FOREX Fundamental analysis for EUR/USD on November 22, 2022
Three main trumps - American exceptionalism, a tight Fed rate and demand for protective assets continue to strengthen the U.S. dollar, so it is premature, in my opinion, to talk about a reversal of the "bullish" trend on the DXY.
Certainly the Fed can slow down the rate of monetary tightening but it can't give up further monetary policy tightening, even though the rate has already risen 375 basis points in 9 months. This is the most aggressive rate hike cycle in forty years. It is clear that the dollar index has recently tested the twenty-year high, holding the lead among other indices of currencies on forex.
The Fed needs more evidence of slowing consumer prices. And, if there is none, the buying of the dollar will resume with renewed vigor. In addition, investors forget that Central Banks are moving in the same fairway, and if the Fed starts to slow the rate hike cycle, then other central banks will not rush into monetary restriction either.
Deutsche Bank, however, believes that the main driver of the greenback's strength this year has been an increase in demand for protective assets. The Bank is not sure there will be as much turmoil in 2023 as there has been this year, and believes the DXY has peaked. However, how can we dismiss the very serious risks of a global economic recession, a war in Ukraine, tensions around Taiwan and other hot spots? All of these could shoot up at any moment and lead to losses for optimist traders.
The trumps of the dollar remain in force, so we should not count on a rapid growth of EUR/USD. If the pair could not consolidate above 1.0265, the probability of decline to 1.015 is growing. We continue to hold the sales formed from 1.033.
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