FOREX fundamental analysis on October 3, 2022
The US dollar remains the leader of currency trading on the forex market. Its endless strengthening is scaring financial markets, as the United States exports not only inflation but also recession risks via the greenback.
During 9 months of 2022 stock indices showed the worst dynamics of the last 20 years. Treasury yields are near historic highs. The Fed is speculating about the need to raise the rate to 5%. All of this has helped the greenback gain 17.5% since the beginning of the year.
There are hardly any optimists left in the stock market, The historical calculations that the S&P 500 has strengthened by an average of 15% since 1942 after the midterm elections are little consolation. History is not a good predictor, especially when exceptions creep into the statistics.
45% of the 795 analysts surveyed by MLIV Pulse believe that only global currency intervention can stop the rise of the dollar. At that, the experts refer to the year 1985, when the agreement of the monetary authorities was able to bring down the dollar index by 10% within two months and in the next two years by 50% more. But the authors of the idea forget that back then the Fed not only began to reduce rates, but also approved currency intervention.
The situation is a little different now. The Fed has said it is willing to sacrifice economic growth to defeat inflation, and the strong dollar is helping the regulator in this fight. As long as Treasury yields are rising and the demand for protective assets is off the charts, fighting the greenback's strength is futile.
The market is ripe for a breather. No trend can last indefinitely. In any case, it will be interrupted by a correction. There are no reasons for a powerful EUR/USD rally, but as the pair recovers, the bears might start taking profits and it will support the asset's strength. The intraday forex trade allows buying on a breakout of the resistance at 0.985, but selling on a pullback from 0.9885, 0.9950 and 1.0000 are the main ones.
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