FOREX Fundamental analysis for EUR/USD on April 11, 2024
Even the Fed makes mistakes sometimes. The rapid slowdown in inflation in 2023 has given FOMC members a sense of confidence. They were ready to ignore the acceleration in prices in January-February, arguing that the overall picture has not changed. In their opinion, the trends in CPI and PCE remain "bearish", and eventually inflation will reach the target level of 2%. However, the third consecutive impulse of inflationary growth threatens to change the positioning of the Fed and cut off the oxygen to buyers of EURUSD.
In March, consumer prices jumped to 3.5%, and core inflation froze at 3.8%. The disinflation process is clearly slowing down, forcing investors to change their forex trading methods. If earlier everyone was concerned about the date of the start of the Fed's monetary expansion cycle, now it is whether monetary policy easing will begin at all in 2024.
Before the publication of US inflation data, market expectations for the start of monetary expansion in June were estimated at about 50%, but after the release they fell to 18%. Derivatives don't really believe in July either, preferring September. Expectations regarding the extent of the Fed's monetary policy easing have decreased from 65 basis points to 45 this year. 80 basis points are forecast for the ECB. And it is not surprising that with such a divergence of the monetary outlook, the EURUSD is falling
The European Central Bank is doing everything possible to confirm its readiness to begin easing in June. That would be a compromise between the hawks and the doves. However, by summer, according to Bloomberg estimates, consumer prices in the Eurozone may fall to 1.8%, and economic growth will remain weak. The ECB will find itself in a difficult position. He will either be forced to cut rates at each meeting, or make a deeper cut at one of the meetings. Wouldn't it be better to start monetary expansion in April?
Investors' attention has finally shifted from the start date to the speed of monetary policy easing. This is the exact opposite of the views of 2015-2016. Nine years ago, the Fed made it clear that it was going to raise rates, but constantly postponed this decision due to the weakness of the global economy. In the end, rates rose only twice - in December 2015 and in December 2016. The US dollar initially grew on expectations of monetary restriction, but then lost its position in forex currency trading.
The strength of the American economy is so great that the Fed is forced to postpone rate cuts to a later period. The US dollar is confidently leading among the G10 currencies, although at the beginning of the year everyone predicted its rapid collapse.
We expect the pair to continue falling. Even if US inflation starts to accelerate in April, the Fed will need additional data. We hold short positions from 1.0845 and periodically strengthen them on upward pullbacks.
EUR/USD Technical analysis
The EUR/USD downtrend continued yesterday. The pair moved from the trend boundary of 1.0863 - 1.0850 to the Target area of 1.0729 - 1.0704. Today, sellers are likely to try to break lower. If the bears succeed, then the next target will be the Golden Zone 1.0645 - 1.0636. If buyers do not allow the quote to break below the target area, then we will wait for the development of a corrective movement.
The nearest resistance area from which it will be possible to look for entry into short positions again is 1.0819 - 1.0810