FOREX Fundamental analysis on September 5, 2022
The Non-farm Payrolls released on Friday caused mixed reactions among traders. During the month the U.S. economy managed to create 315 thousand jobs against the forecast of 300 thousand, but the unemployment rate for the reporting period, strangely enough, rose from 3.5% to 3.7%. After the release, EUR/USD moved to a strengthening, which did not last long. The news about the complete shutdown of Nord Stream was a blow below the belt for the single currency.
The EU is filling up its gas storage facilities at an accelerated pace, but there may not be enough fuel for 2.5 to 3 months. European Union plans call for consumers to cut demand by 15 percent, although not all countries are willing to take the step, which could lead to discord within the bloc and exacerbate the economic downturn.
Forex currency trading depends on the direction of investment flows, which are largely determined by the Central Bank's monetary policy and trade balance indicators. Rising gas prices in Europe are such a negative factor for the economy that an aggressive ECB rate hike (if the Bank decides to do it) will not be noticeable against this background. The ratio of exports to imports in Germany has plummeted to the minimums of the 1980s. The current account had long kept the European currency afloat. Now the euro has lost this support as well.
Trends in Germany's terms of trade
The U.S. labor market report showed that it has become easier for companies to hire employees, which means that employers do not have to raise wages. This is a pretty strong factor in curbing inflation, which will allow the Fed to lower the speed of monetary restriction, which will cool the fervor of dollar buyers, but it is unlikely to help EUR/USD.
The shutdown of Nord Stream and the rising cost of gas put the ECB's monetary policy on the back burner. In this regard, the September rate hike of 75 basis points will not be perceived as a factor of euro appreciation, but as an additional risk of a worsening recession. ECB "doves" get an extra chance to insist on a softer hike in borrowing costs
The attempt to go long ended in a loss for traders, so we return to the previously indicated target of 0.97. For the buyers the key resistance is 0.9950. If the pair is able to consolidate above this level, then it will be possible to look for the small longs again. But so far, only sales.