Fundamental analysis of FOREX on June 23, 2022
For a long time, the Fed has diligently avoided the topic of a possible recession, as a consequence of the policy of raising rates. Yesterday, speaking in the US Congress, Jerome Powell for the first time acknowledged the possibility of an economic downturn. Of course, the Fed will do everything possible to mitigate the recession, but first of all it will direct its forces to fight galloping inflation. The accents placed by the head of the regulator have somewhat shifted the balance of power in forex currency trading.
This is an important statement for financial markets. As a rule, the expectation of a recession leads to a fall in stock indices and a decrease in the yield of debt bonds.
At the same time, the Fed's determination in the fight against inflation is pushing other Central Banks to tighten monetary policy. However, the role of the dollar in the acceleration of inflationary processes plays a special role. The rise in the value of commodities denominated in the US currency, which is in the region of 20-year highs, further accelerates inflation and slows down GDP growth.
In recent years, the positions of the Central Banks of developed countries have changed dramatically. If earlier preference was given to a weak currency, which accelerated inflation and supported exporters, now a strong monetary unit is in priority. This means that the Fed's competitors will revalue national currencies in order not to lose to the dollar.
In other words, stock indexes entered a long "bearish" trend. The yield of treasuries is stabilizing, and commodities are waiting for a correction due to fears of a reduction in demand amid the approaching recession.
I believe that interest in the franc and yen will increase in the market in the near future, while risky assets tied to the raw material component will be in a drawdown. Uncertainty remains for EUR/USD. We are considering selling the pair on a rebound from the resistances of 1.0625 and 1.0650