EUR/USD: the difference between the monetary policy of the Fed and the ECB is intensifying

FOREX Fundamental analysis for EUR/USD on April 29, 2024No matter how much external factors drown the euro, the single currency still pops to the surface like a float. Logically, the quarterly PCE data in the GDP report and the March personal consumption expenditure index should have moderated the strength of EURUSD buyers. However, both times they revived after a seemingly decisive collapse. Yes, the US stock indexes helped the euro through currency correlation, but the main positive is the idea that the ECB may be less aggressive than previously assumed. If this is the case, then data on European inflation may stir up forex currency trading more than the Fed meeting or employment statistics in the United States.Inflation in the United States and the Eurozone are different phenomena, and their growth should be dealt with in different ways. As Christine Lagarde rightly noted, the ECB is independent of the Federal Reserve, and the approaches of Central Banks to solving the same issue may differ. Indeed, price dynamics in the New and Old World have their own characteristics. In the United States, this is a story of massive fiscal stimulus and bloated budget deficits. In the Eurozone, the exchange rate suffered from a sharp rise in energy prices after Russia's invasion of Ukraine. Unsurprisingly, the euro is sensitive to oil prices, and rumors of a possible truce between Israel and Hamas, as well as falling Brent prices, allowed EURUSD to partially recover from the blow caused by the release of PCE in the United States.And although the members of the ECB's Governing Council talk about the regulator's own mission, the markets overestimate the trajectory of the deposit rate, focusing on the United States. If earlier they predicted a decrease in the cost of loans in 2024 by 88 basis points, by the end of April this figure had decreased to 70 basis points. At the beginning of the year, it was 163 basis points. Inflation in the Eurozone, unlike in the United States, continues to slow down. Interestingly, derivatives also reduced the forecast for the Bank of England from 56 basis points to 44 bp, which confirms the dependence of other regulators on the Fed.Despite the fact that Bloomberg expects Eurozone consumer prices to rise by the same 2.4% year-on-year in April as in March, inflation may actually accelerate. According to the World Bank, the commodity market index will decrease by 3% in 2024 and by 4% in 2025, but will remain 38% above the average level of 2015-2019. This will keep inflation high and prevent central banks from cutting rates as quickly as they would like. everything will suffer from this.Support from US stock indexes, a decrease in escalation in the Middle East and the prerequisites for a slower easing of the ECB's monetary policy do not allow the euro to sink. EURUSD is expecting an extremely volatile week, but we still prefer selling when the pair rises towards 1.08 or forming short positions when the price returns below the support of 1.07.Technical analysis for EUR/USDEUR/USD is testing the resistance area of 1.0739 - 1.0685. In the short term, the trend remains "bearish", so we are looking for entry into short positions with the main goal in the area of the minimum for April 16. To start selling, you should wait for the formation of the appropriate signals.If, nevertheless, the resistance of 1.0739 is broken by buyers, and the American session closes higher, then the trend direction will change to an upward one. In this case, starting from Tuesday, we will look for an entry into purchases with a target within 1.0878 - 1.0853.

FOREX Fundamental analysis for EUR/USD on April 23, 2024The head of the French Central Bank, Villaroy de Galo, argues that the conflict in the Middle East will not affect the ECB's determination to cut rates in June. However, a downturn in geopolitical tensions could change the outlook for the US dollar. The volatility of Brent contributed to the growth of the dollar as a defensive asset. Now, when oil prices are declining, the sale of dollar assets begins. Discussions that most of the factors negatively affecting the euro have already been taken into account in the EURUSD rate contribute to the stabilization of this currency pair with increasing correction risks.Bank of America believes that three expected ECB rate cuts in 2024 have already been reflected in the exchange rate of the single currency. If the European Central Bank takes less drastic measures regarding monetary policy, by the end of the third quarter, the EURUSD rate will rise to 1.1, and by the end of the year to 1.12. Provided that the Fed cuts the federal funds rate twice, as markets expect and as Black Rock analysts predict. And this opinion deserves close attention.According to Bloomberg, Black Rock and similar companies currently manage assets of $43.5 trillion, which is twice as much as those of credit institutions. We can say that they largely shape forex currency trading. As for the views of Bank of America, it is assumed that if the rate is kept at 5.5%, EURUSD is quite capable of going down to 1.05 and below.The further dynamics of the main currency pair will depend on how the Fed and ECB rates change. At the end of April, it is worth paying attention to the elaboration of arguments in favor of the sustainability of the greenback. This is not only related to oil. There is an active discussion about how realistic it is to increase the yield of 10-year US bonds to the level of 5% and above. However, to continue the rally, it is necessary that the federal funds rate remain at 5.5% or even higher.Morgan Stanley warns about the risks of currency inflation. A large discrepancy in the monetary policy of the ECB and the Fed may lead to a strong weakening of the euro against the dollar, which may increase inflation risks. Therefore, the ECB may not cut rates as actively as the market expects.The greenback can be supported by statistics on US GDP for the first quarter. The US economy has been growing by 2% or higher for the seventh consecutive quarter, which indicates its resistance to a 525 basis point rate hike. However, behind this sustainability there are significant fiscal incentives that contribute to the growth of government spending, and this cannot last forever.We believe that EURUSD needs time to assess whether all the factors affecting the EA dollar have already been taken into account by quotes. This may lead to temporary stabilization in the range of 1,061-1,071. At the same time, today's statistics on business activity indices can shake the volatility of currency pairs.Technical analysis for EUR/USDEUR/USD continues to trade in a downtrend with a target at the low of April 16. If the pair can gain a foothold below the extreme, then the next target of the "bears" becomes Target zone in the range 1.0561 - 1.0544. We continue to hold short positions open from resistance (A) 1.0693 - 1.0685.The cancellation of the main sell scenario will be the consolidation of the pair above the maximum of April 18. In this case, we are waiting for the development of an upward correction to the resistance (B) 1.0739 - 1.0727. The trend line also runs here, which increases the importance of resistance. After testing the zone, it will be possible to search for entry into short positions.

FOREX Fundamental analysis for EUR/USDThe decrease in tension in the Middle East has breathed new forces into the euro. In the previous case, when EURUSD reached parity in 2022, an energy crisis broke out in Europe, and a possible war between Israel and Iran, further raising energy prices, could seriously undermine the Eurozone economy, which is dependent on fuel imports. This time, Tehran is minimizing the consequences of rocket attacks from Jerusalem, which indicates its reluctance or unwillingness to take revenge. The main currency risk has started to recover, but will the bulls have enough strength for a prolonged correction?EURUSD is holding higher at 1.06, but talk of a collapse of the pair to parity is not abating. The rates on options, at which the equality of the euro and the US dollar will be fixed, are growing. According to Bank of America estimates, the probability of a pair testing this pivot level over the next 6 months is 12%, although no one considered this option at the beginning of the year.The reason for this was a significant change in investors' perception of the prospects for US GDP and the dynamics of the interest rate of the Federal Reserve Fund (FRF). If Bloomberg's autumn forecasts for 2024 assumed a slowdown in the American economy to 0.9%, then the recent IMF forecast indicates growth of 2.7%, which is twice the forecasts of the nearest competitor from the G7 — Canada. At the beginning of the year, derivatives assumed 6-7 acts of monetary expansion of the Federal Reserve Fund, but now they are talking about 1-2. Moreover, they are more inclined to one rate cut. The possibility of the Fed not changing interest rates at all this year is also being actively discussed.It is clear that those who held short positions on the US dollar at the beginning of 2024 are currently the main buyers of the US currency. Vanguard talks about the stable strength of the US dollar, UBS Asset Management predicts its further growth, and Wells Fargo, yesterday's "bear" of the USD index, has already turned around.Although EURUSD quotes were affected by the escalation of the geopolitical conflict in the Middle East and immediately went up with the stabilization of the situation, other factors determining the position of sellers remain in effect. The expected expansion of US GDP by 2.3% in the first quarter, according to Reuters forecasts, makes us think again about the strength of the American economy. The actual data may be even higher, as the leading indicator of the Atlanta Federal Reserve shows +2.9%, and Goldman Sachs gives +3.1%.On the other hand, a slowdown in the PCE index, the Fed's preferred measure of inflation, according to Citigroup, may lead to an expansion of acts of monetary expansion from 1-2 to 2-3, which will put pressure on the US dollar.The monetary policy of the Federal Reserve continues to be a key factor in forex currency trading and continues to depend on data. Therefore, the markets need to be patient and wait for new macroeconomic statistics for the States. The consolidation of EURUSD in the range of 1.061-1.071 is most likely, however, we will sell on each rise.Technical analysis for EUR/USDEURUSD maintains a downward trend towards the nearest target at a low on April 16. If this support is broken, the pair will go to the Target zone 2, 1.0561 - 0.0544. To enter the sale, we recommend waiting for the asset to recover to the resistance area (A) 1.0693 - 1.0685 and resistance (B) 1.0739 - 1.0727.The signal for buying EURUSD will be a breakthrough and consolidation above the resistance area (B). In this case, the short-term trend will change to an upward direction, and the upper Target zone 1.0878 - 1.0853 will be the target of the "bulls".

FOREX Fundamental analysis for EUR/USD on April 19, 2024It seems that Israel is not going to remain silent after the unprecedented rocket attack on its territory by Iran and has already warned the United States about possible retaliation measures, which has caused a significant increase in demand for protective assets. Together with the harsh statements of the FOMC members, we can say that the plans of the EURUSD bulls have come to an end. The main currency pair is in decline again, and rumors of parity testing no longer seem so odious.In addition, investors are finally beginning to realize that defeating the inflationary dragon is not as easy as they expected at the end of 2023. Three pulses of inflation in the first three months of this year have changed the outlook not only of the major banks, but also of the Federal Reserve System (FRS). Bank of America postponed the forecast of the first interest rate cut from June to December, and Goldman Sachs, which previously counted on five acts of monetary expansion, now talks about two.The statement by the president of the Federal Reserve Bank of New York, John Williams, that the re-launch of the monetary policy tightening cycle is not the main scenario of the Fed, but it may well be implemented, stimulated an increase in US Treasury bond yields. This provided support to the EURUSD bears. Besides, John Williams is not alone in his opinion. Rafael Bostic from Atlanta considers it advisable to start monetary expansion at the end of 2024, and Neil Kashkari from Minneapolis argues that the Fed can keep rates at the current level all year.A slight decrease in the rates on treasuries does not change the methods of forex trading. This decline is associated with an increase in interest in safe assets, and not with a successful auction, as happened the day before. Is it possible to find a more reliable asset in the Forex market than the American dollar?The statements of the ECB Governing Council members also cause nervousness among Forex traders. Boris Vuitich, for example, is surprised that markets are still too calm and underestimate the differences in monetary policy between the Fed and the ECB. Francois Villaroy de Galo believes that it is possible to reduce rates at every meeting of the regulator, and not once a quarter. Piero Cipollone, Giannis Stournaras and Gediminas Simkus hint that July may also become a month of monetary expansion after JuneInterestingly, the US dollar is supported by oil. Its growth against the background of increasing geopolitical tensions in the Middle East increases interest in protective instruments. At the same time, the risks of accelerating inflation in the United States are growing, which forces the Fed to keep rates at the current high level.Thus, differences in the approaches of the Fed and the ECB to monetary policy, increased interest in safe assets and rising oil prices speak in favor of continuing the downward trend in the EURUSD market. We continue to sell this pair, focusing on the levels of 1.06 and 1.05. And it seems that this is just the beginning.EUR/USD Technical AnalysisEUR/USD is developing a downtrend. At the moment, sales are open from the resistance area (A) 1.0693 - 1.0685 with the expectation of reaching the minimum of April 16. If the pair fails and fixes below the minimum mark, then we move the target to area 2 in the range 1.0561 - 1.0544.When EUR/USD moves to growth with a subsequent breakout of resistance (A), we are waiting for testing of the next benchmark - resistance (B) 1.0739 - 1.0727. There is also a trend boundary here, which increases the importance of resistance. From here, we will again look for an entry point into short positions with a target at the same minimum from April 16.

AUD/USD is growing moderately, developing the upward momentum of the previous session, during which the pair successfully pushed off from local lows on November 14, 2023 and is currently testing the 0.6445 mark for an upward breakout. Meanwhile, market participants are analyzing the March report on the Australian labor market published on Thursday.The report notes a decrease in the employment rate by 6.6 thousand jobs after a significant increase of 117.6 thousand in the previous month, which is slightly lower than analysts' expectations of 7.2 thousand. Full-time employment increased by 27.9 thousand, while partial employment decreased by 34.5 thousand. The unemployment rate rose from 3.7% to 3.8%, with expectations of 3.9%, and the share of the labor force in the total population decreased from 66.7% to 66.6%.At the same time, the US dollar received good support from Jerome Powell's comments. Although the exact timing of the launch of the program to reduce the cost of borrowing was not specified, the head of the Fed stressed that the national economy will need some time to reach the 2.0% inflation target. This led to a revision of investors' forecasts for the date of the first interest rate adjustment in the current year. An easing of monetary policy in September seems to be the most likely scenario, but a change in course at the end of 2024 is also possible. It is expected that there will be no more than two interest rate cuts this year.On the daily chart, the Bollinger band indicator shows a moderate decrease while. The MACD is trying to move to growth, while at the same time maintaining a sell signal. Stochastic, having retreated from the lows, began to turn up and is trying to break through the 20% level and get out of the oversold area.We consider purchases after a confident breakdown of the 0.6456 level up with a target of 0.6524. We will set the stop loss at 0.6420.A rebound from the resistance of 0.6456, followed by a breakdown of the 0.6420 mark down, will be a signal to form short positions with a target of 0.6356. We will place the stop loss at 0.6456.

FOREX Fundamental analysis for EUR/USD on April 18, 2024"Don't hold losses and let profits grow," is one of the main tenets of forex currency trading. The rule is simple, but many traders violate this principle. As soon as it starts to get hot, they close deals to lock in the profits they make.The results of the auction for the placement of 20-year US Treasury bonds, as well as talk that other central banks may follow the Fed and keep rates on a plateau, became the drivers of the rebound of the EURUSD pair from the level of five-month lows.The main factor in the strengthening of the US dollar against other forex currency indices is the difference in monetary policy rates between the Federal Reserve and other central banks. Due to the strength of the American economy, inflation in the United States has started to rise, while in other countries this is not happening. This has led to rumors that the Fed will keep rates high, while other Central banks will begin a cycle of monetary expansion, which will lead to a fall in their currencies.In addition, the increase in the yield of treasuries also strengthened the position of the US dollar. At the same time, the slowdown in consumer price growth in Britain has sown doubts in the traders' camp. The futures market shifted the start date of policy easing by the Bank of England to November, and some investors began to assume that the Central Bank would take a second step in 2025. This strengthened sterling's position, and its strengthening dragged the single currency along with it.However, ECB officials have already decided to lower the rate. Even the famous "hawk" Joachim Nagel called June the month of the start of the mitigation cycle. His colleagues are more inclined to July, but there are practically no opponents of the "dovish" reversal in the ECB Council. It is clear that other economies besides the United States are unlikely to be able to withstand high rates. Therefore, monetary expansion in Europe will lead to a further fall in the euro and the pound.Market skeptics point to a slight decrease in the profitability of treasuries. But it is known that there is no trend without rollbacks, and this decline is probably a temporary phenomenon. Demand for 20-year securities increased more than expected, which affected the value of bonds and their yields. Nevertheless, there are quite a lot of factors in favor of a strong dollar, and the downward trend of EUR/USD will recover, especially since the upward correction of the pair allows it to be sold at a good priceAfter short-term EURUSD longs from 1.065, we move on to medium-term and long-term sales to rebound from the resistance at 1.07 and 1.073.Technical analysis for EUR/USDEUR/USD is working out an upward correction of the downtrend. As a result, the pair recovered to the resistance (A) of 1.0693 - 1.0685. Please note that the resistance area has not been broken through, so from here you can sell well in the direction of the minimum of April 16. If the minimum is broken, then the next target is Target Zone 2 within 1.0561 - 1.0544.If buyers are able to break above the resistance (A), then the correction is likely to continue to the next resistance area (B) 1.0739 - 1.0727. The trend line also runs here. From here we will also consider sales. The goal remains the same.

USD/CAD analysis on April 17, 2024USD/CAD is adjusted near the level of 1.3820 against the background of changes in the dynamics of the US dollar, while Canadian macroeconomic statistics did not support the national currency.Thus, in March, the consumer price index increased by 0.6% on a monthly basis and from 2.8% to 2.9% on an annual basis, and the base indicator, excluding food and fuel prices, adjusted by 0.5% (mom) and from 2.1% to 2.0% (YoY), which corresponds to according to analysts' forecasts.The US dollar index reached a record high of 106.10 after the publication of March retail sales data. The volume increased by 0.7% on a monthly basis, exceeding preliminary estimates by 0.4%, and jumped from 2.11% to 4.02% on an annual basis, while the base value accelerated from 0.6% to 1.1%. In addition, industrial production over the same period increased by 0.4% on a monthly basis and moved out of the negative zone to zero.On the daily chart, USD/CAD moves away from the resistance line of the ascending channel with dynamic boundaries of 1.3750–1.3500.Technical indicators on Daily confirm the purchase/ the range of EMA fluctuations on the Alligator indicator expands upwards, and the histogram of the awesome oscillator indicator forms corrective bars above the neutral level.Long positions can be opened after the price is fixed above 1.3850. The nearest target will be 1.3960. We set the stop loss at 1.3800.Sales will be relevant after the price is fixed below the support level of 1.3780. Here, the target is 1.3610. We place the stop loss at 1.3840.

The outlook for USD/JPY looks mixed. The pair is stabilizing near the level of 154.60. Despite the high interest from buyers, investors are in no hurry to open long positions, expecting a possible intervention by the Bank of Japan in forex currency trading against the background of a critical weakening of the yen. After the historic increase in the interest rate last month, the regulator announced the continuation of a soft monetary policy. At the same time, the Minister of Finance of Japan, Shunichi Suzuki, noted that the monetary authorities are monitoring the situation with the exchange rate of the national currency and are ready to take appropriate action if necessary. In the case of currency interventions, the yen may begin to strengthen rapidly.The yen was supported yesterday by data on Japan's foreign trade, where exports increased by 7.3% in March and imports decreased by 4.9%. The trade balance has reached a surplus of ¥366.5 billion. The national consumer price index in Japan is projected to adjust from 2.8% to 2.7% in March.Today, investors will focus on the publication of the US Federal Reserve's monthly economic report, known as the Beige Book. Inflation data for March will be presented in Japan.On the Daily, the Bollinger Bands are aimed at strong growth, the MACD retains a buy signal. The Stochastic oscillator is flat in the area of maximum values.To form long positions, it is necessary to confidently overcome the resistance level of 155.00 upwards. The target will be 156.00. We will set the stop loss at 154.50.A rebound from 155.00 followed by a breakdown down to the level of 154.50 will serve as a signal to enter short positions with a target of 153.50. In this case, we will set the stop loss to 155.00.