EUR/USD: the dollar gives weakness

FOREX Fundamental analysis for EUR/USD on October 7, 2024If the report on the US labor market (Non-farm Payrolls) cannot dissuade investors expecting an imminent recession, then probably nothing will be able to change their minds. In September, employment increased by 254,000 jobs, which significantly exceeded the expectations of Bloomberg analysts. Additionally, the data for the previous two months were revised upward by 72 thousand. The unemployment rate dropped to 4.1%, and average wage growth accelerated to 4%. The strong US economy provoked a sharp drop in the EURUSD exchange rate.The US dollar showed the strongest growth in a week since September 2022, against the background of a significant decrease in the probability of monetary expansion in November — from 63% to 2%, and Treasury bond yields rose to three-month highs. The sharp strengthening of the dollar in forex currency trading contrasted with the rapid growth of American stock indexes, where good economic news once again became the impetus for a rally.The growth of the S&P 500 index is associated with a "goldilocks" scenario — a balance between economic growth and slowing inflation. However, challenges such as geopolitics, the pre-election volatility of currency pairs and the possible acceleration of inflation can trigger a correction in stock indices and at the same time strengthen the dollar.Even proponents of the Fed's soft policy, such as Chicago Fed President Austin Goolsby, recognize the risks that inflation may not return to the 2% target. A strong economy and labor market, the likelihood of oil prices rising to $100 per barrel in the event of an escalation of the conflict in the Middle East, as well as new fiscal incentives, regardless of who wins the election — Donald Trump or Kamala Harris — increase the chances of a spike in inflation.The situation is reminiscent of the 1970s, when the Fed prematurely declared victory over inflation, which led to a double recession. According to Yardeni Research forecasts, the Federal Reserve may stop cutting rates in 2024. If the analysts are right and the markets expecting a 50 basis point decline are wrong, EURUSD may continue to fall.However, it is unlikely that inflation will rise significantly in September. Bloomberg experts expect a slowdown in consumer prices to 2.3%, which confirms the continuation of disinflation and will help maintain optimism in the stock market. The euro may temporarily stabilize amid the growth of the S&P 500, but most likely this period will be short-lived.EURUSD sales, formed above 1.12 and strengthened from 1.1045, look good. The pair has a good chance of returning to the levels of 1,085 and below, so the forex trading strategy – shorts from any growth, remains relevant.EUR/USD Technical analysisLast Friday, the short-term downward trend of EUR/USD continued, and the pair reached the lower target zone of 1.0962 - 1.0936. This area is a strong support. If sellers can break through it, the pair will go to the golden zone of 1.0878 - 1.0869.If the target zone is held by buyers, then an upward correction will begin, at the end of which it will be possible to consider selling the instrument from the resistance area (A) 1.1043 - 1.1035. The first sales target will be the 1.0997 level. The second one is at least on October 4

FOREX Fundamental analysis for EUR/USD on October 3, 2024Historically, various geopolitical collapses - wars, epidemics or financial crises - have strengthened the position of the US dollar in forex currency trading. In early October, despite rising tensions in the Middle East, the reaction of the markets was restrained, with the exception of oil. The EUR/USD pair is declining, helped by strong data on the US labor market and expectations of a reduction in the deposit rate of the European Central Bank. Although the global situation is worrisome, investors are not in a hurry to invest in protective assets yet.The increase in the number of vacancies in August and employment data in the United States from ADP, where 143 thousand jobs were created in September, which exceeded forecasts and reduced the likelihood of a Fed rate cut by 50 basis points from 37% to 33%. At the end of September, this probability was higher — 63%.Non-farm Payrolls is coming out on Friday, and if the data on applications for unemployment benefits and the general state of the labor market turn out to be positive, the Fed may not worry about a slowdown in the economy. In this case, the gradual normalization of monetary policy will continue, where the key word is "gradual". However, not all FOMC members consider the fight against inflation to be over. The head of the Federal Reserve Bank of Richmond, Thomas Barkin, notes that the Fed has yet to continue the fight in this directionThe Bank for International Settlements also warns of the risks of price increases related to military conflicts, climate change and trade tensions. In this context, an escalation in the Middle East could strengthen the US dollar: as a safe haven currency and in the event of an increase in oil prices to $100 per barrel. Such bets are becoming more and more popular in the derivatives market.Meanwhile, OPEC+ sees no reason to worry and plans to increase production by 180 thousand barrels per day from December. Saudi Arabia has warned that in case of non-compliance with obligations, oil prices may fall to $50 per barrel.If Israel's retaliatory actions turn out to be symbolic, as in April, the situation in the markets will quickly return to normal. However, this is unlikely to stop the downward trend in EUR/USD. The ECB's rhetoric is increasingly shifting towards the "dovish", and even such "hawks" as Isabelle Schnabel recognize the presence of factors constraining economic growth and mention the risks of deflation. This reinforces expectations of a reduction in the deposit rate in October.Before making final decisions, markets are waiting for the US labor market report for September. In the near future, EUR/USD is likely to remain in the range of 1.1–1.105, although short-term sales opened above 1.12 should be maintained.EUR/USD Technical analysisYesterday, EUR/USD changed its short-term trend to a downward one, as sellers were able to break through the support area 1.1088 - 1.1075. Now the target of the bears is the lower target zone of 1.0962 - 1.0936. We will consider new sales on an upward correction to strong resistance levels.These are currently: the resistance area 1.1117 - 1.1108 and 1.1163 - 1.1150. After testing any of these zones, you should pay attention to the reaction of sellers and wait for the appropriate signals to appear and only then open a short position. To change the direction of the trend to an upward one, buyers need to break through the 1.1163 level and consolidate higher.

USD/CAD analysis on October 2, 2024During Wednesday's Asian trading session, USD/CAD shows multidirectional fluctuations near the 1.3490 mark.Investors are refraining from active actions until the release of the US employment report from ADP, which is expected at 14:15 (GMT+2). Forecasts suggest an increase in employment from 99 thousand to 120 thousand, which may support the US dollar. At the same time, the official report on the US labor market contains Non-farm Payrolls. The number of new jobs outside agriculture is projected to decrease from 142 thousand to 140 thousand. The average hourly wage growth is projected to remain at 3.8% year—on-year, with a slight decrease on a monthly basis - from 0.4% to 0.3%. The unemployment rate is expected to remain at 4.2%.The Canadian employment report will not be released this week. However, the day before, an increase in the index of business activity in the Canadian manufacturing sector from S&P Global was recorded from 49.5 to 50.4 points. In the United States, a similar index from ISM remained at 47.2, failing to justify optimistic forecasts. Canada's economy grew below 1.5% in the third quarter, indicating a slowdown. This, as noted by Douglas Porter, chief economist at the Bank of Montreal, may weaken inflation, which reached the 2% target in August. The Bank of Canada has already cut the interest rate three times since June, but the latest data creates the prerequisites for a larger act of monetary expansion. It is possible that the next decrease will be by 50 basis points at once. However, the final decision of the regulator will depend on the employment report.Additional support for the US dollar is provided by the statement of Fed Chairman Jerome Powell, who proposed limiting the rate cut to 25 basis points. The probability of a 50 basis point rate cut, according to the CME FedWatch Tool, immediately fell to 35%, whereas previously this figure exceeded 50%.On the daily chart, the main forex indicators do not give unambiguous signals. Bollinger bands are showing a decline. The MACD retains a weak buy signal. Stochastic signals a possible downward reversal.When breaking down the 1.3475 level, it is recommended to open short positions with a target of 1.3440 and a stop loss at 1.3500.For purchases, you should wait for a rebound from the 1.3475 level, a breakdown of 1.3500 and a price consolidation above this key resistance. The nearest target is 1.3550. We will set the stop loss at 1.3475

On Wednesday, USD/CHF shows multidirectional movements, not moving far from the 0.8450 level. After two days of growth and a rebound from the local lows of mid-September, the pair. demonstrates an uncertain correction.The dollar's rise at the beginning of the week was supported by a speech by Jerome Powell at a meeting of the National Association for Business Economics (NABE). The head of the Fed noted that the regulator prefers a cautious reduction in interest rates by 25 basis points, fearing a possible return of inflation, despite stable economic indicators.The latest data from the United States turned out to be mixed. The index of business activity in the manufacturing sector (ISM) in September remained at 47.2 points, which is below expectations (47.5), while the number of open vacancies according to JOLTS increased to 8,040 million, exceeding analysts' forecasts.Later this week, an important report on the US labor market for September is expected, which may affect investor sentiment and their expectations regarding the Fed's next steps. Economists expect that the number of new jobs outside agriculture will decrease to 140 thousand, and the unemployment rate will remain at 4.2%. The average wage growth is projected at 3.8% in annual terms.The Swiss franc is supported by positive macroeconomic data. The business activity index from the Association of Supply Managers (SVME) rose to 49.9 points in September, and retail trade expanded by 3.2% in August, exceeding forecasts. Swiss inflation data is expected tomorrow, which is projected to remain at 1.1% year-on-year.The head of the Swiss National Bank, Martin Schlegel, said that inflation is likely to continue to decline within the target range of 0.0–2.0%. 85% of analysts expect the Central Bank to cut the rate to 0.75% at the next meeting in December.The Bollinger Band indicator on the daily chart is slightly decreasing while the MACD and Stochastic signal a possible purchase.If the pair breaks down the 0.8450 level, then we will form short positions with a target of 0.8400. We will set the stop loss to 0.8481.in case of a rebound, breakdown and consolidation of the price above 0.8481, we proceed to purchases with a target of 0.8541. In this case, we will place the protective stop at 0.8450.

FOREX Fundamental analysis for EUR/USD on October 2, 2024After Jerome Powell's statements that the Federal Reserve is in no hurry to make changes, and Christine Lagarde's expressed confidence in defeating inflation, forex currency trading changed its positioning, which led to a sharp change in the direction of EUR/USD. Investors began to actively consider the possibility of reducing the deposit rate by the European Central Bank (ECB) in October. Geopolitical tensions have also increased after Iran's missile strikes on Israel, which supports the growth of the US dollar as a defensive asset.Markets estimate the scale of the ECB's future monetary expansion at 51 basis points, which is comparable to the projected reduction in the US federal funds rate by 50 basis points. However, the ECB is likely to act faster. The fall in inflation in the Eurozone below the 2% target makes monetary policy easing inevitable. After Christine Lagarde's speech and the publication of inflation data, any other actions by the ECB, other than lowering rates, will cause disappointment.The drop in inflation to 1.8% triggered a rally in the German bond market. The yield on two-year securities fell below 2% for the first time since the end of 2022, while the yield on ten-year bonds decreased by 11 basis points and reached 2.01%. Morgan Stanley analysts predict a further drop in yields to 1.8-1.9% by the end of the year, as well as gradual cuts in the ECB rate until March 2025. As a result, by the end of next year, the deposit rate may decrease to 1.75%.Political problems in France are also putting pressure on EUR/USD. The minority government clashed with parliament when Prime Minister Michel Barnier proposed to reduce the budget deficit to 3% of GDP by 2029 by raising taxes and reducing spending. Discontent in parliament can lead to a vote of no confidence, which increases risks to the economy and increases the volatility of currency pairs in the market.An additional factor of pressure on EUR/USD was the escalation of the conflict in the Middle East. Israel is clearing neighboring Lebanon from terrorists, to which Iran responded with a massive missile strike. Investors fear further military action and are selling stocks en masse, switching to safe haven assets, including the US dollar.Thus, the rapid actions of the ECB, political risks in France and rising tensions in the Middle East have strengthened the position of the "bears" in EUR/USD. The pair has broken through the 1.11 level and continues to fall. A breakout of support at 1.1045 will open up an opportunity to strengthen short positions.EUR/USD Technical analysisYesterday, EUR/USD continued its correction and reached the support area 1.1088 - 1.1075. This zone is the boundary of a short-term uptrend. At the moment, the pair is trying to gain a foothold below this area. If this happens, the short-term trend will change direction to a downward one. In this case, starting tomorrow, it will be possible to look for an entry into sales with a target in the area of the lower Target zone 1.0962 - 1.0936.If the price returns above the support area, then we will consider buying EUR/USD with the first target at 1.1144. The next target mark is located around 1.1214.

USD/CAD analysis on October 1, 2024USD/CAD is in the correction phase at 1.3524, while the Canadian currency is under pressure due to weak economic activity, despite positive reports on key sectors.In July, after the June stagnation, Canada's GDP grew by 0.2%. Retail trade (+1.0%, the highest figures since 2023 for the second month in a row), the financial sector (+0.5%) and utilities (+1.3%) contributed to the growth. However, the real estate sector showed a decline of 0.4%, which restrained the overall economic growth of the country.The US dollar is strengthening, which is due to the positive reaction of investors to the speech of Fed Chairman Jerome Powell, who cooled expectations of a rapid reduction in interest rates, declaring the regulator's intention to return to moderate steps of reduction by 25 basis points. At 16:00 (GMT+2), JOLTS data on the number of open vacancies in the United States is expected to be published: analysts predict a slight increase from 7.637 million to 7.640 million after the July drop.Technical analysis shows a correction of USD/CAD inside the descending channel with the boundaries of 1.3600–1.3380. The indicators show a strengthening of the sell signal. The EMA range is expanding on the alligator, the awesome oscillator indicator forms correction bars below the zero level.After fixing the pair below 1.3500, we form short positions with a target of 1.3380. We place the stop loss at 1.3570.Purchases are possible after the breakout of the 1.3550 level. The nearest target will be 1.3650. We will set the stop loss at 1.3480.

GBP/USD is trading in different directions near the 1.3375 level. Statistics from the UK and the USA did not cause significant activity in the market.Earlier, data on UK GDP for the second quarter were published. Economic growth slowed from 0.9% to 0.7% in annual terms and from 0.6% to 0.5% in quarterly terms. Such low rates may prompt the Bank of England to more aggressively ease monetary policy, especially given the recent decision of the US Federal Reserve in September to cut the interest rate by 50 basis points.The pound is also under pressure due to a decrease in the retail price index from the Consortium of British Retailers: the indicator fell by 0.6% in September after a previous decrease of 0.3%. Today, the market is awaiting data on business activity in the UK manufacturing sector from S&P Global. The forecast is 51.5 points. Additionally, in an interview with the former head of the Bank of England, Mervyn King, it was noted that high inflation in the country was caused by the belated actions of the regulator, but now the situation is stabilizing.With the start of trading in the United States, the market will monitor data on the ISM index of business activity in the manufacturing sector, which may rise from 47.2 to 47.5 points in September. Participants also appreciate the recent speech by Fed Chairman Jerome Powell, who confirmed the course of monetary policy easing, but at a slower pace. The Fed rate is expected to decrease by another 50 basis points by the end of the year.The Bollinger band indicator on the daily chart continues to grow. While the MACD indicator retains a weak sell signal, and the Stochastic indicates overbought and possible decline of the pair.We will consider short positions with a confident breakdown down to the level of 1.3340. The target is 1.3250. We will set the stop loss at 1.3390.In case of a breakdown above the 1.3435 mark, we proceed to purchases. The target is 1.3550. We place the stop loss at 1.3380.

FOREX Fundamental analysis for EUR/USD on October 1, 2024When Jerome Powell said that the Fed was in no hurry to act, it came as a surprise to the market, which is used to the speed of the regulator's decisions. As a result, the yield on Treasury bonds rose, and the EUR/USD pair fell sharply. Powell noted that the U.S. economy remains strong and there is no reason to accelerate the process of lowering interest rates. According to his forecasts, the Fed will carry out two more acts of monetary expansion in 2024, totaling 50 basis points.The beginning of monetary policy easing from a fairly significant step of 0.5% looks atypical, especially against the background of a strong economy. However, the Fed explained this by the need to lower real rates and prevent a recession, while inflation has already been defeated. This brings the market back to the familiar policy of constant support for the financial sector. The S&P 500 index continues to rise, updating records, as markets believe that the size of the rate cut does not matter if the economy remains stable.But for Treasury bonds and the US dollar, the issue of the Fed's move plays an important role. The dollar index (USD) has been falling for the third month in a row, which is the longest series since the beginning of 2023. Traders are selling off the dollar in anticipation of a long period of soft monetary policy.The Fed continues to set the tone for other Central Banks. According to Bloomberg research, borrowing rates in developed economies may more than double by the end of 2025, which signals a synchronous cycle of monetary easing. Usually, in such conditions, the dollar index does not experience a strong drop relative to other forex currency indices.However, global monetary expansion favours the global economy and, in particular, the euro. However, its effect is delayed, and the vulnerability of the Eurozone economy leaves opportunities for EUR/USD bears in the short term.Additional pressure on the euro was exerted by inflation statistics in Europe. The slowdown in price growth in the Eurozone increases the risks of a CPI decline below 2% and increases the likelihood of a deposit rate cut by the European Central Bank in October. Christine Lagarde has already hinted that the ECB will take the latest data into account when making a decision.In such a situation, the US employment report will be a key factor in choosing the EUR/USD direction. If the employment data turns out to be strong, the pair may go beyond the lower limit of the 1.108-1.121 range. Otherwise, weak figures will increase the chances of continuing the uptrend. So far, it is advisable to keep selling positions open on growth to the level of 1,121.EUR/USD Technical analysisEUR/USD failed to update the maximum on September 25th yesterday. Instead, the pair declined again to the support area 1.1130 - 1.1121. At the moment, this zone has not been broken through, however, the probability of fixing the price below is high. In this case, we can expect the correction to continue to develop towards the support area 1.1088 - 1.1075, that is, the border of the short-term uptrend.In case of working out a decrease to the support area, purchases can be considered again. The first target for the bulls will be the 1.1144 level. The second one is the 1.1214 mark. To change the trend direction to a downward one, sellers need to break through the 1.1075 level and consolidate below.