EURUSD: the European currency caught a lifeline

EUR/USD, currency, EURUSD: the European currency caught a lifeline

FOREX fundamental analysis for September 6, 2022

The dependence of the European Union on Russian gas has become a major factor in the EUR/USD exchange rate. Traders have stopped paying attention even to such important news as the U.S. labor market report, meeting of the Fed or the ECB. The stoppage of Nord Stream brought the pair down to 20-year lows. However, despite the constant blackmailing of the Kremlin, Europe is looking for alternative fuel supplies and coping with the preparations for the winter season. Gas prices are gradually falling. This makes the prospects of the single currency not entirely hopeless.

Notably, but it is the cost of "blue fuel" that not only depends on the possibility of raising the rate at the September ECB meeting, but also the size of monetary easing. It is expected that in the current environment the regulator can afford a rate hike of 75 basis points at once, without fear of further recession.

Forex trading has become heavily dependent on the major currency risk. Investors are discussing two short-term scenarios for the dynamics of trading instruments. The first, negative from Citi supposes the continuing growth of energy prices, cold winter, inflation takeoff and total collapse of the Eurozone economy. The other scenario suggests an expansion of fiscal stimulus, the suspension of derivatives trading and marginal prices for fuel supplies from Russia. Today it is quite possible that the Kremlin overestimates the possibilities of gas blackmail, and the European currency has already taken into account all the consequences of stopping supplies from Russia. But there is no possible "hawkish" surprise in the euro quotation.

Yesterday the European currency was supported by the British sterling. One of the drivers of the pound decline were fears that the post of the British Prime Minister will be taken by Liz Truss. After her victory, selling on rumors gave way to buying on facts.

However, in the medium term, the EUR/USD scenario remains bearish. The Eurozone's problems will not be solved overnight, and the energy crisis brings a long trail of problems while the United States continues to tighten financial conditions and successfully fight rising inflation. The divergence of monetary policy rates of the regulators and the pace of economic growth will not allow EUR/USD to change the direction of the trend.

Stabilization of gas prices and expectations of hawkish surprises from the ECB allow short-term purchases of EUR/USD from 0.995 with targets at 1.000 and 1.002. If the "bulls" fail to get a grip on 0.995, we expect selling signals in the direction of 0.97.

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EUR/USD: markets return to stability
EUR/USD, currency, EUR/USD: markets return to stability Fundamental analysis FOREX for March 20, 2023Three large credit institutions in the United States declared bankruptcy in March and First Republic bank needs urgent financial aid. This indicates the serious problems of the financial system, and the problems are global, since the banking crisis is spreading around the world very quickly. Credit Suisse of Switzerland went into a downward spiral, but it will be bought by the largest UBS, but only under the financial guarantees of the Government and the National Bank of Switzerland. All this is reflected in forex trading and, in particular, in the dynamics of EUR/USD, which returned to strengthening at the end of the week.Meanwhile, the OSER is calling on the Fed to raise rates and considers the ECB's 50-basis-point monetary tightening to be absolutely the right decision. In this regard, the markets have returned to the belief that the Fed will raise rates by 25 basis points on March 21-22, although last week it was expected that the US regulator would pause in tightening monetary policy after the banking sector crisis.Assumed dynamics of the federal funds rateIt should be noted that two opposing views are now strong in the market. A part of investors believe that the recession of the US economy is much closer than expected, so the Fed's "dovish" U-turn will come as soon as this year. Another part believes the regulator will raise the rate to 5.5%, or even 6%, and the U.S. economy, despite problems in the banking sector, will avoid recession.Forecasts for the U.S. economyNevertheless, investors are gradually moving away from forex trading on the news and switching to monetary policy divergence and macroeconomic reports. At the moment the ECB's monetary restriction rate is higher than the Fed's, which is a positive factor for EUR/USD, so we continue to buy the pair towards 1.0755 and 1.0825.
Mar 20, 2023 Read
EUR/USD: The European Central Bank has not deviated from its plan
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Mar 17, 2023 Read
USDJPY: Bank of Japan hopes for a decline in inflation by the end of the year
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Mar 16, 2023 Read
Forex analysis and forecast for GBPUSD for today, March 16, 2023
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Mar 16, 2023 Read
EUR/USD: the Eurozone was first hit by the banking crisis
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Mar 16, 2023 Read
Forex pair EURUSD: The Fed cedes leadership to the European Central Bank
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Mar 15, 2023 Read
EURUSD: Will the US banking crisis spill over to Europe?
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Mar 14, 2023 Read
EUR/USD: buyers are confident in the European currency
EUR/USD, currency, EUR/USD: buyers are confident in the European currency FOREX Fundamental analysis for EURUSD on March 13, 2023The news about the bankruptcy of SVB bank overshadowed the effect of the United States labor market release, although Non-farm Payrolls was not bad at all. The 311,000 jobs created in February spoke strongly about the steady recovery of the US economy, despite the Fed's hard line.At the same time, according to NFP, the unemployment rate rose to 3.6% for the period and average wage growth fell to 4.6% from 5.9%.US Employment DynamicsOn Friday, the Fed's rate outlook changed. Derivatives raised the probability of monetary tightening by 25 basis points from 30% to 60%, setting a rate ceiling of 5%, well below Thursday's forecast of 5.7%. What's more, investors are once again discussing the dovish reversal of the regulator. In a word, the news for the dollar is not so pleasant.At the same time, positive signals keep coming from the Eurozone. Gas prices went down by 90% compared to the last summer, which has a stimulating effect on the economy of the Euro bloc. Some experts expect some GDP growth of 1.6% for the year, while earlier it was expected a decline by 1.3%.Dynamics of expectations of Fed rate reduction by the end of 2023If we add to that the expectations of the increase of the deposit rates by 50 basis points in March, the growth of EUR/USD looks quite reasonable. Our forex trading strategy implies buying when the pair fixes above 1.0575. Apparently, it's time for the bulls.
Mar 13, 2023 Read
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