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Forex EUR/USD: market waiting for Non-farm Payrolls

EUR/USD, currency, Forex EUR/USD: market waiting for Non-farm Payrolls

FOREX Fundamental analysis for EURUSD on April 7, 2023

Currency trading on the forex market has recently received contradictory signals, which greatly complicates the work of the trader. Bonds are suggesting an imminent recession, stocks are rejecting negative news, and the decline in the dollar index is suggesting a mild economic slowdown. Today's U.S. labor market report may line up all the factors, but preliminary data from ADP spoils the picture for dollar buyers.

The steady fall in the yield curve to record lows confirms the likelihood of a recession. At the same time, stocks are in no hurry to decline, which looks strange, to say the least, amid weak macroeconomic reports.

Yield curve dynamics

When the S&P 500 is holding on to its old levels and the yields of the Treasuries are plummeting, EURUSD tends to go up. But in 2023, the situation in the financial markets has changed many times, causing chaos and turmoil. Most likely, the future course of the dollar and other currency assets will largely depend on the decision of the Fed on monetary policy. The view among FOMC members remains that a rate hike is necessary as long as the U.S. labor market remains reasonably strong. Inflation is well above the 2% target, and if we stop fighting it, it will quickly return to strengthening.

Yield curve dynamics

However, derivatives expect the Fed to start cutting rates as early as July. And there is some risk in that for EUR/USD buyers. If the regulator does not move to soften the rate, the dollar will get a great chance for revenge. But, this is, of course, a matter for the future. For now it makes sense to concentrate on today's Non-farm Payrolls.

A weak report will allow EUR/USD to continue rising to 1.12 and 1.14. If the statistics is a surprise, the pair will start a downside pullback and it will endanger our longs from the support at 1.089.

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EUR/USD: the dollar was not so simple
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Oct 08, 2024 Read
EUR/USD: we continue to sell with any growth
EUR/USD, currency, EUR/USD: we continue to sell with any growth FOREX Fundamental analysis for EUR/USD on October 7, 2024If the report on the US labor market (Non-farm Payrolls) cannot dissuade investors expecting an imminent recession, then probably nothing will be able to change their minds. In September, employment increased by 254,000 jobs, which significantly exceeded the expectations of Bloomberg analysts. Additionally, the data for the previous two months were revised upward by 72 thousand. The unemployment rate dropped to 4.1%, and average wage growth accelerated to 4%. The strong US economy provoked a sharp drop in the EURUSD exchange rate.The US dollar showed the strongest growth in a week since September 2022, against the background of a significant decrease in the probability of monetary expansion in November — from 63% to 2%, and Treasury bond yields rose to three-month highs. The sharp strengthening of the dollar in forex currency trading contrasted with the rapid growth of American stock indexes, where good economic news once again became the impetus for a rally.The growth of the S&P 500 index is associated with a "goldilocks" scenario — a balance between economic growth and slowing inflation. However, challenges such as geopolitics, the pre-election volatility of currency pairs and the possible acceleration of inflation can trigger a correction in stock indices and at the same time strengthen the dollar.Even proponents of the Fed's soft policy, such as Chicago Fed President Austin Goolsby, recognize the risks that inflation may not return to the 2% target. A strong economy and labor market, the likelihood of oil prices rising to $100 per barrel in the event of an escalation of the conflict in the Middle East, as well as new fiscal incentives, regardless of who wins the election — Donald Trump or Kamala Harris — increase the chances of a spike in inflation.The situation is reminiscent of the 1970s, when the Fed prematurely declared victory over inflation, which led to a double recession. According to Yardeni Research forecasts, the Federal Reserve may stop cutting rates in 2024. If the analysts are right and the markets expecting a 50 basis point decline are wrong, EURUSD may continue to fall.However, it is unlikely that inflation will rise significantly in September. Bloomberg experts expect a slowdown in consumer prices to 2.3%, which confirms the continuation of disinflation and will help maintain optimism in the stock market. The euro may temporarily stabilize amid the growth of the S&P 500, but most likely this period will be short-lived.EURUSD sales, formed above 1.12 and strengthened from 1.1045, look good. The pair has a good chance of returning to the levels of 1,085 and below, so the forex trading strategy – shorts from any growth, remains relevant.EUR/USD Technical analysisLast Friday, the short-term downward trend of EUR/USD continued, and the pair reached the lower target zone of 1.0962 - 1.0936. This area is a strong support. If sellers can break through it, the pair will go to the golden zone of 1.0878 - 1.0869.If the target zone is held by buyers, then an upward correction will begin, at the end of which it will be possible to consider selling the instrument from the resistance area (A) 1.1043 - 1.1035. The first sales target will be the 1.0997 level. The second one is at least on October 4
Oct 07, 2024 Read
EUR/USD: the closer Non-farm Payrolls are, the quieter the market
EUR/USD, currency, EUR/USD: the closer Non-farm Payrolls are, the quieter the market FOREX Fundamental analysis for EUR/USD on October 3, 2024Historically, various geopolitical collapses - wars, epidemics or financial crises - have strengthened the position of the US dollar in forex currency trading. In early October, despite rising tensions in the Middle East, the reaction of the markets was restrained, with the exception of oil. The EUR/USD pair is declining, helped by strong data on the US labor market and expectations of a reduction in the deposit rate of the European Central Bank. Although the global situation is worrisome, investors are not in a hurry to invest in protective assets yet.The increase in the number of vacancies in August and employment data in the United States from ADP, where 143 thousand jobs were created in September, which exceeded forecasts and reduced the likelihood of a Fed rate cut by 50 basis points from 37% to 33%. At the end of September, this probability was higher — 63%.Non-farm Payrolls is coming out on Friday, and if the data on applications for unemployment benefits and the general state of the labor market turn out to be positive, the Fed may not worry about a slowdown in the economy. In this case, the gradual normalization of monetary policy will continue, where the key word is "gradual". However, not all FOMC members consider the fight against inflation to be over. The head of the Federal Reserve Bank of Richmond, Thomas Barkin, notes that the Fed has yet to continue the fight in this directionThe Bank for International Settlements also warns of the risks of price increases related to military conflicts, climate change and trade tensions. In this context, an escalation in the Middle East could strengthen the US dollar: as a safe haven currency and in the event of an increase in oil prices to $100 per barrel. Such bets are becoming more and more popular in the derivatives market.Meanwhile, OPEC+ sees no reason to worry and plans to increase production by 180 thousand barrels per day from December. Saudi Arabia has warned that in case of non-compliance with obligations, oil prices may fall to $50 per barrel.If Israel's retaliatory actions turn out to be symbolic, as in April, the situation in the markets will quickly return to normal. However, this is unlikely to stop the downward trend in EUR/USD. The ECB's rhetoric is increasingly shifting towards the "dovish", and even such "hawks" as Isabelle Schnabel recognize the presence of factors constraining economic growth and mention the risks of deflation. This reinforces expectations of a reduction in the deposit rate in October.Before making final decisions, markets are waiting for the US labor market report for September. In the near future, EUR/USD is likely to remain in the range of 1.1–1.105, although short-term sales opened above 1.12 should be maintained.EUR/USD Technical analysisYesterday, EUR/USD changed its short-term trend to a downward one, as sellers were able to break through the support area 1.1088 - 1.1075. Now the target of the bears is the lower target zone of 1.0962 - 1.0936. We will consider new sales on an upward correction to strong resistance levels.These are currently: the resistance area 1.1117 - 1.1108 and 1.1163 - 1.1150. After testing any of these zones, you should pay attention to the reaction of sellers and wait for the appropriate signals to appear and only then open a short position. To change the direction of the trend to an upward one, buyers need to break through the 1.1163 level and consolidate higher.
Oct 03, 2024 Read
USD/CAD: short positions prevail
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Oct 02, 2024 Read
Forex analysis and forecast for USD/CHF for today, October 2, 2024
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Oct 02, 2024 Read
EUR/USD: dollar remains in demand
EUR/USD, currency, EUR/USD: dollar remains in demand FOREX Fundamental analysis for EUR/USD on October 2, 2024After Jerome Powell's statements that the Federal Reserve is in no hurry to make changes, and Christine Lagarde's expressed confidence in defeating inflation, forex currency trading changed its positioning, which led to a sharp change in the direction of EUR/USD. Investors began to actively consider the possibility of reducing the deposit rate by the European Central Bank (ECB) in October. Geopolitical tensions have also increased after Iran's missile strikes on Israel, which supports the growth of the US dollar as a defensive asset.Markets estimate the scale of the ECB's future monetary expansion at 51 basis points, which is comparable to the projected reduction in the US federal funds rate by 50 basis points. However, the ECB is likely to act faster. The fall in inflation in the Eurozone below the 2% target makes monetary policy easing inevitable. After Christine Lagarde's speech and the publication of inflation data, any other actions by the ECB, other than lowering rates, will cause disappointment.The drop in inflation to 1.8% triggered a rally in the German bond market. The yield on two-year securities fell below 2% for the first time since the end of 2022, while the yield on ten-year bonds decreased by 11 basis points and reached 2.01%. Morgan Stanley analysts predict a further drop in yields to 1.8-1.9% by the end of the year, as well as gradual cuts in the ECB rate until March 2025. As a result, by the end of next year, the deposit rate may decrease to 1.75%.Political problems in France are also putting pressure on EUR/USD. The minority government clashed with parliament when Prime Minister Michel Barnier proposed to reduce the budget deficit to 3% of GDP by 2029 by raising taxes and reducing spending. Discontent in parliament can lead to a vote of no confidence, which increases risks to the economy and increases the volatility of currency pairs in the market.An additional factor of pressure on EUR/USD was the escalation of the conflict in the Middle East. Israel is clearing neighboring Lebanon from terrorists, to which Iran responded with a massive missile strike. Investors fear further military action and are selling stocks en masse, switching to safe haven assets, including the US dollar.Thus, the rapid actions of the ECB, political risks in France and rising tensions in the Middle East have strengthened the position of the "bears" in EUR/USD. The pair has broken through the 1.11 level and continues to fall. A breakout of support at 1.1045 will open up an opportunity to strengthen short positions.EUR/USD Technical analysisYesterday, EUR/USD continued its correction and reached the support area 1.1088 - 1.1075. This zone is the boundary of a short-term uptrend. At the moment, the pair is trying to gain a foothold below this area. If this happens, the short-term trend will change direction to a downward one. In this case, starting tomorrow, it will be possible to look for an entry into sales with a target in the area of the lower Target zone 1.0962 - 1.0936.If the price returns above the support area, then we will consider buying EUR/USD with the first target at 1.1144. The next target mark is located around 1.1214.
Oct 02, 2024 Read
USD/CAD: the potential for decline remains
USD/CAD, currency, USD/CAD: the potential for decline remains USD/CAD analysis on October 1, 2024USD/CAD is in the correction phase at 1.3524, while the Canadian currency is under pressure due to weak economic activity, despite positive reports on key sectors.In July, after the June stagnation, Canada's GDP grew by 0.2%. Retail trade (+1.0%, the highest figures since 2023 for the second month in a row), the financial sector (+0.5%) and utilities (+1.3%) contributed to the growth. However, the real estate sector showed a decline of 0.4%, which restrained the overall economic growth of the country.The US dollar is strengthening, which is due to the positive reaction of investors to the speech of Fed Chairman Jerome Powell, who cooled expectations of a rapid reduction in interest rates, declaring the regulator's intention to return to moderate steps of reduction by 25 basis points. At 16:00 (GMT+2), JOLTS data on the number of open vacancies in the United States is expected to be published: analysts predict a slight increase from 7.637 million to 7.640 million after the July drop.Technical analysis shows a correction of USD/CAD inside the descending channel with the boundaries of 1.3600–1.3380. The indicators show a strengthening of the sell signal. The EMA range is expanding on the alligator, the awesome oscillator indicator forms correction bars below the zero level.After fixing the pair below 1.3500, we form short positions with a target of 1.3380. We place the stop loss at 1.3570.Purchases are possible after the breakout of the 1.3550 level. The nearest target will be 1.3650. We will set the stop loss at 1.3480.
Oct 01, 2024 Read
Forex analysis and forecast for GBP/USD for today, October 1, 2024
GBP/USD, currency, Forex analysis and forecast for GBP/USD for today, October 1, 2024 GBP/USD is trading in different directions near the 1.3375 level. Statistics from the UK and the USA did not cause significant activity in the market.Earlier, data on UK GDP for the second quarter were published. Economic growth slowed from 0.9% to 0.7% in annual terms and from 0.6% to 0.5% in quarterly terms. Such low rates may prompt the Bank of England to more aggressively ease monetary policy, especially given the recent decision of the US Federal Reserve in September to cut the interest rate by 50 basis points.The pound is also under pressure due to a decrease in the retail price index from the Consortium of British Retailers: the indicator fell by 0.6% in September after a previous decrease of 0.3%. Today, the market is awaiting data on business activity in the UK manufacturing sector from S&P Global. The forecast is 51.5 points. Additionally, in an interview with the former head of the Bank of England, Mervyn King, it was noted that high inflation in the country was caused by the belated actions of the regulator, but now the situation is stabilizing.With the start of trading in the United States, the market will monitor data on the ISM index of business activity in the manufacturing sector, which may rise from 47.2 to 47.5 points in September. Participants also appreciate the recent speech by Fed Chairman Jerome Powell, who confirmed the course of monetary policy easing, but at a slower pace. The Fed rate is expected to decrease by another 50 basis points by the end of the year.The Bollinger band indicator on the daily chart continues to grow. While the MACD indicator retains a weak sell signal, and the Stochastic indicates overbought and possible decline of the pair.We will consider short positions with a confident breakdown down to the level of 1.3340. The target is 1.3250. We will set the stop loss at 1.3390.In case of a breakdown above the 1.3435 mark, we proceed to purchases. The target is 1.3550. We place the stop loss at 1.3380.
Oct 01, 2024 Read
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