FOREX Fundamental analysis for EUR/USD on September 30, 2024
Forex currency trading cannot live on past events for a long time. After the September Fed rate cut by 50 basis points, investors' attention turned to November. The question is, by how many points will the Fed cut the rate now — by 25 or by 50? This adds to the uncertainty of EUR/USD, which fluctuates depending on the tone of economic data and statements by Fed representatives.
The slowdown in the growth of the personal consumption expenditure index (PCE) to 2.2% in August is pushing for a greater rate cut. Bloomberg experts predict that in the coming years, the PCE will stabilize at about 2%, which coincides with the Fed's goals. The unemployment rate remains at historically low levels, indicating that the soft landing of the economy has already worked out.
As for the real federal funds rate, it is at 2.8%, which is significantly higher than the Fed's target of 0.9%. This indicates the possibility of further interest rate cuts, and is actively supported by the Fed's "pigeons". However, the core index of personal consumption expenditures, which rose from 2.6% to 2.7%, speaks in favor of a more restrained rate cut.
The head of the St. Louis Federal Reserve, Alberto Musalem, warns that a sharp decline may stimulate demand too quickly, which will make it difficult to meet the 2% inflation target. A more cautious approach may be more effective. This idea is supported by the latest data from the Federal Reserve Bank of Atlanta, which raised the forecast for US GDP growth from 2.9% to 3.1%.
Thus, the US dollar is balancing between supporters and opponents of an aggressive rate cut in November, which forces EUR/USD to move within the range of 1.108–1.121. American stock indexes such as the S&P 500 show the best results over the past three quarters, supporting the euro through currency correlation, while the forecasts of the leading Financial companies are putting pressure on the single currency to reduce the deposit rate in Europe.
The EUR/USD pair continues to fluctuate in conditions of uncertainty, which makes the strategy of selling on growth and buying on decline in the format of the range 1.108–1.121 relevant. At least until the publication of September employment data in the United States.
EUR/USD Technical analysis
EUR/USD is trading in a short-term uptrend. Last week, the pair tested the support area 1.1130 - 1.1121, but this zone was held by buyers. After that, the asset moved into growth and reached the first target of the "bulls" 1.1167. The second target of buyers is the maximum on September 25 in the area of 1.1214.
Today we will hold some long positions from the support area (A) to the second target. If the maximum is updated on September 25 and the pair is fixed higher, then the next growth target will be the upper target zone of 1.1279 - 1.1254.
In case of a breakdown of the support area (A) downwards, the correction will continue to the support area 1.1088 - 1.1075, which, among other things, is the boundary of a short-term uptrend. From here we will also consider purchases.