FOREX Fundamental analysis for EUR/USD on August 13, 2024
The world of finance is constantly changing. The question is how much forex currency trading will stir up after the release of the US inflation report, given the significant changes in the political and economic environment. After the events of Black Monday, investors are increasingly concerned about a possible recession, and their attention is focused on how quickly the Fed can ease monetary policy. At the same time, Kamala Harris is fighting a fierce battle with Donald Trump, which has significantly weakened the market's confidence in the Republican's victory in the elections in November. However, for EUR/USD, inflation still plays a key role, since it gives an idea of possible actions by the Fed in the future.
The euro is facing a number of problems, including the weakness of the European economy, the consequences of the political crisis in France, a possible increase in energy prices due to conflicts in Eastern Europe and the Middle East, as well as the ECB's intention to gradually reduce the rate. According to a Bloomberg survey of experts, it is expected that by December 2025 the indicator will decrease to 2.25%.
Despite these difficulties, EUR/USD is trying to overcome the upper limit of the short-term consolidation range of 1.088-1.0945, which may be the beginning of an uptrend. The key factor here is the market's expectations for a Fed rate cut to 3% over the next 12-18 months. As the Fed plans to ease monetary policy, this may lead to a weakening of the US dollar, and many investors are wondering if it's time to start selling the greenback now.
The Fed was able to anchor inflation expectations by tightening monetary policy and maintaining the rate for a long time. at the level of 5.5%. According to a survey by the Federal Reserve Bank of New York, consumers lowered their expectations for inflation over the three-year horizon from 2.9% to 2.3% in July, the lowest level since the start of accounting in 2013. However, can we say that inflation has been defeated? Unlikely.
If the market believes in the return of low inflation, why does it not expect the federal funds rate to fall below 3%? Such high rates have not been observed since 2008, the time of the global economic crisis.
Investors are afraid of a recession, but they believe in a change in the inflationary regime, and therefore the data on the consumer price index (CPI) remains important. If the CPI unexpectedly rises above the expected 2.9%, this could lead to an increase in Treasury bond yields and a strengthening of the US dollar.
However, the EUR/USD rally before the important publication of inflation data indicates that traders expect the disinflationary trend to continue, which would give the Fed the opportunity to more actively ease policy. It makes sense to take a risk and buy a pair on a breakout of the resistance of 1.0945, but it should be remembered that forex orders from large sellers may be located at the levels of 1.097 and 1.1.
EUR/USD Technical analysis
EUR/USD has reached the first growth target within the short-term uptrend - the 1.0939 mark. If the pair can gain a foothold above this level, then growth is likely to continue towards the next target - 1.1008. If sellers can hold the 1.0939 level, then a second correction to the support area 1.0882 - 1.0870 will follow.
Support is the boundary of the trend. Therefore, while the asset is trading above this zone, we will consider long positions when confirmation signals appear.