FOREX fundamental analysis for EUR/USD on November 8, 2022
EUR/USD is trading near parity amid a weakening dollar after last Friday's Non-farm Payrolls release.
The October labor market report from the United States caused mixed reactions among traders. If we are guided by the number of created jobs, the indicator was 261 thousand, which is better than the forecast of 250 thousand. If we consider the unemployment rate, then during the month it rose from 3.5% to 3.7%. In addition, average hourly earnings fell from 5.0% to 4.7%.
The markets are used to a strong dollar. News that would have sent the dollar soaring higher a few weeks ago is now barely acceptable to investors. The continuation of the uptrend of the American currency now requires shocking data, which has not been released yet. This indicates that the EUR/USD downtrend has entered a maturity phase.
The main drivers of the pair's decline were the divergence of the monetary policy of the ECB and the Fed, the demand for protective assets, as well as the high recession risk in the Eurozone economy. By the end of the year, the significance of these factors has noticeably declined.
In addition, Jerome Powell has recently announced that the Fed might reduce the pace of monetary restriction, while Christine Lagarde can not afford it, as European inflation is higher than American and the ECB will have to raise rates, despite the threat of an economic slowdown.
Another strong factor supporting the euro was the reduced threat of an energy crisis. Gas prices are falling, gas storages are being filled and warm winter temperatures are encouraging. Against this background the industrial production in Germany is increasing and for the first time in the last three months we can see the improvement of the investors' mood. More importantly, recession risks are not as dire as they were a month ago.
Of course, we should not forget about the mid-term elections in the United States, the results of which will strongly influence the dollar. It is believed that the victory of the Republicans will weaken the dollar. But even without it the demand for risky assets in the market is noticeable.
We can say that the American currency's trump cards have been shaken up, which will allow EUR/USD to go into consolidation in the medium term. However, this week there is a report on inflation in the U.S., which may introduce adjustments to forex trading methods. We will remain out of the market until the release.
We believe that the strengthening of EUR/USD has a speculative nature and soon the pair will return to the descending trend determined by the fundamental technical analysis according to John Murphy.
Sеt up a sell order for EUR/USD
Sell-limit 1.0050 take-profit 0.9800 stop-loss 1.0120.
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