FOREX Fundamental analysis for EUR/USD on September 2, 2024
Markets 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 analysis
On 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.