FOREX Fundamental Analysis for November 7
Markets are ruled by cycles. The rapid growth of GDP is followed by rising interest rates and cooling of the economy, forcing central banks to soften monetary policy. And so it goes in cycles. Now, after a long and aggressive cycle of tightening financial conditions, the Fed is expected to make a "dovish" turn, and as it seemed to investors, the US labor market report, published last Friday, was a signal for this.
But, perhaps, experts overreacted emotionally to Non-farm Payrolls, predicting a 100 basis points reduction in the federal funds rate to 4.5% in 2024, although, of course, there were prerequisites for such a scenario. The Fed hinted at the end of the rate hike cycle, the Treasury limited bond issuance in Q4, and weak labor market statistics. But, at the same time, one should not draw conclusions from one report, and as the head of FRB Minneapolis Neel Kashkari believes, it is too early to celebrate the victory over inflation, and the Fed should continue its work. At the same time, his colleague, Lisa Cook, believes that at a rate of 5.5% inflation itself will gradually slide to the target of 2%
Risk buyers cooled down a bit, which dropped EUR/USD to 1.07. Investors want to wait for Jerome Powell's speech, hoping that the Fed chief will mark the main milestones of the regulator's monetary policy prospects.
But, in addition to the Central Bank's actions, the Middle East conflict as a potential driver of inflation acceleration has its imprint on EUR/USD dynamics. Of course, if the PCE returns to growth, the Fed will continue the cycle of monetary restriction, and support the dollar. At the same time, higher oil prices will put pressure on the Eurozone economy as an importer of black gold. At the same time, the United States, which exports oil, will receive additional preferences.
I do not think that Jerome Powell's upcoming speech will fully clarify the situation in forex currency trading. Most likely, we will have to wait for the US inflation report. But already now we can assume that the divergence of economic growth between the US and Eurozone will shrink. This will help EUR/USD recovery. In this regard, we will consider a pullback from the supports at 1.0695 and 1.0665 as a signal to buy EUR.
USD/CHF is showing a moderate rise, recovering from last week's decline during which the December lows were updated. The pair is currently testing the 0.8460 level for the possibility of an upward breakout, which is largely facilitated by John Murphy's technical analysis factors supporting the dollar's growth.Investors continue to analyze the August data on the American labor market, which came out worse than expected. The number of jobs outside agriculture amounted to 142 thousand, with a forecast of 160 thousand. Additionally, the downward revision of the July data — from 114 thousand to 89 thousand — caused significant volatility in the Friday session. At the same time, the average hourly wage increased from 0.2% to 0.4% on a monthly basis and from 3.6% to 3.8% on an annual basis. Against the background of these data, expectations for a Fed rate cut in September remained at the same level: the probability of an adjustment by 50 basis points is estimated at about 35%.In Switzerland, as predicted, the unemployment rate remained at 2.5% in August. Experts expect that the Swiss National Bank, given the continued weakening of inflation, will also lower interest rates at its meeting on September 26. The August consumer price index in Switzerland slowed from 1.3% to 1.1%, which is slightly better than forecasts of 1.2%.The indicators show ambiguous signals on the daily chart. The Bollinger bands begin to turn sideways, the MACD shows a weak buy signal, and the Stochastic stopped falling and leveled off near the 20 mark.We will consider buying after an upward breakout of the 0.8500 level. The nearest target is 0.8600. We will set the stop loss at 0.8450.If the price bounces off the 0.8500 resistance and breaks down the 0.8450 level, this will be a signal to start selling with a target of 0.8365. We will place the stop loss at the level of 0.8500. 
FOREX Fundamental analysis for EUR/USD on September 9, 2024The dollar has shown that it is not worth rushing to conclusions. In August, employment growth in the United States amounted to 142 thousand, which, it would seem, should have weakened the greenback. Moreover, the data for the previous months were revised for the worse, which led to an average of 116 thousand for three months. This raised expectations of a rate cut by 50 basis points in September with a probability of up to 50%, and pushed EUR/USD to 1.115. However, the situation has suddenly changed.The reaction of the markets is often superficial, but the details are important. The unemployment rate fell from 4.3% to 4.2%, and monthly wage growth accelerated from 0.3% to 0.4%. This indicates that the labor market remains stable and does not show significant deterioration, which is key to the Fed's decision. As noted by FOMC member Christopher Waller, although the labor market is softening, it is not collapsing, which caused a change in the dynamics of EUR/USD. As a result, the probability of a 50 basis point rate cut decreased to 31%.Investors began to realize that the Fed may act more cautiously than expected, which raises doubts about aggressive forecasts. reduction of rates by 225 bps over the next year. Such expectations seem excessive.The market's position is logical: the Fed was late in tightening monetary policy in 2022, which allowed inflation to accelerate. If the Fed slows down now, a recession may become inevitable. "Pigeons" from the Fed, such as the president of the Chicago Fed, Ostan Goolsby, believe that for a smooth slowdown in the economy it is necessary to act ahead of the curve, without waiting for a deterioration in the labor market.The Fed's shift in focus from inflation to employment may reduce the impact of CPI data on the market. US inflation is expected to slow from 2.9% to 2.6%, while core inflation will remain at 3.2%. Nevertheless, the results of the US presidential debate and the decision of the European Central Bank may be more important for the EUR/USD pair.The market is planning to reduce the ECB deposit rate from 3.75% to 3.5%, but further actions remain in doubt. If ECB President Christine Lagarde continues her dovish rhetoric, the euro may weaken.In addition, the strengthening of Donald Trump's position against the background of lagging behind Kamala Harris may bring back into play a factor that has a positive effect on the dollar.The failure of the EUR/USD bulls to stay above the 1.11 level indicates the weakness of buyers. A breakdown of support at 1.1065 will create conditions for building up short positions.EUR/USD Technical analysisEUR/USD last week tested the boundary of the short-term downtrend of 1.1165 - 1.1152. After that, the price returned under resistance 1.1118 - 1.1110 and reached the first sales target of 1.1072. Today, market participants are likely to try to gain a foothold below Friday's low. If they succeed, the decline will continue with a target at a minimum on September 3 in the area of 1.1026.If the price fixes below the 1.1026 level, the decline may continue to the lower target zone of 1.0949 - 1.0924.If the minimum is held on September 3, the price will try to work out an upward correction model, within which new sales of the instrument can be considered. 
FOREX Fundamental analysis for EUR/USD on September 6, 2024The US economy now resembles a glass of hot water that has been placed in a freezer, and this freezer is the strict policy of the Federal Reserve System. When the economy was booming, capital actively flocked to the American stock market, which spurred the strengthening of the dollar. However, at the first signs of a slowdown, stocks began to fall, investors lost interest in US securities, and the dollar was under pressure from sales. Now everyone is waiting to see if the August labor market report can show that not everything is so bad in the American economy and correct the attitude towards the greenback?For the first time in six months, speculators took purely "bearish" positions on the US dollar. Shorts came out in the amount of $8.8 billion, while back in May, $32.6 billion worth of "longs" were observed on the market. The rejection of the dollar is associated with a cooling economy, an increase in the likelihood of recession and a fall in stock indices. For the S&P 500 index, negative statistics on the US economy are becoming really bad news, since despite the easing of the Fed's policy, investors do not want to see a "hard landing".The yield curve, which came out of a multi-month inversion, indicates the approach of a recession. In the previous four cases, this invariably led to an economic downturn. This is also evidenced by the increase in unemployment. It seems that both investors and the Fed understand that the inflection point, after which unemployment may jump sharply, is already on the horizon. Jerome Powell promised to do everything possible to prevent a serious cooling of the labor market.However, signals of a slowdown are coming more often. After a reduction in the number of vacancies and an increase in layoffs, bad news also came from the ADP report, which showed employment growth in August by only 99 thousand — this is the slowest pace since the beginning of 2021. This figure was lower than even the most pessimistic forecasts of Bloomberg. In addition, the data for July were revised downwards.These factors, together with positive news from Europe, helped the EURUSD rise above the 1.11 mark. The unexpected 2.9% increase in orders in German industry in July, which is significantly better than forecasts (-1%), showed that the German economy is not as weak as expected.In France, political tensions have decreased after the appointment of a new prime minister, Michel Barnier, who was previously involved in the Brexit negotiations. This had a positive effect on French bond yields, reducing the spread with German counterparts, which also supported the single currency.EURUSD trading strategy for today. Despite the recent rise in the euro, this victory of the bulls may be short-lived. If the US labor market has recovered after Hurricane Beryl, then we get a reason to sell EURUSD in the direction of 1.1. Otherwise, weak employment data will increase the risks of recession, which may push the Fed to aggressively lower the rate and return the pair to 1.12.EUR/USD Technical analysisYesterday, EUR/USD strengthened towards the resistance area (A) 1.1118 - 1.1110. But, the zone was held by sellers. The bulls could not break through higher, so today we will look for an entry into the pair's sales near this zone with the first target of 1.1072 and further - 1.1026.However, if the resistance area (A) is broken up during trading, the upward correction will continue to the resistance area (B) 1.1165 - 1.1152. This zone is the boundary of a short-term downtrend. After testing it, you will also be able to search for entry into sales.To change the trend and buy EUR/USD, you need to break through the level of 1.1165 and consolidate above.At the same time, do not forget that today at 12:30 GMT, the US labor market report is released, which can disperse the volatility of currency pairs and lead to chaotic price outbursts. 
FOREX Fundamental analysis for EUR/USD on September 5, 2024The United States is facing impending economic difficulties. The number of open vacancies has decreased to a minimum in early 2021, the number of layoffs has peaked over the past year and a half, the foreign trade deficit is growing, and the manufacturing sector has remained in the recession zone below the 50 level for the fifth month in a row. Also, according to the Beige Book, the economy is showing signs of stagnation. Against this background, the markets demand that the Fed ease monetary policy, which supports the growth of the EURUSD.The smell of recession is in the air again, which is confirmed by the yield curve coming out of inversion, a harbinger of the economic downturn in the United States.The futures market expects the Fed to significantly ease in 2024 — by almost 110 basis points. Since the beginning of autumn, the chances of a 0.5% rate cut in September have increased from 30% to 45%. The weakening of the labor market increases the likelihood that the Fed will begin a cycle of aggressive monetary easing, and the first step may be by 50 basis points, which may not be the last major reduction.The increase in demands for easing the Fed's policy seems logical, but officials themselves remain calm. The President of the Federal Reserve Bank of Atlanta, Rafael Bostic, believes that now is the moment of balance between stable prices and maximum employment. However, the Fed must remain vigilant and do everything to reduce economic risks.Experts interviewed by Reuters believe that the Fed will cut the rate by 25 basis points at each of the three remaining FOMC meetings in 2024. This is less than the market expects, and as a result, the EURUSD rate may fall to 1.1 by November, and then rise again to 1.11 by the end of February and to 1.12 a year later.Thus, the Fed's decisions remain more unpredictable compared to the European Central Bank (ECB), where, according to forecasts, they will lower the deposit rate in September and carry out another 2-3 acts of easing in 2024. This uncertainty in the Fed's actions leads to increased volatility in the US bond marketAlthough in theory this situation should favor the dollar as a defensive asset, the lack of data on the American labor market for August makes it difficult for traders to choose the right forex trading strategy. Ahead of the publication of important statistics, the risks of EURUSD consolidation in the range of 1.102–1.109 or 1.104–1.111 are growing. In such a situation, it is reasonable either to stay out of the market or sell the pair on growth.EUR/USD Technical analysisYesterday, EUR/USD quotes went into an upward correction. Today, the corrective movement is likely to continue with a target in the resistance area 1.1118 - 1.1110. After testing this zone, we suggest considering new sales of the instrument with the first target at 1.1072 and with a view to 1.1026. If the price is fixed below the 1.1026 level, the sellers' next target will be the lower target zone of 1.0949 - 1.0924.An alternative option involves the growth of the pair with a subsequent breakthrough of the resistance area. In this case, the correction will continue to the trend boundary, which is located in the area of 1.1165 - 1.1152. After reaching this zone, we will also consider sales 
FOREX Fundamental analysis for EUR/USD on September 4, 2024The bad news has turned negative for the stock market again. Previously, negative economic statistics were perceived as a signal for an early easing of the Fed's rate, which supported the growth of the S&P 500. However, with the arrival of autumn, weak data on manufacturing activity in the United States caused a sharp drop in indices, similar to the fastest collapse since Black Monday.The drop in demand for risky assets through currency correlation led to the strengthening of the dollar as a protective asset and the collapse of the EURUSD to a two-week low.Everything is changing in the financial markets. Back in June, FOMC members did not plan to cut the rate in September. But by the end of the summer in Jackson Hole, Jerome Powell announced the need to adjust monetary policy. The turn to the "dovish" exchange rate is explained by a series of disappointing US economic data, which negatively affected the dynamics of the dollar. The head of the Fed also promised to support the labor market.Most likely, an important role in the regulator's decision was played not by the deterioration of the economy, but by the loss of the key argument by the EURUSD bears — the superiority of the United States over other economies. The country's GDP may slow down, but this will not necessarily lead to a weakening of the dollar. The bad news remains negative for stock indexes, and a decrease in risk appetite and uncertainty before the elections will contribute to a fall in the euro.Goldman Sachs believes that Donald Trump's return to the White House will slow down the economy due to protectionism and restrictions on immigration. Even fiscal incentives will not save the situation. Kamala Harris's presidency will only slightly accelerate GDP growth.In any case, GDP growth will slow down, and the Fed will have to ensure a "soft landing" of the economy, as it was in 1984, 1995 and 2000. In 1984, the rate fell by 300 basis points in four months, in 2001 — by 275 in the first half of the year. In 1995, the decrease was 75 points in 7 months, but before that there was no increase in the rate by 150 points, as in the previous cycle.To ensure a soft landing for the economy, the Fed must act decisively. However, this requires a slowdown in the labor market, otherwise an aggressive reduction in rates does not make sense.In anticipation of important employment data for August, the EURUSD pair may consolidate in the range of 1.102–1.11. Growth near the upper limit of this range may be a good selling opportunity.EUR/USD Technical analysisOn Tuesday, the short-term downward trend of EUR/USD continued. As a result, the pair updated the minimum on September 2. The main target of the decline is the lower target zone of 1.0949 - 1.0924. Today, we can expect a continuation of the downward trend with an update of yesterday's low.New sales are best considered after an upward correction. Strong resistance levels are: resistance areas (A) 1.1118 - 1.1110 and (B) 1.1165 - 1.1152. In the case of testing by a pair of these zones, we will open sales when the appropriate signals appear. The sellers' first target will be the 1.1072 level. 
FOREX Fundamental analysis for EUR/USD on September 3, 2024In autumn, not only the foliage falls, but also the prices of stocks and bonds. Investors are reviewing their portfolios after the holiday season and already know that September will traditionally be unprofitable. Notably, the S&P 500 has been declining in September for the past four years, and U.S. Treasury bonds have fallen in eight out of the last ten years. This creates favorable conditions for EUR/USD bears, especially in conditions when the market overestimates the scale of the expected actions of the Fed.In these circumstances, the key event may be the US employment report for August, which will affect dollar pairs by the end of the year. If the data disappoints, investors can remain confident that the Fed will cut the rate by 100 basis points in 2024, which will support stocks, bonds and EUR/USD. However, if the labor market recovers from the effects of Hurricane Beryl, then expectations of aggressive monetary easing may collapse, and the dollar will once again be the leader among the forex currency indices.Judging by the behavior of the markets, the second scenario seems more likely. Reducing the risk of a euro reversal indicates a growing demand for call options, which gives Deutsche Bank reason to recommend selling EUR/USD at any growth.At the same time, after Isabelle Schnabel's tough speech, expectations for an ECB rate cut fell from 67 to 59 basis points. Schnabel pointed out that lower inflation hides deeper economic problems in the Eurozone.Macroeconomic statistics have recently shown good results, ahead of forecasts, which indicates greater stability of the Eurozone economy. This increases the risks of a round of inflation, especially against the background of rising wages. The problems of German industry remain structural, and monetary policy does not affect them.On the other hand, the "pigeons" believe that a recession is approaching, and if the economy is not stimulated further, the Eurozone may face deflation again. History shows that fighting deflation is much more difficult than beating inflation.Both sides agree that the policy should be relaxed again in September, but further steps will depend on new data.In addition to the September meetings of the Fed and the ECB, investors' attention is focused on the upcoming US presidential elections, including the debate between Donald Trump and Kamala Harris on the 10th. While the markets are waiting for US employment data, any increase in EUR/USD can be used for sales with a target at 1.1. 
Since the start of trading, USD/JPY shows a multidirectional movement near the key mark of 146.00. On Monday, the bulls are experiencing some pressure, as the American stock exchanges are closed for Labor Day, and traders are in no hurry to open new positions as they prepare for the publication of an important report on the U.S. labor market, which is expected on Friday. Forecasts indicate an increase in the number of jobs in the non—agricultural sector from 114.0 thousand to 163.0 thousand, while the average hourly wage may rise from 0.2% to 0.3%, and the unemployment rate may decrease from 4.3% to 4.2%.The results of the employment report, combined with inflation data, can seriously affect the prospects for monetary policy of the US Federal Reserve System. At the moment, the main scenario is a 25 basis point rate cut in September, but the probability of a 50-point cut increased after inflation data published last Friday turned out to be slightly lower than expected: the basic index of personal consumption expenditures in July increased by 2.6% year-on-year, while forecasts indicated by 2.7%, and on a monthly basis remained at 0.2%, as expected.Japan's macroeconomic statistics, released on Friday, turned out to be mixed. The consumer price index in Tokyo rose from 2.2% to 2.6% in August, and the indicator excluding fresh food and energy prices rose from 1.5% to 1.6%. However, the unemployment rate in the country rose from 2.5% to 2.7%, and the growth rate of retail sales decreased from 3.8% to 2.6%, which turned out to be worse than expected at 2.9%.The deputy governor of the Bank of Japan, Himino Redzo, said that financial markets should be closely monitored, especially after the rate was adjusted at the end of July. A sharp decline in the Nikkei 225 index may have a negative impact on the banking sector. And, although an increase in interest rates seems inevitable to analysts, the exact timing of monetary restriction will depend on a number of factors, including inflation, labor market data and global economic risks.The Bollinger band indicator on the daily chart has aligned in the horizontal direction. The MACD continues to rise, confirming the buy signal. The stochastic oscillator also indicates a bullish trend, but is approaching overbought levels.We will open long positions with a confident breakdown above the level of 147.00 with a target of 149.00. We will set the stop loss of the transaction at the level of 146.00.If the pair breaks down the level of 145.00, we will receive a sales signal with a target of 143.00. We will also place a stop loss at 146.00. 
FOREX Fundamental analysis for EUR/USD on September 2, 2024Markets often act impulsively and then analyze the consequences. The weak US employment report for July and subsequent comments by Jerome Powell at a symposium in Jackson Hole, where he pointed to the Fed's dissatisfaction with the cooling of the labor market, pushed speculators to mass sales of the dollar. By the end of the week on August 27, hedge funds and asset managers had increased short positions on the dollar to record levels since January. The partial fixation of these positions after the release of inflation data in the US and the EU allowed the EUR/USD bears to return to the game.The decrease in inflation in the Eurozone to 2.2%, which is the lowest value since 2021, inspired the sellers of the euro. This lowered expectations of a rate hike by the European Central Bank and allowed some of its members to start promoting the idea of easing monetary policy. For example, the head of the Bank of France, Francois Villeroy de Galot, spoke in favor of easing the exchange rate at the next meeting of the regulator. This position was supported by Maddis Muller and Olli Rehn.The futures market expects the ECB to cut rates by 150 basis points by the end of 2025, which is more than the bank's own expectations. However, according to the ECB's internal forecasts, inflation in Europe will accelerate by the end of the year, while the market does not believe in this jump. The future will show who is right, but now investors' attention is focused on the US employment report for August.Bloomberg forecasts suggest that the employment rate in the agricultural sector will grow by 165 thousand, unemployment will decrease to 4.2%, and average salaries will accelerate from 0.2% to 0.3% on a monthly basis. Economists believe that the weak data for July were related to Hurricane Beryl, which forced about 450 thousand people not to go to work, and more than a million switched to a reduced schedule.If the dynamics of the labor market recovers, then expectations of Fed policy easing will decrease, which will support the dollar in forex currency trading. But if employment continues to fall, it will increase the chances of a Fed rate cut by 50 basis points in September, which will return support for the euro.Markets are growing on expectations, so investors' attention will be focused on the behavior of the EUR/USD pair before the key employment report. If the asset starts to fall in early autumn, this may confirm the strategy of "buy on rumors and sell on facts." On the other hand, if EUR/USD consolidates, it will indicate the caution of traders.In any case, there is a high probability of a decline in the euro to the levels of $1.1 and $1.0945, which allows you to hold short positions formed from the levels of 1.118, 1.115 and 1.1115 and increase them on corrections.EUR/USD Technical analysisOn Friday last week, there was a change in the direction of the short-term EUR/USD trend from ascending to descending. Sellers broke through the key support of the 1.1057 - 1.1063 trend. Now the target for the bears is the lower target zone of 1.0949 - 1.0924.At the moment, the pair is correcting upwards. If the correction continues, it will be possible to wait for testing of the resistance area 1.1134 - 1.1126. From here, we will look for entry into short positions with a target at today's minimum. The trend boundary is at 1.1180 - 1.1168 levels.