FOREX Fundamental analysis for EUR/USD on April 18, 2024
"Don't hold losses and let profits grow," is one of the main tenets of forex currency trading. The rule is simple, but many traders violate this principle. As soon as it starts to get hot, they close deals to lock in the profits they make.
The results of the auction for the placement of 20-year US Treasury bonds, as well as talk that other central banks may follow the Fed and keep rates on a plateau, became the drivers of the rebound of the EURUSD pair from the level of five-month lows.
The main factor in the strengthening of the US dollar against other forex currency indices is the difference in monetary policy rates between the Federal Reserve and other central banks. Due to the strength of the American economy, inflation in the United States has started to rise, while in other countries this is not happening. This has led to rumors that the Fed will keep rates high, while other Central banks will begin a cycle of monetary expansion, which will lead to a fall in their currencies.
In addition, the increase in the yield of treasuries also strengthened the position of the US dollar. At the same time, the slowdown in consumer price growth in Britain has sown doubts in the traders' camp. The futures market shifted the start date of policy easing by the Bank of England to November, and some investors began to assume that the Central Bank would take a second step in 2025. This strengthened sterling's position, and its strengthening dragged the single currency along with it.
However, ECB officials have already decided to lower the rate. Even the famous "hawk" Joachim Nagel called June the month of the start of the mitigation cycle. His colleagues are more inclined to July, but there are practically no opponents of the "dovish" reversal in the ECB Council. It is clear that other economies besides the United States are unlikely to be able to withstand high rates. Therefore, monetary expansion in Europe will lead to a further fall in the euro and the pound.
Market skeptics point to a slight decrease in the profitability of treasuries. But it is known that there is no trend without rollbacks, and this decline is probably a temporary phenomenon. Demand for 20-year securities increased more than expected, which affected the value of bonds and their yields. Nevertheless, there are quite a lot of factors in favor of a strong dollar, and the downward trend of EUR/USD will recover, especially since the upward correction of the pair allows it to be sold at a good price
After short-term EURUSD longs from 1.065, we move on to medium-term and long-term sales to rebound from the resistance at 1.07 and 1.073.
Technical analysis for EUR/USD
EUR/USD is working out an upward correction of the downtrend. As a result, the pair recovered to the resistance (A) of 1.0693 - 1.0685. Please note that the resistance area has not been broken through, so from here you can sell well in the direction of the minimum of April 16. If the minimum is broken, then the next target is Target Zone 2 within 1.0561 - 1.0544.
If buyers are able to break above the resistance (A), then the correction is likely to continue to the next resistance area (B) 1.0739 - 1.0727. The trend line also runs here. From here we will also consider sales. The goal remains the same.