FOREX Fundamental analysis on September 21, 2022
Christine Lagarde's statement on further ECB rate hikes had no impact on the dynamics of foreign exchange assets. Investors are keeping an eye on the Fed and the main question today is how far the regulator will step - by 75 or 100 basis points?
The main scenario with 80% probability is a 0.75% rate hike. However, the latest inflation report may force the Fed to be more aggressive with its monetary tightening, although it is certainly not enough for a fruitful analysis, and the burden on the economy would be much higher with such a decision.
In this regard, not only the FOMC's interest rate ruling, but also various economic forecasts are of great interest. In particular, the unemployment forecast.
In addition, the Fed will analyze the neutral rate positioning.
As for the European currency, the lack of high quality bonds to bail it out has added to the old problems. Unlike in the United States, only a few countries' bonds are safe-haven assets in the Eurozone. Thus, if demand for German securities outstrips supply, Italian bonds are dumped at any price.
Of course, the 75 basis points from the Fed are already factored into prices, so we may see the dollar selling on the facts today. But, in any case, the upward pullback in EUR/USD will not be very long. Our forex trading strategies will use the rise in the asset for new sales at a better price until the pair consolidates above parity.