Fundamental analysis of FOREX on June 28, 2022.
Despite the strong divergence between the rates of monetary policy of the Fed and the ECB, buyers of EUR/USD remain optimistic, expecting a "hawkish" surprise from the European regulator and hoping that the recession of the American economy will force the Fed to pause in tightening monetary policy.
At the same time, the published statistics on orders for durable goods in the United States again forced the S&P 500 to go into the "red" zone, and through the correlation of currencies and indices, supported dollar buyers.
The volume of orders for durable goods increased by 0.7% (mom), showing a strengthening of seven months out of eight. It is possible that rumors of a possible recession will turn out to be somewhat exaggerated, although JP Morgan suggests that the increase in orders is directly related to the increase in the cost of durable goods
Dynamics of orders for durable goods in the USA
Goldman Sachs believes that an economic downturn is inevitable, and the Fed will sooner or later abandon the "hawkish" pressure. The regulator may even have to lower the recently raised rates.
If a month ago, CME derivatives predicted the US federal funds rate at 4.0% in March 2023, now this indicator has been revised to 3.6%. The probability of a 200 basis point rate hike by the end of 2022 has dropped from 74% to 52%. All this reduces investor interest in the dollar, but it should be noted that the weakness of the greenback does not particularly help buyers of the single currency.
Dynamics of forecasts for the federal funds rate
The euro has some potential for growth. Data on consumer prices of the Eurozone countries and the Euroblock as a whole begin to be released on Wednesday. It is assumed that in Germany in June, inflation will rise from 7.9% to 8.0%, in France from 5.2% to 5.7%, in Italy from 6.8% to 7.4%. The composite indicator will rise from 8.1% to 8.4%. Rising inflation may push the ECB to aggressively raise rates. And taking into account the fact that forex currency trading lives solely on expectations, the strengthening of EUR/USD looks logical.
In addition, investors are watching the meeting of the heads of Central Banks in Portugal. On the eve of Mario Draghi announced the need to normalize monetary policy. The markets are waiting for Christine Lagarde's speech today.
Looking at the dynamics of EUR/USD. it can be seen that the activity of the "bulls" immediately breaks against the resistance of the "bears". The couple moves very uncertainly. In such a situation, the most reliable method of forex trading will be to stay out of the market.