FOREX Fundamental analysis for EUR/USD on March 6, 2023
The main driving force for the dollar is the state of the U.S. economy, which is difficult to determine at the moment. The positive macro-reporting from the USA shows that the aggressive policy of the Fed does not increase the risk of recession. Moreover, economic indicators are on the rise.
There is some analytical confusion between "hard" data, such as inflation, unemployment, retail sales etc. and "soft" data, i.e. indicators based on surveys. The "hard" data brings the most surprises.
The dynamics of economic surprises in the U.S.
Judging by the not always logical market behavior, investors do not know how to behave. While previously positive economic news put pressure on stock indices and, through currency correlations, on risky assets, lately any positive news is perceived by the S&P 500 as a growth factor, as investors see that a rate hike is not destroying the U.S. economy.
It is possible that the effects of monetary restriction will begin to be felt only after a certain rate threshold, and so far the Fed has not reached it, or maybe the economy needs a long time lag to fully work out the actions of the regulator.
Whatever it is, but without U.S. labor market data it will be hard to decide on the prospects for forex trading. Bloomberg predicts 215,000 jobs, but the bank may be wrong.
U.S. jobs dynamics
Jerome Powell's testimony to Congress and Non-farm Payrolls are expected to push the volatility of currency pairs to the highest levels. For EUR/USD there is a high probability of false-breaks of the consolidation range boundaries at 1.0575-1.0675. With such inputs it is better to either stay out of the market or trade with small targets, being able to turn over in time.