FOREX Fundamental analysis on August 26, 2022
The "bulls" of stock indices and risky assets continue to flee the market, not risking sitting out of position during Jerome Powell's speech. The S&P 500 retreated by 4% from August highs, EUR/USD is in consolidation with a clear advantage of sellers.
Nevertheless, there are still optimists who believe that if the Fed announces a pause in monetary restriction or a reduction in the pace of rate hikes, the dollar will immediately collapse, and stock indexes and risks will soar. Perhaps this would be the case in conditions of low inflation, but now the Fed will go further, despite possible labor market problems and rising unemployment. The regulator is tightening financial conditions and will not abandon this task.
Investors are arguing by 50 or 75 basis points that the FOMC will raise the rate in September, but as the Committee members themselves say, today the answer to this question is akin to a coin toss. Before making a decision, the Fed will analyze the inflation report, labor market data and business activity indicators.
In fact, the size of the rate increase in September is not the most important question. More important is the period of keeping rates at a high level, and here the ECB is unlikely to compete with the Federal Reserve, although, as can be seen from the minutes of the meeting, the members of the Governing Council of the European regulator are very concerned about the collapse of the single currency.
I believe that regardless of Jerome Powell's speech, the medium-term trends of EUR/USD will not change. This means that our forex trading method remains the same - the build-up of short positions opened from 1.002 at the breakdown of the 0.095 and 0.991 supports, if the pair goes above the resistance of 1.003, then we will wait for the completion of the corrective rollback.