FOREX Fundamental Analysis for November 17, 2023
Investors realize that the market reaction to the October US inflation report was excessive, as the actual figure deviated slightly from the expected one. Nevertheless, the EUR/USD rallied vigorously. Traders did not want to miss the start of a new rally, although they may have accepted the dollar's capitulation too early.
However, the American statistics of the last few days are clearly not in favor of the greenback. The squatting producer prices and declining retail sales have been joined by a rise in jobless claims. This indicates a cooling labor market with slowing inflation.
Treasury yields are falling, stock indices are strengthening, pulling risky assets up through currency correlation. It seems to be time to buy EUR/USD. But investors are in no hurry to part with the greenback.
The market realizes that no other country can show such economic growth as in the USA. The factor of American exceptionalism remains the driver of support for the greenback, at least until there is a significant deterioration in macroeconomic statistics. For the Fed to start easing monetary policy, a serious reason is required. In 2020, such was the COVID-19 pandemic that forced the Fed to cut rates to near zero. But right now, forex currency trading is dominated by the idea of a soft landing for the U.S. economy. Without any stress from the monetary authorities. And once investors are imbued with this idea, they will return to the dollar again.
Over the past two years, investors have firmly believed in the Fed's dovish reversal 6 times and 6 times it resulted in traders' losses. The seventh attempt is coming up. Nevertheless, we continue to buy EUR/USD on pullbacks, focusing on the 1.079-1.089 price range.