EUR/USD: speculators close dollar shorts

AUD/USD analysis on September 16, 2024In the Asian session on Monday, AUD/USD shows moderate growth, returning to the "bullish" trend after a slight correction at the end of last week. The instrument is approaching the level of 0.6725, trying to break it up amid expectations of a rate cut from the US Federal Reserve.Recall that the Fed meeting will begin tomorrow, and the final decision will be announced on September 18. Investors expect a 25 basis point rate cut and hope to receive signals of monetary policy easing by the end of the year. Recent data from the University of Michigan showed a slight increase in five-year inflation expectations from 3.0% to 3.1%, and the consumer confidence index improved to 69.0 points, exceeding the forecast.Meanwhile, the attention of market participants is focused on data from China, published over the weekend. China's industrial production slowed to 4.5% in August against the expected 4.8%, retail sales fell to 2.1% with a forecast of 2.5%, and investment in the urban sector fell to 3.4%.On Thursday, a report on the Australian labor market is expected, which may show a slowdown in employment growth from 58.2 thousand to 30.8 thousand, while the unemployment rate will remain at 4.2%. RBA Chief Economist Sarah Hunter noted that population growth is outpacing job expansion, which, combined with reduced working hours, could influence further decisions by the Reserve Bank of Australia. Recall that the interest rate was raised to a 12-year high of 4.35%.The main forex indicators on the daily chart do not give unambiguous signals. The Bollinger bands are narrowing, which indicates a mixed trading dynamics. The MACD turns up, signaling a purchase, and the Stochastic indicates a possible overbought.We consider long positions when the level of 0.6732 breaks up with a target of 0.6800. We will set the stop loss at 0.6700.Sales are relevant in case of a breakdown down to the level of 0.6700. The target is 0.6642. We will place the stop loss at 0.6732.

On Monday, USD/JPY continues to decline, testing the minimum values of July 2023 in the region of 140.20. Pressure on the US dollar is increasing due to expectations of the upcoming easing of monetary policy by the Fed, whose two-day meeting begins tomorrow. The basic forecast still assumes a 25 basis point rate cut, but the probability of a more significant easing, by 50 basis points at once, has increased to 59%, compared with 30% last week. Investors also hope that the regulator's statements will contain signals about possible rate changes before the end of the year.A meeting of the Bank of Japan is expected later in the week. Although experts do not predict further tightening of the regulator's policy, the comments of the Central Bank's management are interesting to investors. On Friday, inflation data in Japan for August will be published. The core consumer price index (excluding products) is expected to rise from 2.7% to 2.8%. This may strengthen the position of the Japanese regulator on the issue of raising rates. According to a Reuters poll conducted late last week, none of 52 economists expect a rate hike at the September meeting of the Bank of Japan, but 54% are confident that it will happen before the end of the year. The forecast for the rate at the end of the year remains at 0.50%.The yen is also supported by positive data on industrial production in Japan. In July, it increased from 2.8% to 3.1%, and in annual terms — from 2.7% to 2.9%.On the chart, technical indicators confirm the downtrend. The indicator of the Bollinger bands is directed downwards, indicating an increase in the "bearish" movement. The MACD shows a confident sell signal, and the stochastic turns to decline.It is recommended to open short positions after a confident breakdown down to the level of 140.00. The first target will be 138.00. We will place the stop loss at the level of 141.00.For purchases, we will wait for a rebound from the 140.00 level with a breakdown up to the 141.00 mark. The target is at 143.00. We will set the stop loss at 140.00.

FOREX Fundamental analysis for EUR/USD on September 16, 2024When a person doubts the effectiveness of their actions, it is better for them to do less, but correctly. On the eve of the first federal funds rate cut since 2020, the opinions of market participants and Bloomberg analysts were divided. According to derivatives, the probability of monetary expansion by 50 basis points is 59%, while economists on average expect a more modest decrease of 25 bps. The EUR/USD pair is growing, following investor sentiment.In the markets, you can often see a lurch from one extreme to the other. Derivatives suggest a 250 bps rate cut to 3% by the end of 2025, indicating a high risk of recession in the United States. However, stock markets are showing optimism: the S&P 500 index has grown by 18% since the beginning of the year and has almost reached a historic high, indicating investors' faith in the "soft landing" of the economy. In addition, the current economic situation looks more encouraging than in 1995, when a similar scenario was implemented.The results of changes in monetary policy are manifested with a delay of 6, 12 and 18 months. Since 2022, the Fed has raised rates 11 times, bringing them to 5.25-5.5%, which is the highest since 2001. Over the past year, inflation has decreased from 3.2% to 2.5%, and core inflation from 4.2% to 2.7%. Real interest rates are now significantly higher, which significantly slows down the economy.The Financial Times is inclined to believe that there will be no recession at all. Here they hope for a "soft landing" of the economy. According to analysts, GDP growth in 2024 will be 2.3%, and in 2025 — 2%. Inflation is expected to fall to 2.2% by the end of 2023, and unemployment will rise to 4.5%.Indeed, if a recession can be avoided, then the expectations of the futures market on the scale of monetary policy easing in 2024 may be overestimated. A rate cut of 100 bps to 4.5% is unlikely, and if the Fed notes this at a meeting on September 17-18, investors will be upset, as it was at the beginning of the year. At that time, the markets were also waiting for more active actions from the Federal Reserve, but did not receive them, which caused a dollar rally.In the near future, the Fed's September rate forecast may become an important factor in the dynamics of EUR/USD. It is likely that officials will raise forecasts from one act of monetary expansion in 2024 to two or three, but hardly to four or five, as markets suggest. In this regard, it makes sense to sell EUR/USD on the rise to the levels of 1.1115 and 1.1140 or stay out of the market until the outcome of the Fed meeting is released.EUR/USD Technical analysisLast week, EUR/USD reached the resistance area (A) 1.1094 - 1.1086 as part of the correction to the short-term downtrend. The resistance area was held by sellers on Friday, but today the pair breaks through this zone. We believe that the upward correction will continue to the resistance area (B) 1.1140 - 1.1128. After testing this zone, we suggest considering sales with the first target at 1.1071, then at the minimum of September 11 - 1.1002.To change the direction of the trend and purchases, buyers need to break through the 1.1140 mark and consolidate above. In this case, starting from the next trading day, it will be possible to search for entry into long positions with a target in the upper Target zone of 1.1279 - 1.1254

FOREX Fundamental analysis for EUR/USD on September 13, 2024The market turned out to be adamant, and the dollar began to decline. The probability that the Fed will cut the interest rate by 50 basis points in September has increased from 13% to 45%. The chances of a large-scale monetary expansion increased after the release of data indicating a slowdown in inflation and a weak labor market in the United States. The ECB stimulated the strengthening of the euro against the dollar, and additional factors fueled the speeches of former head of the Federal Reserve Bank of New York William Dudley, who called on the Federal Reserve to act decisively, while expectations of a decrease in the growth rate of the PCE indicator in the United States also intensified.Although recent news about falling unemployment, rising wages and core inflation could signal a return to previous scenarios indicating the stability of the economy and a possible new increase in inflation, the Fed still prefers to be cautious. The probability of a 25 basis point rate cut in September initially jumped to 87%, but then dropped back to 55%. Investors are alarmed by the increased number of applications for unemployment benefits and rising producer prices.The August CPI and PPI inflation data show that the personal consumption Expenditure Index (PCE), which the Fed uses as a key indicator of inflation, may slow to 0.1%. This leaves room for a 50 basis point rate cut in September. Dudley is actively promoting this idea, arguing that given the weakness in the labor market, such a move would be justified.However, the weakening of the dollar in forex currency trading is not only due to expectations of aggressive actions by the Fed. The ECB also lowered the deposit rate to 3.5%, but the head of the bank, Christine Lagarde, practically rejected the possibility of easing monetary policy in October. She stressed the dependence of the Central Bank on the general economic situation, but not on individual data. Although inflation may decrease in September, it is expected to start rising again by the end of the year.These statements led to a revision of market expectations: the probability of further easing of the ECB's policy in October decreased from 40% to 20%, which allowed the euro to strengthen its position against the dollar.The derivatives market suggests that the Fed may cut rates 10 times over the next 12 months, while the ECB may cut rates 7 times, which increases the likelihood of a stronger euro. However, the Fed is unlikely to start cutting rates by 50 basis points, fearing a market reaction, while the weakening of the Eurozone economy may force the ECB to accelerate monetary expansion. We maintain the previous methods of forex trading and consider it advisable to sell EUR/USD when strengthening to 1.1115-1.1125 or when the bulls are unable to hold the level of 1.1085.EUR/USD Technical analysisThe EUR/USD quote has reached the resistance area (A) 1.1094 - 1.1086 today. The short-term trend remains downward, therefore, from zone (A) we will consider selling the pair with the first target of 1.1048 and the prospect of testing the minimum of September 11 -1.1002.If buyers are able to break above the resistance area (A) during trading, then the corrective growth will continue to the resistance area (B) 1.1140 - 1.1128. This zone is the boundary of the trend, and here we will also look for entry into short positions.To change the direction of the trend and switch to purchases, the pair needs to break through the level of 1.1140 and consolidate above.

FOREX Fundamental analysis for EUR/USD on September 12, 2024The August inflation report in the United States sobered the treasury bond market, caused fluctuations on American stock markets and rocked currency trading on forex. The acceleration of core inflation by 0.3% over the month made investors doubt the beginning of an aggressive cycle of easing the Fed's monetary policy. This led to an increase in bond yields, which only recently fell to a two-year low, and gave the EUR/USD bears a chance to approach the important 1.1 level.Although the overall inflation rate slowed from 2.9% to 2.5%, investors' attention was attracted by the acceleration of the three-month benchmark index from 1.6% to 2.1%. Despite the statements of the US President's economic adviser Lael Brainard that this report signals that the peak of inflation has passed, the problem remains for the Fed. The data showed that the labor market is not cooling, and inflation remains stable. If it continues to grow, as in the 1970s, the Fed risks repeating the mistakes of the past, when prematurely declaring victory over inflation led to a double recession.In such a situation, the best scenario is to start with a soft rate cut of 25 basis points. The probability of such an outcome at the September Fed meeting increased from 66% to 87%, while the market continues to forecast a 100 bps rate cut in 2024, including a possible 50 bps cut in November. This explains the cautious decline in EUR/USD.The ECB may accelerate the pair's decline. Almost all Bloomberg experts expect a 25 bps reduction in the deposit rate to 3.5% at the September 12 meeting. Forecasts envisage two more rounds of monetary easing in 2024 and a rate cut to a neutral level of 2.5%. If ECB President Christine Lagarde points to the weakness of the Eurozone economy and slowing inflation, the euro's decline may accelerate.The American economy continues to show resilience, and the Fed risks accelerating inflation if it cuts rates too actively. At the same time, the weakness of the Eurozone economy may force the ECB to adhere to a soft monetary policy, which will give impetus to a further fall in EUR/USD.We are waiting for Christine Lagarde's press conference. If the head of the ECB hints at a rate cut in October, the EUR/USD pair may work out the goals of 1.1 and 1.0945 faster. We give preference to sales.EUR/USD Technical analysis EUR/USD remains in a short-term downtrend. Yesterday, market participants updated the minimum on September 10. The main target of sellers is the target zone 1.0949 - 1.0924.If the pair goes into an upward correction during the trading session, then it will be possible to wait for testing the resistance area 1.1094 - 1.1086. After testing this range, we suggest considering entering EUR/USD sales with a target at the minimum on September 11. The trend boundary shifts to 1.1140 - 1.1128. If this zone is worked out in the format of an upward correction, then we will also look for entry into short positions from it..

FOREX Fundamental analysis for EUR/USD on September 11, 2024If someone believed that the US dollar would benefit from the presidential election, then the recent debate between Donald Trump and Kamala Harris showed the opposite. After discussions, Harris' chances of winning rose from 53% to 56%, and the Japanese yen and Swiss franc benefited from this. Forex currency trading favored risky assets, which allowed EUR/USD to strengthen, rebounding from the 1.1-1.1015 support area.Despite Trump's rhetoric about the need to weaken the dollar to support American industry, his policies remain protectionist and pro-inflation. Trade wars and new tariffs may slow down global growth, which will negatively affect risky currencies such as the euro. In the event of an increase in inflation, the Fed may suspend monetary policy easing, which explains the recent growth of the EUR/USD pair against the background of Harris' success.Although Trump blames Democrats for the weakness of the fight against inflation, the reason for its growth was mainly external factors such as disruptions in supply chains. With their normalization, Bloomberg forecasts a decrease in the consumer price index in August from 2.9% to 2.6%, while core inflation will remain at 3.2%.These data alone are unlikely to determine the Fed's decision to cut rates in September, but combined with employment reports, they may affect expectations. The futures market assumes a rate cut of 150 basis points until January, which means a 50-point decrease at two of the four FOMC meetings.However, such a sharp weakening of monetary policy may indicate an approaching recession, which will cause panic in the markets, adding losses to traders. Does the Fed need this? Unlikely.The United States looks more economically stable compared to Europe, which is suffering from the war in Ukraine and the energy crisis. According to Morgan Stanley, the ECB has more reasons to aggressively ease monetary policy, and they predict a reduction in the deposit rate by 100 basis points during three meetings, including the September one. As a result, EUR/USD may fall to 1.02 by the end of the year, which is below the consensus of Bloomberg experts at 1.11.Goldman Sachs also predicts a fall in EUR/USD, as synchronous monetary policy easing is usually favorable for the dollar. Against this background, the market's reassessment of the Fed's actions opens up the opportunity to sell EUR/USD with rebounds from the resistances of 1.1065 and 1.109.EUR/USD Technical analysisYesterday, EUR/USD fulfilled all sales targets from the resistance area 1.1165 - 1.1152. The next target of sellers within the short-term downtrend is the lower target zone of 1.0949 - 1.0924. At the moment, the pair is going to work out an upward correction, during which we are waiting for testing of the resistance area 1.1107 - 1.1099. After that, we will consider new sales with the first target of 1.1061 and further - at the minimum of yesterday.The trend boundary is shifting to the levels of 1.1153 - 1.1141. If the pair reaches it, it will also be possible to look for entry into short positions.

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.