FOREX Fundamental analysis for EUR/USD
It is difficult to talk about the fall of the dollar when the main Central Banks are much more inclined to ease policy than the Fed. Economic growth in the United States is significantly ahead of other countries, which supports the dollar against the euro. This trend is strengthening, the positions of the EURUSD bears are strengthening, and the pair's rebound upward is a consequence of the desire of some market participants to lock in profits. However, we should not forget that this scenario is only an assumption of investors. Forex currency trading largely depends on the course of the Fed's monetary policy, and the decisions of the Federal Reserve, in turn, are influenced by external data. But it is unlikely that anyone will be able to predict what the statistics will be.
The strong start of the US economy in the new year has expanded the camp of market optimists. Economic growth forecasts for the United States have been revised due to a strong labor market and rising consumer spending. It is now assumed that GDP will grow by 2.2% in 2024, despite the fact that the probability of recession has decreased to 35%.
Analysts predict that the Fed will cut federal funds rates only twice in 2024. This is less than expected in the market and predicted by the FOMC. The members of the Open Market Committee express different points of view. Some of them urge caution, while others insist on additional measures to stimulate the economy.
In general, the Fed's goal is to beat inflation, but at the same time avoid recession. However, the risk of an economic downturn increases if indicators such as PCE reach the target level. The Fed is also paying attention to the yield curve, as its inversion in the past signaled an impending recession.
History shows that the Fed reacts to the deteriorating economic situation, including rising unemployment, faster than to the warning signals of the benchmarks. As long as the macroeconomic data in the United States remains favorable, the Fed is unlikely to take active action
We believe that the recent EURUSD rebound from the 1.08 level is most likely due to the fixation of short positions by major players and has a technical rather than fundamental explanation. Therefore, we will use the rebound from the resistances at the levels of 1.085 and 1.088 as an opportunity for new sales.
EUR/USD Technical analysis
The strong drop at the end of last week was replaced by a correction based on the testing of resistance 1.0894 - 1.0885. After EUR/USD reaches this area, we are considering new sales with a target at the minimum of March 22. If the asset breaks through and consolidates below the extreme, the next target of sellers becomes the target zone 1.0729 - 1.0704.
The current trend line has moved to 1.0940 - 1.0927. If this area is reached, then from here we will also look for entry into short positions.