{{val.symbol}}
{{val.value}}

EURUSD: the dollar wins in any scenario

EUR/USD, currency, EURUSD: the dollar wins in any scenario

FOREX Fundamental analysis on August 5, 2022

Today, markets are waiting for Non-farm Payrolls to confirm or deny signals of an approaching recession. The inversion of the yield curve and the slowdown in economic growth indicate the beginning of a recession. Economic indicators and statements by FOMC members suggest the opposite.

Reuters forecasts July employment at the level of 250 thousand jobs, which is lower than last month's figure of 372 thousand and will be a minimum of 19 months. It is possible that the labor market has taken a pause after the rapid post-pandemic growth.

This is, in fact, what the Fed needs. When rates rise, companies get more expensive loans and have to choose between financial obligations and employee salaries. As a rule, borrowers win. Salaries of employees remain at the same levels, personal consumption decreases, price growth slows down.

And everything would be fine with Jerome Powell's team if it weren't for the market, the whims of which are often difficult to predict. The S&P 500 strengthened by 13%, which reduced the probability of an economic recession over the next 12 months from 91% to 51%. However, the situation in the commodity markets is diametrically opposite.

The probability of a recession from financial markets

At the same time, the stock market is confident that the Fed will pause in raising rates, and in 2023 will move to lower them. This, of course, will allow inflation to remain at high levels, so it is unlikely that the Fed will like this scenario.

But the S&P 500 does not seem to hear the "hawkish" comments of the monetary authorities and rushes up, ignoring the Fed's policy. This can lead to serious losses for traders who like risky assets.

I think that EUR/USD buyers will not be saved even by the ultra-weak statistics of the American labor market. At best, the bulls will try to take the pair through the upper limit of the 1.01-1.03 range and test 1.0355 or even 1.0395. But they are unlikely to break through higher. With a high degree of probability, the initiative here will be intercepted by "bears" with new medium-term sales. Another reason to open short positions is a breakout of the 1.0180 support.

Trader Avatar

 

Symbols EUR/USD

Other blogs by this trader

Forex analysis and forecast of GBPUSD for today, August 12, 2022
GBP/USD, currency, Forex analysis and forecast of GBPUSD for today, August 12, 2022 On Friday, GBP/USD continues to retreat from the local maximum. In the Asian session, the bears attempted to gain a foothold below the 1.2200 level.The strengthening of the pair took place on the release of the US inflation report on Wednesday, according to which the consumer price index for July fell from 9.1% to 8.5%, and core inflation remained at 5.9%The report allowed investors to doubt the need for aggressive tightening of the Fed's monetary policy. The probability of a rate hike in September by 75 basis points has fallen, and the chances of a 50-point monetary restriction have risen sharply.Even the speeches of FOMC members, assuring that the Federal Reserve will continue its policy of raising rates, as the inflation rate is at record highs and far from the 2.0% target, could not convince buyers of risky assets.Today's release of data on the pace of economic growth and the volume of industrial production in the UK did not have a noticeable impact on the dynamics of GBP/USD.Technical analysis GBP/USDThe MFI indicator, as well as the Bollinger Bands, are growing moderately.The MACD histogram has moved into a positive area and continues to rise, forming a weak buy signal.The stochastic oscillator is growing and approaching the 80% level. A test of the overbought area boundary will take place in the near future.We consider the formation of short positions after the price has fixed below the support of 1.2176. The target mark is 1.2054. We set the stop loss to 1.2236.If a breakout is above 1.2236, we consider buying the pair with a target of 1.2400. In this case, we take out the stop loss at 1.2150.
Aug 12, 2022 Read
EURUSD: Investors ignore the Fed's policy
EUR/USD, currency, EURUSD: Investors ignore the Fed\'s policy FOREX Fundamental analysis on August 12, 2022The markets went against the Fed. The "hawkish" rhetoric of FOMC members did not stop S&P 500 buyers. Demand for risky assets is growing, and any slightly positive news sharply strengthens stock indexes, and through currency correlation, and EUR/USD.However, literally the day after the release of the US inflation report, the S&P 500 went into the "red" zone, making Eurodollar buyers nervous.At the same time, the decline in the consumer price index from 9.1% to 8.5% reduced the probability of a Fed rate hike in September by 75 basis points, which collapsed the yield of treasury bonds, but made the stock market attractive. EUR/USD rose to 5-week highs.The stock market was also supported by the reduction of recession risks. After the release of the US labor market report, investors believed that the United States economy would be able to avoid a recession. According to Goldman Sachs, a local slowdown in the economy is possible, but not a recession.The demand for risky assets is somewhat different from the Fed's plans, as the weakening of the dollar improves financial conditions, allowing companies to spend more, including on wages, which accelerates inflation. The Fed has opposite goals, but the recovery of stock indexes can be stopped only by Jerome Powell.The speech of the head of the Fed is able to sober up EUR/USD buyers. But the euro, if you look at it, has plenty of problems of its own. Bloomberg believes that in October – March, the Eurozone economy will face a recession. And if we add here the slowdown in GDP, the political uncertainty of Italy and the very limited actions of the ECB, then there is no desire to buy the euro.While investors are buying up risks, EUR/USD remains afloat. The fall of the pair below 1.028 will be a signal for the formation of short positions.
Aug 12, 2022 Read
DXY: Will the dollar recover after the US inflation report?
US Dollar Index, index, DXY: Will the dollar recover after the US inflation report? Trading idea for the dollar index (DXY) dated August 11, 2022After yesterday's publication of the US inflation report, the dollar index went down to support 105.00, losing about 1.0%.According to the release, the CPI consumer price index fell from 9.1% to 8.5% in annual terms, with a forecast decline to 8.7%. Core inflation, which does not take into account the cost of food and fuel, remained at 5.9%, although analysts expected an increase to 6.1%.After the news was released, the probability of a third consecutive rate hike by 75 basis points decreased from 68% to 35%. Experts believe that in September, the Federal Reserve will hold a monetary restriction by 50 basis points. The chances of implementing this scenario have increased from 30% to 56%.Nevertheless, the head of the Federal Reserve Bank of Chicago, after the release of the report, said that the Fed would not refuse to raise rates further. Other FOMC members made similar statementsThe head of the Federal Reserve Bank of Minneapolis, Neil Kashkari, believes that the inflation report is not a signal to change the course of the Fed's monetary policy. The official believes that by the end of the year the federal funds rate will be 3.9%, and by the end of next year – 4.4%.We believe that the USD drawdown is a growth correction, and soon the dollar index will strengthen its position relative to other forex currency indices. We offer to install a DXY purchase orderBuy-stop 105.30 take-profit 107.30 stop-loss 104.60
Aug 11, 2022 Read
AUDUSD: the initiative has passed to buyers
AUD/USD, currency, AUDUSD: the initiative has passed to buyers AUD/USD review of August 11, 2022On Wednesday, after the release of the US inflation report, AUD/USD showed a sharp strengthening. According to the report, in July the consumer price index fell from 9.1% to 8.5% with a forecast of 8.7%, and core inflation remained at 5.9%.Today, the pair slightly corrects yesterday's growth, retreating from local highs.For investors, the main issue is the prospect of the Fed's monetary policy. Buyers of risky assets believe that inflation in the US has peaked and, after a number of measures taken by the Fed, has moved to a decline. Consequently, the US regulator will not aggressively raise rates or even take a break from monetary restriction.USD supporters claim that the Fed does not intend to abandon tightening monetary policy, as inflation in the US remains at record levels and is far from the 2% target.Statistics on consumer price expectations have been released in Australia today. The August indicator was revised downwards from 6.3% to 5.9%. It is possible that in the near future the Reserve Bank of Australia will move to a softer position.The RBA has announced the launch of a digital version of the national currency. During the year, specialists from various fields will study the potential and effectiveness of the use of cryptocurrencies, solve legal and regulatory issues. The results of the experiment will be announced in August 2023.AUD/USD Technical AnalysisThe CCI indicator and Bollinger Bands show an upward trend.The MACD indicator is growing in a positive area and retains a strong bullish signal.The stochastic oscillator from the bottom up is testing the 80 level for a breakdown%With a confident breakdown above 0.7107, we open long positions with a take profit of 0.7202. We set the stop loss at 0.7050.Fixing the pair below the 0.7050 support will be a signal for the formation of sales with a target of 0.6950. We will place the stop loss at 0.7107.
Aug 11, 2022 Read
Forex analysis and forecast for USDJPY for today, August 11, 2022
USD/JPY, currency, Forex analysis and forecast for USDJPY for today, August 11, 2022 After yesterday's collapse caused by the release of the US inflation report, where the consumer price index fell from 9.1% to 8.5%, ahead of the forecast by 8.7%, and core inflation remained at 5.9%, on Thursday USD/JPY seeks to regain positions.Currently, investors are trying to figure out whether the Federal Reserve will continue to aggressively raise rates or slightly reduce the ardor of monetary restrictions, and maybe even take a pause in tightening monetary policy.The Japanese government announced its resignation on Wednesday, as it does not feel the support of voters due to the rapidly rising prices of food and fuel.Political uncertainty has become an additional factor of pressure on the Japanese yenTechnical analysis for USDJPYThe Bollinger Bands indicator on the daily chart remains in moderate decline.The MACD indicator played a small recovery of the pair last week, but now it has started to decline in the negative range and has formed a sell signal.The stochastic oscillator is steadily decliningThe breakdown of support at 133.00 will be a signal to enter short positions with a take profit of 131.00. We set the stop loss at 134.00.With a confident breakdown of the resistance of 134.00, we return to purchases with a target mark of 135.57. We will place a protective stop just below 133.00.
Aug 11, 2022 Read
EURUSD: US inflation report has stirred up markets
EUR/USD, currency, EURUSD: US inflation report has stirred up markets FOREX Fundamental analysis on August 11, 2022Yesterday, forex currency trading finally revived. The EUR/USD bulls have come to believe that US inflation peaked in June and began to decline, so there is no point in the Fed continuing to aggressively tighten monetary policy. The bears, along with some FOMC representatives, believe that one report is clearly not enough to assess the effectiveness of the Fed's actions, so monetary restriction will continue.In July, the consumer price index slowed from 9.1% to 8.5%, with a forecast of 8.7%. Core inflation remained at the June level of 5.9%Despite the local decline in the indicator, it should be recognized that inflation in the United States remains at record highs and is still far from the 2% target. According to the head of the Federal Reserve Bank of San Francisco Mary Daly, it is too early to talk about a victory over price growth. The Fed has not finished the work it started and it is likely to raise the rate by 75 basis points in September.Investors' opinions on the size of the September act of monetary restriction differ. The probability of an increase of 75 basis points in a few hours fell from 70% below 50%, which allowed the Nasdaq Composite to complete the longest decline and strengthen by 20% from the lows of June. The yield of treasuries collapsed, the dollar had to retreat.I believe that the inflation report has cooled the particularly zealous "hawks" who are proposing to raise the rate in September by 1.00% at once, but did not affect the policy of the Federal Reserve. Moreover, according to the head of the Federal Reserve Bank of Chicago, Charles Evans, the Fed does not plan to refuse to raise rates in 2023. The head of the Federal Reserve Bank of Minneapolis, Neil Kashkari, expects that by the end of this year the rate will rise to 3.9%, and to 4.4% next year.It seems that the reaction of EUR/ USD to the release turned out to be excessive, but allowed us to open sales from 1.0355, which we will increase when the support breaks 1.018. The reduction targets remain 1.01 and 1.00.
Aug 11, 2022 Read
GBPUSD: How will the US inflation report affect sterling?
GBP/USD, currency, GBPUSD: How will the US inflation report affect sterling? Trading idea for GBP/USD on August 10, 2022During Wednesday's Asian session, the volatility of currency pairs remains low. GBP/USD shows flat dynamics and consolidates near the level of 1.2100, waiting for the release of the United States inflation report.Analysts expect the consumer price index to show a decline from 9.1% to 8.7% (YoY), while core inflation, which does not take into account energy and food prices, will rise from 5.9% to 6.1%.The growth of any of the indicators will provoke a strengthening of the US dollar, as it implies an even more aggressive tightening of the Fed's monetary policy, especially since the optimistic Non-farm Payrolls published last Friday, as they say, untied the regulator's hands, as it greatly reduced the risks of an economic downturn.So far, analysts assume that in September the Fed will raise the rate by 75 basis points, but the probability of a rate hike by 1.00% is growing day by day.In the UK, meanwhile, the race for the post of prime minister continues. To date, Liz Truss is leading among the two Tory candidates, promising to reduce taxes for citizens and businesses.The Bank of England announced a recession of the British economy, which could last for 15 months and announced the continuation of the rate hike cycle.We believe that GBP/USD will return to the downtrend and suggest placing a pending sell orderSell-limit 1.2120 take-profit 1.1950 stop-loss 1.2180
Aug 10, 2022 Read
Forex analysis and forecast for USDCAD for today, August 10, 2022
USD/CAD, currency, Forex analysis and forecast for USDCAD for today, August 10, 2022 On Wednesday, USD/CAD is consolidating near the 1.2900 level. Investors are in no hurry to form new positions, preferring to wait for the release of the US inflation report.According to Bloomberg forecasts, the consumer price index is expected to show a slight decline while core inflation (excluding energy and food prices) will rise.Today's report is important for the Fed as it will help determine the effectiveness of the selected mechanisms of influence on inflation, as well as help identify the prospects for the monetary policy of the regulator.On Friday, reports of the US and Canadian labor markets were published. If in the United States the data showed an unexpected improvement, then in Canada in July employment decreased by 30.6 thousand jobs with a forecast of growth of 20.0 thousand. The unemployment rate remained the same – 4.9%, but the share of the labor force in the total population decreased from 64.9% to 64.7%.Technical analysis for USD/CADOn the chart of days, the Bollinger Bands Indicator is in a stable flat.The MACD histogram crosses the zero level from the bottom up and moves into the positive area, which allowed the indicator to form a weak buy signal.The stochastic oscillator is declining.Technical indicators, graphical and candlestick patterns do not give unambiguous signals. Before the news is released, it is unlikely that the movement of currency pairs in the market will become more active.If the price is fixed above the key resistance of 1.2900, we open long positions in the direction of 1.3000. We will set the stop loss at 1.2850.In case of a rebound from 1.2900, you should wait for the breakdown of support 1.2850 and only then open sales with a take profit of 1.2750. We will make a stop loss for 1.2900.
Aug 10, 2022 Read
Message sent successfully.
We will contact you soon!