FOREX Fundamental analysis for EUR/USD on November 10, 2022
The U.S. inflation report is coming out today. If the consumer prices growth is higher than analysts' expectations, the expectations of the Fed monetary policy easing will be given up, just like the EUR/USD uptrend.
Of course, other drivers also supported the rise in the pair. For instance, the stagnating economy in the Middle Kingdom and the victory of the Republicans in the mid-term elections. However, the latter factor is not so indisputable, because we did not see the victory of the "elephants" over the "donkeys". The Democrats are actively fighting for both the House of Representatives and the Senate. And all is not as good in China as it may seem at first glance. The number of people infected with COVID-19 is growing and has already reached the highs of the last six months.
According to a forecast from Bloomberg in October, consumer price growth will slow from 8.2% to 7.9% and core inflation from 6.6% to 6.5%. That's in annual terms. But the Fed is likely to take months into account as well. And here, core inflation is expected to rise from 0.5% to 0.6%. In other words, there is no reason to change the course of the monetary policy, so a rate increase by 75 basis points in December seems to be the most probable, however investors would not like a softer decision.
Analyzing Jerome Powell's words on revision of the rates' benchmark upward, the analysts assume the target to be 5.0-5.25%. However some experts believe the Fed funds plan is 6.0%. In this scenario, the treasuries yield will rise to 4.6% and pull the dollar with it.
My guess is that if the report shows the same or higher values, EUR/USD will quickly return to the downside. We will enter selling on a break of the support at 0.995. If the report confirms the slowdown in inflation, the pair will go to test resistance at 1.015. Forex trading on the news can bring good profits to traders, but does not exclude significant losses, so traders should not forget about protective orders and deposit load.
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