force the Federal Reserve to reconsider plans to lower interest rates. In this context, the EUR/USD pair has the potential for further decline.The victory of Donald Trump in the presidential election led to euphoria in the stock markets. Expectations of accelerated GDP growth and expanded corporate earnings due to fiscal stimulus and deregulation prevailed over any negative news. However, the increase in Treasury bond yields was then perceived as an insignificant factor.However, Trump's return has also brought risks. Trade tariffs and restrictions on migration can slow down economic growth. Fiscal incentives will increase government debt and bond supply, which may lead to lower bond prices and higher yields. Richmond Fed President Thomas Barkin attributes this to fiscal policy, rather than the Fed's decision to pause rate cuts.Markets are gradually losing confidence in further cuts in the federal funds rate. The probability of the Fed's second move in 2025, according to derivatives, is estimated at only 16%, while the FOMC's December forecasts suggested two declines.Bank of America believes that with the stabilization of the labor market, the Fed can complete the cycle of monetary easing. The importance of employment statistics for December is increasing against the background of Bloomberg's forecast of a slowdown in growth from 227,000 to 165,000 jobs, with estimates ranging from 100,000 to 268,000.If the indicator coincides with the consensus, it will mean that the US economy created 2.1 million jobs in 2024. This is less than 3 million in 2023, but more than the 2 million created in 2019 before the pandemic. A strong labor market and accelerating inflation call into question the need for the Fed to lower interest rates.Unlike the Fed, other Central Banks are forced to cut rates. The debt crisis in the UK demonstrates the inability of the Bank of England to follow the Fed due to the weakness of the economy, which is also relevant for the Eurozone.Differences in the monetary policy of the Fed and the ECB continue to put pressure on the EUR/USD pair. US labor market data for December may accelerate or slow down the downward trend. Strong data will be a reason to sell the pair with targets of 1.012 and 1.000, while weak data will create conditions for short-term purchases when the pivot level breaks through in the form of resistance at 1.0325.EUR/USD technical analysisEUR/USD is testing key support for the short-term uptrend of 1.0298 - 1.0285. At the moment, the area is being held by buyers. Therefore, when appropriate signals appear near this support, one can look for entry into long positions with the first target at 1.0361 and the second at 1.0436.If the support area 1.0298 - 1.0285 is broken down during trading, the short-term trend will change to a downward one. In this case, we will consider short positions with a target at the lower target zone of 1.0160 - 1.0133.