FOREX fundamental analysis for EUR/USD on February 24, 2023
Currency trading on the forex market has been changing lately in line with the news from the United States. The economic situation has improved and the Federal Reserve has decided to strengthen the fight against inflation. The market waits for a pause in FRS activity - the greenback becomes weaker. But market dynamics depends not only on American data.
For example, the ECB's decision to raise interest rate to 3.75% - the highest level since 2001 - is unnoticed by investors. Or Bank of Japan's refusal to monitor the yield curve after the change of the regulator's head.
Most likely, once all the positives are taken into account in the USD exchange rate, investors will switch their attention to other assets. And it seems that the moment is not going to last for a long time. The Fed has 3 or 4 monetary cuts to complete its rate hike cycle. Morgan Stanley believes that the regulator will drive inflation down to 3% fairly quickly and will not raise rates to 6%.
In any case, every currency pair is made up of two assets, and one should not focus solely on the dollar. The acceleration of the world economy will undoubtedly have an impact on the dollar. The Eurozone's economic growth is already commendable, as is the ECB's determination to raise the rate by 50 basis points at its next meetings.
Forex trading based on the news obviously gives an impetus to the currency instruments, but once the market is saturated with news it looks for other drivers. It is quite possible that investors will pay attention to the Eurozone economy. Although, there might be a lull in Forex until the release of the U.S. labor market report. Traders want to see if the January momentum was a one-time blip or if employment is steadily rising? Until then, EUR/USD is likely to maintain a sideways range, and we intend to close shorts in the support area of 1.056 - 1.051 and buy the pair from there.