Fundamental analysis for FOREX on September 27, 2024
The price takes everything into account, but it is not always easy to understand the market mood when stocks show stable growth and bonds are concerned about the resurgence of inflationary risks. This leads to instability of the EUR/USD exchange rate, which fluctuates in search of a direction until important data on employment in the United States are received.
The effectiveness of the Fed's soft policy depends on weaknesses in the US economy. The Federal Reserve has begun a cycle of lowering interest rates ahead of events in order to support current economic growth and prevent a deterioration in the labor market. The Fed's forecasts include two additional rate cuts in 2024, as well as a slight increase in unemployment.
However, economic data suggest the opposite. Applications for unemployment benefits fell to the lowest level in four months, orders for durable goods exceeded expectations, and GDP was revised upward. It is noteworthy that the US economy is showing strong performance, despite the strict policy of the Fed in 2022-2023. Fiscal incentives and fixed mortgage rates supported demand and contributed to sustained growth.
There is an opinion that the Fed's rate cuts may not immediately revive lending, even if they are immediately reduced by 100 bps. However, the drop in mortgage rates to a minimum in two years indicates that Americans are actively refinancing loans. This could lead to GDP growth and accelerated inflation, which raises concerns among investors in treasury bonds and supports a bearish EUR/USD sentiment.
At the same time, the stock market is more optimistic, believing that the Fed will be able to avoid a recession and keep inflation under control. Stocks continue to rise, and the S&P 500 index is updating highs, which stimulates demand for risky assets and supports the growth of EUR/USD.
When the equity and bond markets give opposite signals, it is difficult for major currency pairs such as EUR/USD to find a clear direction. This uncertainty is likely to persist until the release of US labor market data for September. In such a situation, the optimal forex trading strategy may be to sell EUR/USD with an increase to 1.121-1.124 and buy with a decrease to 1.108-1.111.
EUR/USD Technical analysis
After unsuccessful attempts to break through the support area, EUR/USD quotes are growing and have reached the first target - 1.1167. The second target of buyers is the maximum on September 25th. If the pair holds even higher, it will be able to reach the upper Target zone of 1.1279 - 1.1254 in the future.
If EUR/USD breaks down the support area, then the downward correction may continue to the trend boundary of 1.1088 - 1.1075. From here, you can also search for entry into long positions.