Fundamental analysis of FOREX on December 7, 2023
Investors expect a sharp rate cut from Central Banks, although such a decision requires a good reason. Isn't that why regulators have been taking unpopular measures for many months, tightening financial conditions in order to return everything to normal overnight? The signal for a reversal of the monetary policy course should be a significant deterioration in the economic situation. And indeed, there are such prerequisites. But the markets are once again ahead of events, forgetting about the statements of the monetary authorities to keep rates at high values for a long period of time.
The Financial Times conducted a survey among financial experts, and two-thirds of respondents believe that the Fed will begin to reduce the cost of borrowing no earlier than the third quarter of next year, with 30 out of 40 experts predicting that the rate cut in 2024 will not exceed 50 basis points.
At least five acts of monetary expansion are expected in the futures market next year, at 25 basis points each. The initial month of the Fed's exchange rate change is March. Yesterday's U.S. labor market report from ADP added confidence to supporters of this scenario.
But the situation in Europe is much worse than in the United States. Moreover, most analysts believe that the ECB went too far with the tightening of financial conditions and finished off the European economy, accustomed to low rates. If inflation continues to slow at the same pace, Christine Lagarde will be the first among the central banks of developed countries to announce a reversal of monetary policy.
The futures market expects the ECB to cut rates by 150 basis points in 2024, starting in March. But even here, experts predict a decrease in the cost of borrowing by only 100 bps.
EUR/USD does not have time to work out the change in market forecasts. Back in November, the pair updated the highs for 3.5 months, and now, having lost the support of stock indexes, it is also soon losing its won positions.
The November US labor market report will help clarify the market situation. Strong statistics will support sellers, weak data will support buyers
AUD/USD analysis on December 20, 2024AUD/USD is consolidating near the 0.6221 mark. The pair is in a sideways trend with a downward trend. This is due to the high popularity of the US dollar, which puts pressure on the Australian currency.According to the Australian Bureau of Statistics (ABS), household wealth continued to grow for the eighth consecutive quarter in the third quarter, rising 2.4% to AUD$401 billion. The total amount of wealth reached 16.9 trillion, which is 9.9% more than a year earlier. The main growth drivers were an increase in the value of real estate and savings in pension funds. Meanwhile, expected inflation rose from 3.8% to 4.2% in December, exceeding the Reserve Bank of Australia's target range of 2.0–3.0%. This increases the likelihood of maintaining the current monetary policy of the regulator for a long time. Analysts expect the first rate cut not earlier than spring, but with a further increase in inflation, the decision may be postponed until the second half of the year.The US dollar index is trading at 108.10, updating yesterday's highs. In the third quarter, US GDP grew to 3.1% (against the expected 2.8%), the number of initial applications for unemployment benefits decreased to 220,000, and repeat applications decreased to 1,874 million. Sales volumes in the secondary housing market in November also showed a significant increase of 4.8%, reaching 4.15 million.AUD/USD technical analysis for todayOn the daily chart, the AUD/USD pair adjusted and left the "expanding formation" figure with the boundaries of 0.7100–0.6250. The indicators indicate a strengthening of the downtrend. The EMA lines of the alligator indicator are directed downwards and are below the signal line, while the Awesome Oscillator histogram remains in the negative zone.Trading recommendationssale will be relevant if the price drops below the level of 0.6190 with a target of 0.6080. The stop loss is 0.6250.buy is considered when the pair is fixed above the 0.6250 level with a target of 0.6370. The stop loss is 0.6200. 
GBP/USD analysis on December 20, 2024On Friday, after the decision of the Bank of England to leave the interest rate at 4.75%, GBP/USD is adjusted near the 1.2480 mark. This decision was supported by six of the nine members of the Monetary Policy Committee of the regulator. Financiers are afraid of a new round of inflation growth. Three members preferred a 25 basis point rate cut, which turned out to be more than analysts expected (two votes in favor of a cut were expected).Experts note a change in the Central Bank's rhetoric in assessing inflation and the labor market: from an "unstable" to a "balanced" situation. This may indicate a possible policy adjustment next year. At the same time, representatives of the Bank of England pointed to an increase in inflation.: The consumer price index rose from 1.7% in September to 2.6% in November, and GDP forecasts for the fourth quarter were lowered from an expected 2.0% to 1.7%. According to forecasts, the interest rate may fall to 3.50% in 2025.The US dollar index strengthened to 108.10, which is higher than yesterday's highs. The US economy grew by 3.1% in the third quarter against the projected 2.8%. There is also a decrease in initial applications for unemployment benefits to 220 thousand (against the forecast of 230 thousand), and repeated applications fell to 1.874 million. The volume of sales in the secondary housing market increased by 4.8% and reached 4.15 million, which is higher than expected and close to the highs of March (4.19 million).Technical analysisOn the daily chart, the pair is approaching the support line of the descending channel with the boundaries of 1.2700–1.2300. The main forex indicators confirm the sell signal - the fast EMA lines on the alligator indicator diverge from the signal line, and the awesome oscillator (AO) histogram forms corrective bars in the negative zone.Trading recommendationssale is relevant after the breakdown and consolidation of the pair below the level of 1.2450 with a target of 1.2300. The stop loss is 1.2520.buy is considered when the price rises and fixes above the level of 1.2530 with a target of 1.2700. The stop loss is 1.2450. 
On Friday, USD/CHF shows versatile fluctuations near the level of 0.8980. After testing local highs in early July, the asset declined amid the publication of fresh macroeconomic data from the United States.The Philadelphia Federal Reserve's index of business activity in the manufacturing sector unexpectedly fell from -5.5 to -16.4 points in December, although analysts had forecast an increase to 3.0 points. The personal consumption expenditure price index increased by 1.5% in the third quarter, and its base version rose from 2.1% to 2.2%. Initial applications for unemployment benefits decreased from 242 thousand to 220 thousand, which turned out to be better than the forecast of 230 thousand, and the number of repeat applications decreased from 1.879 million to 1.874 million, also exceeding expectations. In addition, sales in the secondary housing market increased by 4.8% in November, reaching 4.15 million against the forecast of 4.07 million.Swiss statistics reflected a decline in trading activity. Exports decreased from 27.826 billion to 23.682 billion francs, while imports fell from 19.801 billion to 18.257 billion francs, reducing the trade surplus from 8.025 billion to 5.424 billion francs. According to SECO, the Swiss economy is expected to grow by 1.2% in 2023, 1.6% in 2025, and 1.7% in 2026, which is lower than the average annual growth of 1.8%. Experts see the main driver of the recovery in domestic demand, as demand for Swiss goods in Germany and China continues to decline.Investors also continue to analyze the results of the US Federal Reserve meeting on December 18. As expected, the rate was reduced by 25 basis points to 4.50%. The regulator's new forecasts suggest a rate cut of 50 basis points in 2025, which differs from the September expectations of three consecutive cuts of 25 basis points.USD/CHF technical analysis for todayJohn Murphy's technical analysis on the daily chart shows the expansion of the Bollinger bands, which opens up opportunities for a bullish trend. The MACD indicator indicates a steady buy signal. Stochastic also demonstrates an attempt to reverse downwards, signaling a possible overbought dollar in the short term.Trading recommendationssale with a confident breakdown of the 0.8957 level down. The target will be the 0.8900 mark. We will put the stop loss at 0.8990.buy will be possible if the 0.8957 level acts as support, and then the pair breaks the 0.9000 mark up. In this case, the prospect of growth to 0.9100 opens up. We will place the stop loss at 0.8957. 
FOREX Fundamental analysis for EUR/USD on December 20, 2024Tariff disputes are just beginning to excite the Federal Reserve System (Fed), and Donald Trump is already initiating a partial government shutdown. The Republican rejected the proposal of the Speaker of the House of Representatives Michael Johnson on temporary financing of government agencies until March 14, insisting on a solution that includes raising the debt ceiling. However, the plan failed in the vote — 235 against 174. This led to the suspension of the government's work, which increased the volatility of currency pairs and increased interest in safe haven assets. EUR/USD, of course, continues to decline.Trump, in a familiar manner, called what was happening a "Biden shotdown," arguing that the current president is solely responsible for the government. He takes credit for the strong economy left by the Democrats and criticizes everything he considers problematic. Meanwhile, the economy is indeed showing resilience. U.S. GDP growth accelerated to 3.1% in the third quarter, higher than expectations and the previous estimate of 2.8%. The forecast of the Federal Reserve Bank of Atlanta indicates a further increase to 3.2% in the fourth quarter.Trump's election victory was driven by criticism of high inflation under Joe Biden. However, his own policies, including tariffs and fiscal incentives, are pro-inflation and have already begun to influence the Fed's forecasts. Department Head Jerome Powell noted that some officials have begun to take into account the potential consequences of the new president's policies in their economic assessments. That is why the Fed limited forecasts to only two rate cuts in 2025, raising market doubts about the end of the monetary easing cycle.Despite accusations against the Fed for lowering rates against the backdrop of a strong economy and rising inflation, its actions look justified. The regulator is well aware that markets are responding to expectations. Investors began to ask questions: will the Fed continue to cut rates, was the December adjustment the last one, and could a new stage of policy tightening begin?These doubts were caused by a decline in stock indices, an increase in treasury bond yields and a strengthening dollar, which, in turn, tightened financial conditions and may slow down inflation.Thus, the growth in demand for protective assets due to the shotdown, rumors about the end of the Fed's policy easing cycle and the likelihood of tightening financial conditions contribute to the fall of EUR/USD.Ignoring the potential slowdown in the US economy due to the government shutdown, investors continue to sell euros. If the shotdown pushes the Fed to further rate cuts, the EUR/USD rate may reach the target of 1.03. The strategy is to keep short positions.EUR/USD Technical analysisEUR/USD is trading in a short-term downtrend. In the decline, sellers reached the Target zone of 1.0353 - 1.0326, but failed to break through it. Therefore, an upward correction may develop today, the purpose of which will be to test the resistance area (A) 1.0444 - 1.0435. After that, we will consider new sales with the first target at 1.0393, and the second target at today's minimum.If the resistance area (A) is broken up during trading, the correction will continue to the resistance area (B) 1.0494 - 1.0481. This zone is the boundary of the trend, and sales can also be considered from it. 
In Thursday's Asian session, the GBP/USD pair is trading near the 1.2590 level, partially recovering the losses of the previous day. The upward trend is supported by the factors of John Murphy's technical analysis, however, market participants remain cautious in anticipation of the decision of the Bank of England, which will be announced today at 14:00 (GMT+2). Experts predict that eight of the nine members of the committee will vote to keep the current interest rate at 4.75%, without changing the policy.The pressure on the British pound increased yesterday after the publication of the minutes of the US Federal Reserve meeting. The regulator lowered the rate by 25 basis points to 4.50% and clarified the forecast for 2025, pointing to two possible rate cuts instead of the previously estimated three. At the same time, Jerome Powell, the head of the Fed, stressed that the probability of tightening monetary policy next year is extremely low. In addition, the Fed revised the unemployment forecast, reducing it from 4.4% to 4.2% for the current year, and also raised the GDP growth forecast to 2.5% for 2024.In the UK, fresh inflation data turned out to be higher than expected, which may affect the further policy of the Bank of England. In November, the consumer price index rose from 2.3% to 2.6%, and core inflation rose to 3.5%. This deviation from expectations by only 0.1% reinforces expectations of possible changes in monetary policy in the future.An important news for the UK economy was its official entry into the Trans-Pacific Partnership (TPP). The country has lifted tariffs on palm oil imports from Malaysia and simplified trade procedures for union members. These steps indicate the UK's desire to integrate into the global economy and strengthen international ties with the TPP participants.Technical analysis for GBP/USD for todayOn the daily chart, indicators indicate mixed sentiment. The Bollinger bands begin to turn into a horizontal plane, signaling the instability of the price range. The MACD remains in the selling zone, and Stochastic shows signs of oversold pound, which creates correction risks.Trading recommendationsshort positions after the breakdown of the 1.2550 level down with a target of 1.2450. We will set the stop loss at 1.2600.buy will be relevant with a confident breakdown of 1.2600 up with a target of 1.2700. The stop loss is 1.2550. 
FOREX Fundamental analysis for EUR/USD on December 19, 2024Trading 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 analysisYesterday, 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. 
USD/CHF analysis for December 17, 2024During Tuesday morning trading, the USD/CHF pair continues to strengthen, developing a bullish trend that began last week. Quotes have updated the maximum from November 22 at 0.8955, however, market participants prefer to act cautiously, waiting for the results of the final meeting of the US Federal Reserve this year, which will be held on Wednesday at 21:00 (GMT+2). According to analysts, the interest rate will be reduced by 25 basis points to 4.50%. This scenario is already embedded in market prices, so it is unlikely to put serious pressure on the US dollar. Investors, however, will focus on long-term interest rate forecasts for the next three years, as well as on the possible economic policy of Donald Trump, who will take office on January 20.At the same time, the franc is under pressure from the unexpected decision of the Swiss National Bank (SNB) to reduce the rate by 50 basis points — from 1.00% to 0.50%. This step turned out to be more aggressive than market expectations, where a decrease of only 25 points was predicted. In an accompanying statement, SNB representatives stressed their willingness to adjust monetary policy in the future in order to keep inflation within the target values. The regulator also does not rule out interventions in the foreign exchange market to stabilize the franc, which investors still consider as a reliable safe haven asset. Inflation forecasts have been adjusted downwards: the average consumer price index is expected to reach 1.1% in 2024 (previously 1.2%), 0.3% in 2025 (against the previous 0.6%) and 0.8% in 2026 (previously 0.7%). The expected GDP growth in Switzerland will be about 1.0% this year and 1.0–1.5% next year (against the previous forecast of 1.5%). Meanwhile, the current inflation rate remains one of the lowest in the Eurozone. In November, the indicator was 0.7% in annual terms. The producer and import price index also decreased: on a monthly basis from -0.3% to -0.6% against the forecast of 0.2%, and in annual terms — from -1.8% to -1.5%. The SNB's quarterly report for the fourth quarter is expected to be published tomorrow at 16:00 (GMT+2).USD/CHF Technical analysis for todayOn the daily chart, the Bollinger Indicator shows steady growth. The MACD indicator continues to grow and maintains a strong buy signal. At the same time, Stochastic reached the overbought zone, slowed down and moved to a horizontal position, indicating possible risks of a correction of the US dollar in the near future.Trading recommendationslong positions after a confident breakdown of the 0.8957 level up with a target of 0.9037. The stop loss is set at 0.8915.sales with a rebound from the 0.8957 level and a breakdown of the key support of 0.8900 down. The target is 0.8827. We put the stop loss at 0.8957. 
On Tuesday, USD/JPY is trading with versatile dynamics around the 154.20 mark, not far from the local highs on November 25. The volatility of currency pairs remains restrained, as market participants are awaiting the results of the two-day meeting of the US Federal Reserve, which will be announced tomorrow at 21:00 (GMT+2).According to the CME Group, the probability of a 25 basis point rate cut is estimated at 95.4%, despite the steady recovery of the American economy and inflation, which has stabilized around 3.0%. At the same time, traders are analyzing possible actions of the Bank of Japan, taking into account the impact of the economic policy of the new White House administration.If President Donald Trump fulfills his promises to impose 25% duties on imports from China, the Japanese regulator is likely to react by devaluing the yen. According to a Bloomberg study, 52% of analysts believe that the Bank of Japan will continue to adhere to a tough policy in January, and 44% expect a rate hike to 0.25% at the December 19 meeting. Some experts point to the role of wage dynamics, believing that it will determine the position of the regulator closer to the spring wage negotiations. Steady wage growth outpacing inflation is considered by the Bank of Japan as a key criterion for revising the rate.The latest economic data from Japan show positive changes. The volume of orders for engineering products in October increased by 5.6% year-on-year after falling by 4.8% a month earlier, which significantly exceeded experts' expectations (0.7%). On a monthly basis, the indicator strengthened by 2.1%, exceeding forecasts. In addition, the Jibun Bank manufacturing business activity index from S&P Global improved from 50.5 to 51.4 points in December, and the index in the service sector increased by 0.3% after a slight decline a month earlier.The Daily chart shows an attempt to reverse the uptrend. The Bollinger Band indicator is expanding, hinting at the possibility of continued growth, but in the short term, the asset may remain overbought. The MACD indicator holds a steady buy signal, and the Stochastic has frozen at the maximum levels.Trading recommendationslong positions after breaking up the level of 154.50 with a target mark of 155.50. We will set a stop loss at the level of 153.87.sales with a confident breakdown down to the level of 153.87. The target mark is 152.70. Stop loss at 154.50.