FOREX Fundamental analysis for EUR/USD on November 28, 2024
Investors' views on the implementation of the election promises of the new US administration are becoming increasingly skeptical. These doubts, combined with the end of the month and the correction of portfolios, as well as "hawkish" statements by ECB representatives, allowed the euro to go on the offensive. Even favorable economic data from the United States and the unstable political situation in France could not completely knock down this momentum.
Donald Trump's threat to impose 25% tariffs on imports from Mexico and Canada has raised doubts. About 62% of oil supplies to the United States come from these countries, while the American oil industry has adapted to processing heavy rather than light grades. The Fed's study showed that for the sustainable profitability of the industry, the price of WTI in the region of $ 65 per barrel is needed, and for increasing production — $ 89. The implementation of Scott Bessent's plans to expand oil production by 3 million barrels per day. It could bring down prices to $50, which, contrary to expectations, would hit the budget, driving the deficit to 7-12% of GDP by 2034, instead of the promised 3%.
Rebalancing portfolios and strengthening the euro
Doubts about the feasibility of US economic initiatives are forcing investors to reconsider forex trading strategies. The correction of portfolios at the end of the month weakens the dollar, while contributing to the growth of the EUR/USD pair. Barclays emphasizes that the strengthening of the dollar makes foreign assets more accessible to American companies, which stimulates greenback sales.
US economic data and pressure on the dollar
Despite positive macroeconomic indicators, such as the growth of the base PCE index by 0.3% mom (2.8% yoy), the expansion of US GDP in the third quarter by 2.8% and the minimum applications for unemployment benefits since February, this did not bring success to the "bears" in EUR/USD. The futures market estimates an 85% probability of maintaining the Fed rate at the next meetings, which curbs the appetite for the dollar.
Euro support: Schnabel's statement and inflation expectations
The statement by Isabelle Schnabel from the ECB on the need for caution when lowering the deposit rate strengthened the euro's position. She noted that the neutral rate level is in the range of 2-3%, which reduced the forecasts of monetary easing from 150 to 146 bps against the background of expectations of rising inflation in Germany and the EU. This could push the euro above the $1.06 mark.
Trading Strategy
Despite the short-term growth potential of the euro, the long-term prospects for EUR/USD remain ambiguous. The divergence of economic growth and the attractiveness of American assets play into the hands of the bears. Resistance levels around 1.0615 and 1.071 may be suitable points for forming short positions.
EUR/USD Technical analysis
Yesterday, EUR/USD changed its short-term trend to an upward one. Buyers broke through the resistance area (B) 1.0484 - 1.0470 and gained a foothold higher. Now the main goal of strengthening the pair is the upper Target zone of 1.0636 - 1.0608.
At the moment, the price is being adjusted, and as part of the correction, it may test the support area (A) 1.0495 - 1.0486. After the support test (A), we will look for entry into long positions with the first target at 1.0536, the second target near yesterday's high. The trend boundary is shifting to 1.0449 - 1.0435.