FOREX Fundamental Analysis for November 14, 2023
The market is waiting for the release of the US inflation report (13:30 GMT) and allows us to speculate on the prospects of forex currency trading. In 2023-2023, the dollar was the unchallenged leader among the currencies of developed countries, but in 2024, its position may shake a lot. True, there were such talks in the current year, but rumors about the death of the greenback turned out to be greatly exaggerated.
Investors expected that the ECB would start raising the rate later, and when all the acts of monetary restriction of the Fed will be already taken into account by the market, the European regulator will remain in the center of attention, bearing possible preferences for the euro. However, the war in Ukraine interfered in the calculations, and the European Central Bank had to end the tightening cycle around the same time as the Fed.
However, the Fed has fought inflation quite well, raising rates by 425 basis points in 2022 and 100 bps in 2023. Moreover, the Fed, fearing a repeat of the mistake of the 1970s, plans to leave rates at high levels for a long time. All this supported dollar buyers.
Theoretically, each 100 basis point restriction reduces the economy by 1%. The time stretch carries the effect into the next year. This means that in 2023, the US GDP was to miss 4%. In fact, the economy added 2.9% (y/y) and GDP growth was 4.9% in the third quarter.
This was made possible by the public's accumulation of fiscal stimulus from the COVID-19. pandemic, which provided strong support for domestic demand. But everything comes to an end sooner or later, and this will definitely not be the case in 2024. The United States economy could shrink seriously, and the dollar would lose such an important driver as "American exceptionalism".
At the same time, the Eurozone has managed to avoid recession, China is gradually recovering, and the end of the crisis in the Middle East will adjust energy prices. In short, everything is just beginning for the euro, and if we take into account the growing demand for risky assets and the next expectation of a dovish reversal of the Fed, we can assume a good growth of EUR/USD. I believe that the pair will rise to 1.095; 1.105, and in 9 months - to 1.12. Keep buying in priority.