FOREX Fundamental Analysis for EUR/USD on September 25
The Eurozone is losing to the United States on all fronts. While the Fed can afford to continue the rate hike cycle, for the ECB each act of monetary restriction causes tangible damage to the Euro bloc economy.
Eurozone business activity leaves much to be desired. In September, the composite index failed to rise above the critical level of 50 p. If we take the situation of the Eurozone countries, many of them are worse off than the UK, not to mention Japan, and even more so, the US. Under such conditions EUR/USD is unlikely to return to growth.
The United States economy coped with the aggressive tightening of financial conditions from the Fed. But will the dollar be able to overcome new obstacles? Is it rising oil prices, risks of a US government shutdown, strikes in the auto industry and student loan payments? According to Goldman Sachs, these four factors could slow fourth-quarter GDP from 3.1% to 1.3%. And Daco is talking about 0.6%.
If the scenario starts to play out, the United States will lose its exclusivity and EUR/USD could return to recovery, provided that things do not get worse in the Eurozone itself again.
Perhaps China will help the Old World? Beijing intends to reach 5% GDP growth. This would be good, but the Eurozone itself will have to try harder. First of all, the ECB should abandon monetary restriction. It is possible that the September inflation report will be the basis for this step, as Bloomberg expects CPI to fall from 5.2% to 4.6%. It would seem that the "dovish" rhetoric should hurt the euro. In fact, investors are currently concerned about the Eurozone economy much more than inflation.
I believe that many negative factors are already taken into account in EUR/USD quotes. The pair has been falling for 10 weeks in a row and it is time for an upward correction. However, catching "falling knives" is not the best method of forex trading. We will consider buying when the price fixes above 1.067. It is quite risky to open longs now without any signs of reversal.