FOREX Fundamental Analysis on October 4, 2022
The United Nations urges the world's central banks, especially the Fed, to stop tightening monetary policy, which is sure to end in a global recession. According to the UN, every 1.0% increase in the federal funds rate reduces the GDP of developed countries by 0.5% and of developing countries by 0.8% at once.
Thomas Barkin, head of the Federal Reserve Bank of Richmond, said in response to the statement that the Fed cares about the prospects of the global economy, but first of all the regulator will follow the situation in the United States.
UN worries are not in vain. The JP Morgan Global Purchasing Managers Index fell to a June 2020 low of 49.8p. Global manufacturing fell for the first time in two years, though business activity indices in the United States remain above 50p, but also show a downward trend.
Market participants viewed the comments of the Fed's spokesman as positive news, suggesting that due to the slowdown in the U.S. economy, the Fed will slow down monetary policy tightening or even begin to adjust to a "soft" course. Stock indices returned to growth, which through currency correlations helped the EUR/USD and GBP/USD bulls. Sterling rose above $1.13 as it additionally reacted to the information that the Treasury decided to postpone the income tax cut for rich Britons. In addition, the Bank of England calmed the markets by resuscitating the QE program.
Investors decided that once the worst is over, there is no point in defensive assets. The year 2022 introduced quite a lot of events in forex trading. This includes the war in Ukraine, the energy crisis in the Eurozone, and galloping inflation. There are more than enough drivers for EUR/USD to fall to a 20-year low. Not surprisingly, the volatility of currency pairs remains at high levels, which allows traders to make good profits.
However, no matter who says what, but rising global uncertainty is a good reason to buy the dollar. It is unlikely that in the near future the greenback will lose its protective role, especially now that winter begins, and nobody can say how Europe will survive it. There are also no forecasts about the end of Russian aggression in Ukraine, nor about the consequences of the Fed's aggressive monetary restriction.
Investors are unlikely to get rid of the dollar, so we consider the EUR/USD growth a temporary correction. In the format of the forex strategy of the day we do not refuse to buy the pair above 0.9850, but are ready to return to the medium-term sales at the rebound from 0.9885; 0.9950 and 1.0000.
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FOREX Fundamental Analysis for November 30, 2023German inflation slowed to 2.3%, allowing ING to claim that the ECB's assessment of inflationary pressures was wrong. Inflation is falling across the Eurozone and the regulator, according to financial analysts, can start cutting interest rates right from tomorrow. The expectation of monetary policy easing and the weak Euro bloc economy, which requires global stimulus, put pressure on EUR/USD.And is deflation really that attractive? According to Rafael Bastick, head of FRB Boston, consumers are already starting to postpone purchases and cut back on spending, expecting prices to fall further. This is detrimental to any economy, and especially to the Eurozone economy, as the ECB probably overdid it by raising rates, although the main cause of inflation was a logistical disruption due to the COVID-19 pandemic, which the European regulator had no influence on.In the United States, the negative processes associated with the cooling of the economy are slower, as here large-scale stimulus allowed the population to accumulate excess savings. Nevertheless, the FOMC is no longer denying the likelihood of lowering rates, which now create additional economic risks.At the same time, the OECD urges Central Banks not to rush to reduce the cost of borrowing. Here they believe that the Fed will cut rates in the second half of 2024, and the ECB only in 2025. OSER forecasts US GDP growth of 1.5% next year and 1.7% in 2025. This is a good performance compared to the Eurozone. For Germany, analysts are planning growth of 0.6% and 1.2% respectively.American exceptionalism allows Goldman Sachs to state that in 2024 the dollar index will continue to lead other forex currency indices. Morgan Stanley recommends long-term EUR/USD selling with an eye on the parity level. Banks believe that the world economies, except for the U.S., will not withstand the burden of high rates, which will increase the demand for the dollar as a protective asset.We believe that EUR/USD dynamics now largely depends on inflation reports. If the US PCE falls below expected values, the main currency risk could continue to strengthen. If the forecast and actual figures are close, the pair will go into a prolonged consolidation. The EUR/USD growth was too turbulent and it is time to take a pause.It is possible that the upper boundary of the consolidation range is already marked and passes through 1.1015. If the price goes below 1.096, the pair will test the lower boundary of the channel around 1.091 or 1.086. For risk traders, you can look for entry points for short-term sales. 
GBP/USD continues its upward trend with the renewal of local highs on Wednesday. Buyers broke an important resistance at 1.2700 and are trying to consolidate above this level."Bullish" impulse GBP/USD received yesterday after the speech of three representatives of the Federal Reserve, each of whom announced a possible change of course of the regulator's monetary policy, as inflation is steadily declining, and high rates carry additional risks for the United States economy.The dollar index descended to 102.600. Today, investors are waiting for the release of the annual report on US GDP, as well as the consumer price index. On Friday there will be a speech by Jerome Powell.British statistics has little influence on the pair dynamics, but today the head of the Bank of England Andrew Bailey will speak, who may highlight the prospects of the Central Bank's monetary policy course, which will cause an increase in volatility.Technical analysis for GBP/USD for todayOn the daily chart, GBP/USD broke through the upper boundary of the ascending channel. The Alligator indicator has correctly built a fan of averages upwards. Awesome oscillator is growing in the positive range.After consolidation of the pair above 1.2760 we form purchases in the direction of 1.2930. Stop-loss is set at 1.2720.Selling will be relevant if the pair drops below the support at 1.2660. The nearest target for sellers is 1.2500. Stop-loss in this case will be placed at 1.2720. 
FOREX Fundamental Analysis for November 29, 2023The market received an indirect confirmation of the red-hot idea of a "dovish" reversal. In yesterday's speech, the head of FRB Chicago compared the monetary restriction cycle with the process of turkey cooking. Both there and there, he notes, the main thing is not to overdo it. Austan Goolsby believes that as inflation approaches the 2% target, the need to tighten financial conditions decreases. Markets saw the statement as a hint that the Fed is moving to a softer monetary policy.FOMC member Christopher Waller, known for his hawkish stance, went even further in his reasoning. He believes that with inflationary pressures falling steadily, there is no point in keeping rates at a high plateau for a long time.The markets took these words as a signal to sell the dollar. Stock indices rushed to new heights and dragged risky instruments, including EUR/USD, through currency correlation. The probability of the federal funds rate cut in May overnight rose from 51% to 70%. The odds of its reduction to 4.5% by the end of 2024 rose from 51% to 76%.In addition, Christopher Waller reassured the markets by stating that the treasury rates are above the July values, when the Fed stopped monetary restriction, so there is no reason to worry about easing financial conditions.If such hardened hawks are turning into doves, no great confirmation of risky ideas is needed. So, indeed, the Fed may allow monetary easing, as even the regulator's leadership sees current rates as unnecessarily high. Again, the Fed is not abandoning the scenario of a soft landing for the economy.Now the markets are waiting for Friday's speech of Jerome Powell. If the head of the Fed confirms the course of the "regulator" on monetary expansion, the main EUR/USD rally will be ahead. Today we will analyze important statistics - annual data of US GDP and consumer price index. The pivot level for EUR/USD is 1.094. As long as the pair is trading higher, long positions remain relevant. 
Trading idea for USD/JPY from November 28, 2023On Tuesday, USD/JPY shows a weak recovery attempt and trades just above 148.50 at the moment.Market participants are interested in the direction of the monetary policy vector of the Bank of Japan, in this regard they are carefully analyzing the national statistics. In October, inflation in Japan accelerated from 3.0% to 3.3%, but the core rate fell from 4.2% to 4.0%.After the report was released, the BOJ governor noted a lack of confidence that inflation will reach the 2% target in the near future. Kazuo Ueda considers the growth of wages and consumer prices as a positive development, but stated the risks of uncertainty and that the Central Bank will not give up control of the yield curve and raise interest rates.At the moment USD/JPY dynamics depends more on the dynamics of the US dollar. Investors are waiting for important economic releases and Friday's speech of Jerome Powell. Special attention is paid to the estimation of the US third quarter GDP, as well as the personal consumption goods price index.We believe that USD/JPY maintains the global uptrend and will soon retest the important resistance at 150.00. We suggest including a buy order in the trader's trading planBuy-stop 149.00take-profit 150.00stop-loss 148.40 
On Tuesday, GBP/USD traded in a varied manner, not retreating far from the local highs of September 1. Yesterday the pair strengthened slightly, playing off the weakness of the U.S. dollar.Rumors are growing in the market that the Fed may move to easing monetary policy faster than previously planned. At the same time, the Bank of England states that it will be difficult to achieve the inflation target of 2%, so the cycle of rate hikes is likely to continue.Sterling was also supported by UK Prime Minister Rishi Sunak's statement about attracting £29.5 bln of foreign investment.The UK Retail Prices Index was released today, recording a decline from 5.2% to 4.3%. The retail sales index for the month rose from (-36.0) to (-11.0).Analysts believe that the situation in the UK is improving, and the increase in consumer demand before the Christmas holidays will help the economic recovery.A number of Fed representatives will speak today.Technical analysis of GBP/USD for todayThe Bollinger Bands indicator on the Daily is headed for a strong rise, as is the MACD indicator, which maintains a buy signal. The Stochastic oscillator is in the area of maximum values.After price consolidation above 1.2650, we open purchases with a target of 1.2747. Stop-loss is set at 1.2600.If the pair drops below the support at 1.2600, we move to short positions with the target at 1.2500. Stop-loss is set at 1.2650. 
FOREX Fundamental Analysis for November 28, 2023Stock indices may close November with the best result of the month. The demand at the US debt bond auctions is huge, hence the yields are falling and pulling the dollar down through currency correlation. Will this help EUR/USD?For the dovish reversal forecasters to be right and for the Fed to start cutting rates in May, a slowdown in US GDP is required. Judging by the yield curve inversion, a US economic slowdown is very real, with Deutsche Bank predicting that the recession will start in the first half of 2024. This would force the Fed to cut rates by 175 bps to 3.75%, although derivatives do not yet rate the likelihood of such a scenario highly.It may seem to some that Deutsche Bank is pessimistic, but the options market gives even sadder forecasts. It expects the Fed to cut the Fed Funds rate by 250 basis points to 3%.There is another argument in favor of this forecast. The Fed is trying to achieve a soft landing for the United States economy. Now it is balancing on the verge of recession, so the regulator will have to increase stimulus, while conducting monetary expansion.But not everyone believes in such a scenario. Hedge funds are increasing longs on the dollar, remembering that the Fed this year six times brought losses to traders risk buyers. Surprise number seven may come at the end of the year.Actually, whether the Fed chooses to keep rates high or ease monetary policy depends on the inputs. From the point of view of John Murphy's technical analysis, a breakdown of the local high of November will allow to increase purchases in the direction of 1.1020 and 1.1060. If the pair closes below 1.094, we will form short-term sales. 
The franc is supported by the national statistics. Thus, according to the report, employment grew by 1.9% or 102.3 thousand jobs in the third quarter. At the same time, the number of open vacancies decreased by 10 thousand or 8.1% (y/y).The USD/CHF index is declining and trades at 103.100. The US manufacturing sector business activity index in November dropped from 50.0 to 49.4 ppts with the forecast of 49.8 ppts. In contrast, the services sector recorded a growth from 50.6 to 50.8 ppts with expectations of 50.4 ppts.Daily USD/CHF is trying to break below the 61.8% Fibonacci level of 0.8805.Alligator indicator and awesome oscillator indicate selling.If the price fixes below the level of Fibonacci grid at 0.8805, we open short positions with the target mark at 0.8695. Stop-loss will be set at 0.8860.It is recommended to buy only in case of sharp reversal of the asset with consolidation above 0.8882. The target is 0.8959. Stop-loss is placed at 0.8830. 
FOREX Fundamental Analysis for November 27, 2023Weak data on Eurozone business activity indices confirms the recession of the European economy, which together with the expectation of lower inflationary pressure helps the European currency. Prospects of a dovish Fed reversal will support risk assets, including the euro. World stock indices are showing their best rally since November 2020. The dollar is weakening.At the same time, Eurozone business activity indices caused a mixed market reaction. Optimists cited the fact that the actual figures were better than expected. Pessimists do not like the fact that PMI remains below the key level of 50.0 p for the sixth month in a row. However, so far it is safe to say that the ECB monetary policy affects the dynamics of the European currency more than the war in Ukraine and the threat of energy crisis.But strong inflation does not happen with a weak economy. The growth rate of consumer prices in the Eurozone is declining much faster than in the United States. Bloomberg expects that in November they will reach the minimum mark of July 2021 - 2.7%, and core inflation will go down to 3.9%.Naturally, the derivatives market is expecting the ECB to loosen monetary policy. The economy of the European bloc needs stimulation, especially since the forecast of the European Central Bank that the inflation target of 2% will be reached only in 2025 looks overly negative, as well as Christine Lagarde's statement that the regulator will continue to fight inflation.If it were not for expectations of a 100 basis points cut in Fed rates in 2024, EUR/USD would already be at parity. But it must be said here that macro reports from the US are also helping to weaken the dollar.Jerome Powell will surely be re-assuring to avoid a repeat of the scenario of the 1970s. Therefore, the Fed, if it does not plan to raise rates, will keep them at the maximum for as long as possible, the economic situation allows it. As soon as investors realize this idea, EUR/USD will go into consolidation. If buyers consolidate above 1.094, the upper boundary of the range will be the area of 1.1020-1.1060. If not, it will pass through the current values.