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.
GBP/USD trading idea on January 15, 2025On Wednesday in the Asian session, GBP/USD shows a slight decrease, trading near the level of 1.2200. The pound remains near multi-month lows, due to the fall in the value of British government bonds and weak macroeconomic statistics, which increase the likelihood of further monetary easing by the Bank of England.Investors are evaluating the UK inflation data released this morning. In December, the consumer price index increased by 2.5% year-on-year, which is lower than the forecast of analysts who expected growth to 2.7%, and lower than the November figure of 2.6%. On a monthly basis, inflation increased by 0.3% against 0.1% in November. Core inflation, excluding volatile categories such as food and energy, increased by 3.2% year-on-year compared with the previous value of 3.5%. These data may give the Bank of England grounds to resume interest rate cuts in order to stimulate the economy and mitigate the effects of the new government's tax reform. Sarah Breeden, Deputy Governor of the Bank of England, noted last week that current macroeconomic data support the idea of a gradual rate cut. In this regard, UBS analysts expect that in February the British regulator may continue the cycle of monetary expansion.Additional pressure on the pound is exerted by the crisis of the UK debt market. The yield on 30-year bonds has reached its highest in 26 years, raising concerns about the country's fiscal sustainability. Investors are actively selling off British bonds amid rising government debt, slowing economic growth and ongoing inflation risks. Rising yields have already increased the government's debt service costs, which may lead to the need for higher taxes and government spending cuts. This worsens the prospects for the British economy and increases pressure on the GBP/USD pair.Pending GBP/USD orders:Sell Stop at 1.2160 with a target at 1.1900 and a stop loss at 1.2250. 
AUD/USD analysis on January 15, 2025By the middle of the week, AUD/USD rose to 0.6192, reflecting cautious optimism in the market.At the same time, traders are cautious ahead of the publication of December inflation data in the United States, which may affect the prospects for interest rate cuts by the Federal Reserve in 2025.Earlier, the Australian dollar partially recovered its positions after the reaction of the US dollar to the statistics on the producer price index.Key events for AUDOn Thursday, Australia will publish an employment report, which is an important indicator of the state of the labor market. These data are crucial for adjusting the forecasts for interest rate dynamics of the Reserve Bank of Australia (RBA).At the end of the month, fresh inflation data for the fourth quarter of 2024 will be published. These indicators will play a key role in shaping expectations regarding the upcoming RBA meeting and its decisions on borrowing rates.Currently, investors estimate the probability of a rate cut at the February RBA meeting at 70%. In the case of such a scenario, the rate may decrease by 25 basis points from the current 4.35% per annum. The market has already taken this opportunity into account in prices.Nevertheless, the continuing uncertainty about the future policy of the RBA and the target rate level deters investors from taking active action, limiting the AUD's growth potential.AUD/USD technical analysis for todayOn the 4-hour chart, the AUD/USD pair is forming an upward wave with a target at 0.6211. It is expected that this level will be tested today, after which a decline to 0.6161 is possible. A consolidation zone is likely to form around this mark. If the pair breaks through this zone up, a correction to 0.6290 may begin. In case of a breakdown downwards, a new wave of decline is possible with a target of 0.6116. The MACD indicator supports this scenario, as its signal line is below the zero mark, but pointing upwards.On the hourly chart, the pair is forming a wave of growth towards 0.6211, which is expected to be reached today. Then a correction wave to 0.6161 is possible. The Stochastic oscillator confirms this scenario, as its signal line is above the 50 mark and is moving up to 80.ConclusionThe recent recovery of the Australian dollar is being held back by uncertainty surrounding the RBA's future decisions. Key internal data, including employment and inflation figures for the fourth quarter, significantly affect market expectations. The main forex indicators point to the short-term growth potential of AUD/USD, however, further success of buyers will depend on clarity regarding the RBA's policy and general economic conditions. 
During the Asian session on January 15, NZD/USD tends to stay above the 0.5600 mark, receiving moderate support from statistics on the New Zealand Institute of Economic Research (NZIER) business confidence index. In the fourth quarter, the indicator increased by 16.0% after the previous decrease of -1.0%.An additional growth factor for the New Zealand currency was data on the construction sector and China's foreign trade. The number of building permits issued increased by 5.3%, recovering from a decrease of 5.2% in the previous month. China's exports grew by 10.7% year-on-year after rising by 6.7%, exceeding the forecasted 7.3%, while imports increased by 1.0%, which also exceeded expectations. Against this background, China's trade surplus increased from $97.44 billion to $104.84 billion in December, which is higher than the projected $99.8 billion.The signing of the Comprehensive Economic Partnership Agreement between New Zealand and the UAE was also a significant event. This agreement is aimed at expanding trade and investment between the two countries, with a projected growth of up to 5.0 billion dollars by 2032.The pressure on the US dollar yesterday was exerted by data on industrial inflation, which caused a revision of expectations for the Fed rate. In December, the annual production price index rose to 3.3% from 3.0% in November, but was lower than the projected 3.4%. The monthly figure dropped to 0.2%, which is worse than expected at 0.3%.Today, investors' attention is focused on December data on inflation in the United States, where it is expected to rise from 2.7% to 2.9%, while the base index is projected to remain at 3.3%.On the daily chart, the Bollinger indicator shows sideways dynamics with a wide price range corresponding to the current market activity. The MACD and Stochastic give a steady buy signal, supporting bullish sentiment.The formation of long positions is recommended after the breakdown and consolidation of the price above the level of 0.5607 with a target of 0.5700 and a stop loss at 0.5571.A pullback from the 0.5607 level downwards, followed by a breakdown of the 0.5571 support, can serve as a signal for sales. The target will be 0.5511. We will place the stop loss at 0.5607. 
FOREX Fundamental analysis for EUR/USD on January 15, 2025Financial markets are gradually recovering from the initial shock caused by a series of unexpected events. The initial panic provoked by news of Trump's massive tariff plans, fears of the spread of the British debt crisis, and Bank of America's forecast of a possible Fed rate hike in 2025 is beginning to give way to a more balanced assessment of the situation. This is reflected in the corrective movement of the EUR/USD pair.Particular attention is drawn to the fact that Trump is in no hurry to refute Bloomberg's information about the phased introduction of tariffs, unlike his reaction to the Washington Post publication. Such silence is interpreted by the market as an indirect confirmation of information, encouraging speculators to reduce long positions in the dollar.On the British front, Rachel Reeves is trying to calm the markets by emphasizing that the sharp rise in government bond yields is not a direct result of government measures. Despite the increased volatility, the Treasury intends to adhere to the established rules of borrowing. This position contributed to the stabilization of the pound and, as a result, the euro.It is noteworthy that the so-called British debt crisis is largely a reflection of the rapid rise in yields on U.S. Treasury bonds. Analysts at State Street Global Advisors warn that overcoming the 5% barrier for 10-year treasuries could trigger a drop in EUR/USD to parity.Despite the stability of the American labor market, historical experience shows that the transition from easing to tightening monetary policy during the year is extremely rare. Since 1994, such a reversal has been observed only once, in 1998, when the Fed was forced to ease policy due to the collapse of Long-Term Capital Management, but then returned to tightening after the situation stabilized.The futures market is currently pricing in one Fed rate cut in 2025 with a second one less than 10% likely, while the ECB is expected to make three or four cuts. This divergence in expectations largely explains the current decline in EUR/USD.The publication of the December US CPI will be a key factor in determining the forex trading strategy. Analysts' forecasts are divided: 39 experts expect growth of 0.3% mom, 32 predict 0.2%. This uncertainty leaves room for both continued correction and resumption of the downtrend.In the short term, the resumption of disinflation may trigger a pullback of EUR/USD to the levels of 1.039 and 1.0445, creating the opportunity to form long positions. However, the loss of the 1.03 level, especially against the background of strong inflation data from the United States, will be a signal for the resumption of sales. 
During the Asian session on January 14, AUD/USD shows moderate strengthening, developing the bullish momentum of yesterday, when the pair was able to retreat from the lows of April 2020. AUD is supported by favorable macroeconomic statistics from Australia.The consumer sentiment index from Westpac Banking Corp., which evaluates the level of confidence in economic activity based on a survey of about 1.2 thousand respondents, decreased by only 0.7% in January compared with a drop of 2.0% a month earlier. In addition, China's strong foreign trade data continues to have a positive impact. China's exports increased from 6.7% to 10.7% year-on-year, beating forecasts of 7.3%, while imports increased by 1.0%, after a decrease of 3.9% earlier. This led to an increase in the trade surplus from 97.44 billion to 104.84 billion dollars, exceeding analysts' expectations of 99.8 billion dollars.Investors also paid attention to Australia's inflation data from TD Securities. On a monthly basis, the consumer price index accelerated from 0.2% to 0.6%, although the downward trend remains from 2.9% to 2.6% year-on-year. The annual consumer price index, published earlier, rose to 2.3% from 2.1% in October, partly due to government subsidies for electricity. The final decision of the Reserve Bank of Australia (RBA) on the interest rate, which will be made after the publication of the quarterly report on January 29, may affect the cost of borrowing in February and become an important factor before the federal elections.The main focus on Thursday will be on the December report on the Australian labor market, where employment is expected to increase by 15.0 thousand compared with 35.6 thousand in November and the unemployment rate will rise from 3.9% to 4.0%.Today, at 15:30 (GMT+2), a report on the US producer price index will be published. If the actual data coincide with the forecast of 0.4% growth in December, the statistics will support the annual growth rate to 3.4%. However, it is unlikely that this change will significantly affect the Fed's plans, which involve two interest rate cuts of 25 basis points each in 2025.AUD/USD technical analysis for todayOn the daily chart, the Bollinger Band indicator is trying to move to a flat state. The MACD indicator shows a confident buy signal, while Stochastic signals a possible oversold Australian dollar in the short term.Trading recommendationsWith a confident break above the 0.6200 level, it is recommended to open long positions with a target of 0.6250 and a stop loss at 0.6178.Short-term sales are possible with a rebound from the 0.6200 level, followed by a breakdown down to 0.6178, with a target of 0.6130 and a stop loss at 0.6200. 
FOREX fundamental analysis for EUR/USD on January 14, 2025Forewarned means armed. The events that unfolded around the publication of the Washington Post on January 6 set the tone for the whole year, charting a difficult path for EUR/USD to parity. Rumors that the new president's team is planning to phase in tariffs of 2-5% per month have seriously hit the US dollar, forcing speculators to get rid of the largest long positions since 2019.If in 2022 and early 2024 the attention of investors and traders in the Forex market was focused on inflation, by the end of last year the focus shifted to the labor market. Subsequent data demonstrating its resilience has re-energized hedge funds and asset managers. Speculators are trying to guess the trajectory of consumer prices, and Donald Trump's policies are a key element in these forecasts.According to economists from the Trump team, the gradual introduction of tariffs will have a lower inflationary effect than a one-time increase in duties on imports from China to 60%, and on goods from other countries to 10-20%. If the CPI and PCE inflation indicators remain stable, the Fed will be able to return to easing monetary policy, which will weaken the dollar. That is why the insiders from the Washington Post and Bloomberg caused such a strong reaction from the EUR/USD pair. According to forecasts by the Commonwealth Bank of Australia, if Trump does not refute these rumors on social media, as it was before, the dollar may continue to lose ground.Despite this, the idea of continuing the EUR/USD downtrend remains relevant on Wall Street, forex hedging is undergoing adjustments. Goldman Sachs predicts a 5% rise in the dollar in 2025 due to "American exceptionalism" and a slowdown in GDP growth outside the United States due to tariffs. The bank expects the euro to decline to $0.97 over the next six months. Deutsche Bank predicts fluctuations of the pair in the range of 0.95-1.05 this year.The path to parity can be different. This could be a rapid drop, as in the fourth quarter, or a trend with deep pullbacks caused by the Trump administration's attempts to balance the imposition of tariffs and inflation control.However, it is not a fact that the phased introduction of tariffs will solve the problem. According to Citi, this approach could lead to multiple disruptions in supply chains and increased inflationary pressures. In the case of an immediate tariff increase, the inflationary spike will be short-term, and its effect will disappear in a year.I remain of the opinion that the growth of EUR/USD in 2025 is inevitable, but it will be difficult to contain inflation in the United States. If the Fed's monetary expansion cycle ends earlier than expected, the pair's pullbacks should be used to sell with targets at 1.012 and 1.00.EUR/USD technical analysisEUR/USD is being adjusted upwards. The resistance area 1.0278 - 1.0269 was tested in the Asian trading session today. In the European trading session, market participants are likely to try to update the maximum of the day. If, after updating the maximum, a false breakdown pattern forms, then it will be possible to consider a short position with the first target at 1.0228, and the second target at 1.0177.If the pair gains a foothold above the Asian maximum during trading, the correction will continue to the trend line of 1.0329 - 1.0315. From this zone, it will also be possible to consider selling with the main goal at yesterday's low. 
An impressive sight is unfolding in the foreign exchange market: the British pound, which had recently shown signs of strength, is now rapidly losing ground. After reaching local highs on January 7, the GBP/USD pair is steadily moving down, approaching the critical mark of 1.2140, where a real battle of bulls and bears may unfold.The catalyst for the current movement is the American economy, which has once again surprised the markets with its resilience. The December labor market data turned out to be truly impressive: the US economy created 256 thousand new jobs, which exceeded the most optimistic forecasts of analysts by almost a hundred thousand. At the same time, even the November figures were revised only slightly – from 227 to 212 thousand, which indicates the stability of the positive trend.The dynamics of wages also paints an interesting picture: despite a slight slowdown in growth – from 4.0% to 3.9% year–on-year and from 0.4% to 0.3% month-on-month - the indicators remain at levels comfortable for the economy. The unemployment rate also pleased investors, dropping from 4.2% to 4.1%.Such strong statistics significantly change expectations regarding the actions of the Federal Reserve System. Previously, the market actively priced in aggressive monetary policy easing, but now forecasts have become much more restrained: only two rate cuts of 25 basis points in the second half of the year. The Fed seems to have taken a pause to assess the potential impact of the new administration's policies on inflationary processes.On the British side of the Atlantic, investors froze in anticipation of important statistics. On Wednesday, the market will closely monitor inflation indicators. Analysts predict a slight decrease in the core consumer price index from the current 3.5% in annual terms. Thursday will bring data on GDP and industrial production for November, where a moderate recovery is expected: by 0.2% and 0.1%, respectively.Of particular interest is the position of the Bank of England, voiced by the deputy head of the regulator, Sarah Breeden. Her recent comments indicate a willingness to gradually reduce interest rates, although the exact pace of this process remains a matter of debate. It is noteworthy that the regulator is already detecting signs of a slowdown in economic activity, which may intensify against the background of tax initiatives of the Labor government.Technical analysis for GBP/USD for todayTechnical analysis paints a bearish picture. The Bollinger Band indicator is expanding, showing an increasing downward momentum. The MACD is confidently signaling sales, and the stochastic oscillator is approaching the oversold zone, hinting at a possible short-term correction.Under these conditions, traders should closely monitor the 1.2100 level: its confident breakdown can open the way to 1.1950, while a rebound and an upward break of the 1.2200 resistance can reverse the trend towards 1.2350. 
Upcoming eventsThis week promises to be full of macroeconomic publications, where the inflation indicators of key economies will take the central place.:- Wednesday: publication of the US consumer price index for December, accompanied by inflation statistics from Sweden, France, Spain and the UK- Thursday: German inflation data- Friday: publication of the harmonized eurozone consumer price index for December and a block of Chinese statistics (GDP, real estate market, retail sales)The key events of the past week and their impact on the marketsChinese foreign trade: unexpected growthChina's December foreign trade statistics exceeded analysts' expectations:- Exports: 10.7% YoY growth (November: +6.7%)- Imports: 1.0% YoY increase (November: -3.9%)It is noteworthy that the export growth may be partly due to the acceleration of purchases ahead of the expected tariff increase.US labor market: unexpectedly strong dataFriday's US employment report significantly exceeded forecasts:- 256 thousand new jobs were created (forecast: +160 thousand)- Unemployment decreased to 4.1% from the previous 4.2%- Wage growth slowed to 0.3% (previously: 0.4%)The data indicate a suspension of the cooling of the labor market, which reduces the likelihood of an early easing of the Fed's monetary policy. The market's reaction was reflected in the strengthening of the dollar and rising interest rates in both the United States and Europe.Inflationary dynamics in ScandinaviaNorway: core inflation dropped to 2.7% (forecast: 2.8%), confirming the disinflationary trend and increasing the likelihood of a rate cut in March.Denmark: inflation rose to 1.9% from 1.6%, mainly due to the underlying effect in the energy sector.Market dynamicsStock marketsGlobal indexes ended Friday with a decline amid rising bond yields:- Dow Jones: -1,6%- S&P 500: -1,5%- Nasdaq: -1,6%- Russell 2000: -2,2%Debt marketStrong data on the US labor market triggered an increase in yields. The yield on 10-year US Treasury bonds rose by 10 bps to 4.76%, exceeding the September lows by 110 bps.Forex market- USD: strengthening amid rising rates- JPY: growth leader despite higher yields- GBP: pressure remains, the EUR/GBP pair is testing the level of 0.84- NOK and SEK: volatile trades with neutral outcome