FOREX Fundamental Analysis for EUR/USD on July 14, 2023
The U.S. dollar rises, as a rule, in two cases - when the U.S. economy is expanding rapidly or when it is on the verge of recession. Probably neither is happening right now. When GDP growth is sluggish, the greenback usually weakens.
There are many contradictions in the U.S. economy, and markets didn't really believe the Fed's claims of two rate hikes this year. And the deep inversion of the yield curve with a 20 percent rally from the October lows of the S&P 500 only adds to the uncertainty.
Investors realize that the July rate hike to 5.5% will happen, but it will likely be the final one.
Eurizon SLJ Capital believes that the dollar is highly overvalued and it will decline to a fair price in the near future, especially since there are fundamental justifications for this weakening. These include the expansion of the national debt from 54% to 118%, the growing trade deficit and more. In other words, there is nothing stopping EUR/USD from rising to 1.20 over the next 6 months.
Other analyst firms are also predicting a weaker greenback, but with more down-to-earth targets for EUR/USD. Deutsche Bank sees the pair at 1.15. Nomura sees it at 1.14, but in September. According to Goldman Sachs experts, the drivers pushing the main currency risk upward will remain. First of all - it is a decline in the rate of inflation growth.
The dollar index came under the pressure of fundamental factors. The decline of EUR/USD below 1.1215 will provoke fixing purchases. Intraday forex trading allows short-term selling followed by a shift to medium- and long-term longs.