FOREX Fundamental analysis on September 26, 2022
The central banks, trying to support the national currencies, were powerless against the confident march of the dollar. Moreover, rate hikes of central banks only bring closer a global recession, in which the greenback will feel the best. How not to fall EUR/USD with such a fundamental background?
Jerome Powell believes that a new reality has arrived for the American economy. Whereas in the past central banks raised rates by 25 basis points and sent the markets into a spin, monetary tightening by 75 basis points is now the norm.
A dozen regulators raised rates last week. The trouble, however, is that many central banks trying to keep up with the Fed are failing to keep up with the results of monetary tightening for national economies, which could lead to unintended consequences, as the Fed is poised to raise the rate to 5% as early as 2023.
The dollar has become stronger in forex trading and is being bought as the major defensive asset. Long positions on the dollar, according to the CFTC, are opened about 8 times more than the 20-year average.
But EUR/USD has another downside driver: the Eurozone problems. Europe is expected to start winter earlier this year, which will lead to a new round of gas prices. This is a big problem not only for the people, but also for the industry of Eurobloc, which is not in the best shape according to the business activity indexes. The Euro has no reason to grow, so it is just a matter of time before the EUR/USD drops to 0.95. For now there is a technical pullback, which might continue in case the "bulls" catch up with 0.9640. Our forex trading strategy suggests to use upward corrections for new sales.
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