Forex. EUR/USD: the market forces to change the trading strategy

USD/CHF analysis on January 6, 2025During the Asian session, the USD/CHF pair is trading in a correction near the 0.9091 mark. The Swiss franc started the year with a slight decline against the US dollar.On Friday, the portal procure.ch He published a report on the Swiss business activity index for December, where the indicator fell to 48.4 points from the previous 48.5. However, this had little effect on market dynamics, as investors' main attention is focused on the upcoming inflation statistics, which will be published tomorrow. Experts predict a decrease in the consumer price index by 0.1% in December, which may lead to a slowdown in the annual inflation rate below 0.7%. If the forecasts are confirmed, this will be an important signal for the Swiss National Bank regarding possible changes in monetary policy. The probability of a return to negative rates this year is low, but a reduction in rates to a range of 0.25–0.00% is possible.Despite the recent strengthening of the US dollar index to 108.6, the dynamics of USD/CHF remains stable. The prospects for updating the annual highs for the dollar index this week remain. An additional growth factor may be the ISM Manufacturing Business activity index report, which showed an improvement from 48.4 to 49.3 points in December. If a similar indicator for the service sector, which will be published today, meets expectations and rises from 56.1 to 58.5 points, this may strengthen the position of the US currency.On the daily chart, the pair is approaching the resistance line of the ascending channel with dynamic boundaries of 0.9230–0.8940. Technical indicators signal continued growth: the fast EMAs on the alligator indicator are moving away from the signal line, and the awesome oscillator (AO) histogram is forming new ascending bars in the buy zone.To form long positions, it is recommended to wait for the price to consolidate above the resistance level of 0.9120 with a target of 0.9220. We will set the stop loss at 0.9050.We will consider sales when the 0.9060 support level breaks with a target of 0.8940 and a stop loss at 0.9120.

During Monday's Asian trading session, the AUD/USD pair shows a sideways movement near the 0.6224 mark. The Australian currency remains stable, despite the growth of the US dollar last week, which allows it to remain above the minimum values of last year at 0.6200.Today, investors' attention was attracted by preliminary indicators of Australian business activity from S&P Global. The seasonally adjusted index in the services sector rose from 50.5 to 50.8 points, continuing its positive trend throughout 2024, although the growth rate remains moderate. The composite index was fixed at 50.2 points, reflecting a slight decline in private sector output. At the same time, the manufacturing sector showed a decrease in activity, which limits the potential for strengthening the Australian dollar.Future moves by the monetary authorities of China, Australia's largest trading partner, could change the situation. A positive reaction was caused by a report in the Financial Times about a possible interest rate cut by the People's Bank of China this year. This could contribute to the recovery of the Chinese economy and the expansion of imports from Australia, including coal and iron ore.At the same time, the US dollar index is showing a local correction and is currently trading at 108.6 points, not far from the annual high of 109,200. This happened after the publication of business activity data from the ISM, where the manufacturing index rose from 48.4 to 49.3 points, reaching its highest level since March last year.On the daily chart, the AUD/USD pair is moving within a descending channel with boundaries of 0.6280–0.6100. Technical indicators give a weak sell signal: the fast EMAs on the alligator remain pointing down, and the histogram of the awesome oscillator indicator (AO) is still in the sell zone.To form short positions, it is recommended to wait for the price to consolidate below the support level of 0.6180 with a target of 0.6040. We will set the stop loss at 0.6250.We will consider purchases after the pair has consolidated above the resistance level of 0.6270 with a target of 0.6400 and a stop loss at 0.6210.

FOREX Fundamental analysis for EUR/USD on January 6, 2025When the US dollar is booming, the euro is falling. The EUR/USD pair dropped to two-year lows, reaching the first of the two previously set short targets of 1.03. This happened against the background of a massive flight of capital into safe assets after the terrorist attacks in New Orleans and Las Vegas. Not only did the traditional New Year's Eve rally in the US stock markets fail, but the surge in demand for safety forced the bulls to retreat.Societe Generale analysts believe that with continued capital inflows to the United States and the stability of the American economy, the dollar will continue to strengthen. According to the MLIV Pulse survey, 51% of respondents expect the dollar to rise in 2025, while only 27% predict its weakening. Experts from Rabobank, Wells Fargo and Investec predict EUR/USD parity in the second quarter, and Danske Bank — in the medium term.The "bearish" market sentiment is related to expectations that fiscal stimulus and deregulation initiated by Donald Trump will accelerate economic growth in the United States and increase inflation. At the same time, the introduction of customs tariffs will slow down the Eurozone economy and lead to an influx of cheap Chinese goods, which may cause deflationary risks in Europe.The futures market predicts a reduction in the Fed's federal funds rate by only 43 basis points in 2025, while the ECB's deposit rates may decrease by 108 bps. The different rate of monetary expansion is a strong argument in favor of EUR/USD falling to parity or lower.Among 46 Financial Times experts, 46% believe that the European Central Bank was late in cutting rates in 2024. Another 43% believe that monetary policy is moving in the right direction. The consensus forecast indicates a reduction in the ECB deposit rate by 100 basis points to 2%. Only 19% of respondents expect the cycle of monetary easing to continue in 2026, while the majority believe it will end in 2025.The market narrative is clear — it remains to wait for its implementation. According to Richmond Fed President Thomas Barkin, Trump's policy may accelerate inflation, but if it slows down economic growth, the administration may reconsider its position. This creates the prerequisites for a tug of war for EUR/USD.The December US labor market report will be the main forex indicator for January. Reuters experts predict employment growth of 150,000 and the unemployment rate will remain at 4.2%. Although markets are confident about the Fed's January pause, stronger data may increase the likelihood that the pause will last into March, which will support the dollar.In the context of waiting for key data and uncertainty regarding Trump's policy, EUR/USD may consolidate. A rebound of the pair from the resistance levels of 1.0335 and 1.0365 or a drop below 1.0255 should be used to form short positions.EUR/USD technical analysisEUR/USD reached the "golden zone" of 1.0261 - 1.0252 last week. However, the support area was held by buyers, as a result of which the pair went into an upward correction to a short-term downtrend. As part of the correction, EUR/USD quotes reached the resistance area (A) of 1.0325 - 1.0316 today. Near this zone, we can consider new sales of the instrument with the first target at 1.0275 and the second at 1.0224.If the resistance area (A) is broken up during trading, the correction will continue to the resistance area (B) 1.0376 - 1.0362. From the resistance area (B), we will also consider selling with the main target at 1.0224.

With the start of weekly trading, GBP/USD continues to trade in a narrow range of 1.2573–1.2490 near 1.2581. The low volatility of currency pairs during the holiday period and weak macroeconomic indicators in the UK are holding back the pound's attempts to regain lost ground.According to the National Statistical Service of Great Britain (ONS), the country's economy showed zero growth in the third quarter, which increased the risks of recession, although analysts had expected a decrease of 0.1%. In addition, industrial production decreased by 0.7% in October, and the composite business activity index dropped to 50.5 points, reflecting business concerns about a 40 billion pound tax increase initiated by the government. In such circumstances, hopes for a positive effect from the political stability caused by a strong parliamentary majority were not justified.These factors also limit the Bank of England's ability to continue lowering the interest rate from the current level of 4.75%. In August, the regulator began easing policy for the first time since 2020, lowering the rate from 5.25%, but further steps have been postponed. The head of the Bank of England, Andrew Bailey, supported the preservation of current parameters, which was supported by five more members of the Monetary Policy Committee, while three others supported a 25 basis point rate cut, citing weakening demand and the labor market. Despite this, the decrease in inflation to 1.7% in September indicates the partial effectiveness of the measures taken, although the rising cost of electricity has again pushed inflation above the target 2.0%.Against this background, the United States is showing more stable economic dynamics. Despite the slowdown in the dollar index, which is trending sideways around 108.00, the outlook for the currency is positive. A possible trigger for the changes will be the economic policy of Donald Trump, who may impose import duties after his inauguration on January 20. If this happens, the British economy will be hit, given the significant exports of cars, equipment, chemicals and pharmaceuticals to the United States.In such circumstances, the pound's inability to show sustained growth increases the likelihood of a continuation of the GBP/USD downtrend in the coming months.Technical analysis for GBP/USD for todayOn the daily chart, the pair is correcting, remaining within the descending channel with the boundaries of 1.2660–1.2100. Attempts to update the autumn lows were unsuccessful.Technical indicators confirm the sell signal: the EMA lines of the alligator indicator maintain a significant distance from the signal line, and the awesome oscillator (AO) indicator forms descending bars in the sell zone.Trading recommendations- Short positions: open when the price is fixed below the 1.2500 level with a target of 1.2350. The stop loss is 1.2600.- Long positions: open after the breakdown of the 1.2610 level with a target of 1.2770. The stop loss is 1.2500.

FOREX Fundamental analysis for EUR/USD on December 30, 2024The US dollar is moving towards the end of the year with the best performance since 2015, having strengthened by more than 7% against key global forex currency indices. The main driver of this rally was the steady growth of the US economy, which allowed the Federal Reserve to minimize the depth of the monetary policy easing cycle. As a result, interest rates in the United States will remain higher than in other regions, including the Eurozone, which creates the prerequisites for a further decline in the EUR/USD pair to parity.Central banks usually act synchronously, focusing on the leader, which is usually the Fed. However, in conditions of varying rates of economic growth, following the Federal Reserve can have negative consequences for less stable economies. The United States, thanks to fiscal incentives and rapid productivity growth amid the introduction of artificial intelligence technologies, has withstood the toughest policy tightening cycle in recent decades. In contrast, the Eurozone economy turned out to be less prepared for such conditions.Europe still has not reached its pre-crisis GDP growth trajectory. This is due to insufficient fiscal support, lower labor productivity, and the consequences of the geopolitical conflict in Ukraine, including the energy crisis. In the context of high interest rates, the Eurozone economy is showing weak adaptation, and in the second half of the year, its GDP is likely to show zero growth.The ECB's attempt to continue following the Fed, which is planning a pause in policy easing in early 2024, could prove disastrous. For example, the head of the National Bank of Austria, Robert Holzmann, believes that the ECB will need more time to lower rates due to rising energy prices and the weakening of the euro, which increases inflationary pressures.In such circumstances, the IMF's forecasts for 2025 for the eurozone, which are already noticeably inferior to those of the United States, risk not being justified. An additional pressure factor is Donald Trump's policy, which includes fiscal incentives to accelerate US GDP growth and trade tariffs aimed at weakening the economies of the partners.The only chance for the ECB to avoid deepening the gap may be a faster rate cut compared to the Fed. However, over the next 1-3 months, this is likely to lead to a fall in the EUR/USD pair to parity.The main risk for such a scenario remains possible difficulties with the implementation of Donald Trump's election program. Financial markets, based on expectations from the so-called "red wave", have already incorporated most of the positive scenarios into quotes. If these expectations are not met, a pullback of the EUR/USD pair may follow, which will become a new selling opportunity towards the 1.03 and 1.00 levels.

FOREX Fundamental analysis for EUR/USD on December 27, 2024Against the background of discussions about which of Donald Trump's election promises can be realized, it is more correct to ask another question: can the US economy maintain the high growth rates demonstrated in 2024? The resilience of the American economy to the Fed's unprecedentedly harsh monetary measures in 2022-2023 has become a key factor in ensuring the dollar's status as one of the strongest currency indices on the Forex market this year.A strong economy implies a strong currency, which is confirmed by macroeconomic data. The forecast of the Federal Reserve Bank of Atlanta points to US GDP growth of 3.1% in the fourth quarter, while the European outlook remains weak — Bloomberg experts do not expect Eurozone GDP growth of even 1% in 2024. This divergence is becoming the main driver of the EUR/USD depreciation.The main factor in the difference between the Old and New Worlds is labor productivity. In the United States, it has been growing at 2% and above for five consecutive quarters. According to the forecasts of the Congressional Budget Office, if the average productivity growth is 1.1%, the US national debt will increase from 99% of GDP in 2024 to 116% of GDP by 2034. However, if productivity increases to 1.6%, the debt burden will decrease to 108% in ten years. The technological boom associated with artificial intelligence can raise this figure to 2.5–3%, which is comparable to the innovative spurts of the past — the introduction of jet engines in the 1960s and the development of the Internet in the 1990s.High productivity is the basis for fiscal incentives and tax breaks, which in turn accelerates GDP growth. Donald Trump's policies of fiscal stimulus and deregulation reinforce these trends. Due to this, the US economy significantly outperformed the European one in 2024, which led to a decrease in EUR/USD by almost 6%.The prospects for 2025 also point to increased economic divergence. While the United States continues to attract investment in high-tech sectors, Europe is facing political crises that, alas, are holding back growth.However, the EUR/USD pair's path to parity may be uneven. Temporary factors such as the rally in stocks in the United States, an increase in the number of unemployed receiving benefits to 1.9 million people, the highest level since 2018, as well as an improvement in China's GDP forecast to 4.5% in 2025, may provide short-term support for the euro.However, in the long term, the divergence in economic growth between the United States and Europe, reinforced by Trump's measures and the Fed's slower rate cuts, will send EUR/USD to parity. Unsuccessful attempts by the pair to overcome the resistance levels of 1.0425, 1.047 or 1.051 will be signals for the formation of short positions.

FOREX Fundamental analysis for EUR/USD on December 24, 2024The US dollar, thanks to the Fed's decision to suspend interest rate cuts and Donald Trump's controversial policy, is showing its best quarterly results since 2022. Uncertainty in the markets is growing, forcing investors to look for safe assets, one of which remains the dollar. Attempts by the EUR/USD bulls to develop an offensive are facing stiff resistance.Donald Trump has previously stated that a strong dollar creates economic difficulties, reducing the competitiveness of American companies. However, his plans to implement an "America First" strategy, including fiscal stimulus and trade tariffs, only exacerbate this problem. The growth of the American economy against the background of a slowdown in other countries attracts capital to the United States, strengthening the dollar. Speculators, in turn, increased the volume of long positions to the maximum since May.In 2024, the dollar holds the lead among other forex currency indices due to its undervaluation. Forecasts for the end of 2023 suggested that the Fed's tight monetary policy would slow US GDP growth to 1%, but the reality turned out to be different — the economy is ready to grow by 3%. Expectations of a decrease in Treasury bond yields also failed to materialize — instead, they increased. The start of the rate reduction cycle, which was forecast for early 2024, occurred only in September.Interestingly, major financial institutions expect further declines in bond yields in 2025. Their consensus forecast assumes a drop in the yield of 10-year securities to 4.25%, which is lower than current levels. This is based on assumptions about a slowdown in the economy and continued easing of the Fed's policy. However, an alternative scenario assumes that due to fiscal incentives, growing budget deficits and inflationary pressures, rates will rise, strengthening the dollar.But the uncertainty remains. Perhaps Donald Trump will not be able to implement his initiatives, inflation in the United States will slow down, and the economy will begin to cool. In this case, the euro may strengthen sharply even against the background of the weakness of the eurozone and the continued reduction of ECB rates.In the meantime, the market is preparing for the holidays, being in a consolidation phase. Low volatility of currency pairs can provoke sharp movements in EUR/USD, including a breakdown of support at 1.0385. However, perhaps the best solution would be to take a wait-and-see attitude during this period of uncertainty.

USD/CHF analysis on December 23, 2024Since the beginning of the week, USD/CHF has been moving in a corrective trend, trading around 0.8933. The strengthening of the Swiss franc, supported by the monetary policy of the Central Bank, almost returned the asset to the levels of the beginning of last week.At the last meeting, the Swiss National Bank lowered the interest rate by 50 basis points to 0.50%. This was the most significant step in monetary policy easing in the last decade. The reason for this decision was lower-than-expected inflation, which is projected to reach zero in 2025. In addition, the construction price index for the period from April to October increased by 0.1% and reached 115.2 points, which is the highest since 2019. The annual growth rate was 0.5%.The US dollar index is holding at around 107.50. The decline in the growth rate of the base index of personal consumption expenditures caused a negative market reaction. In November, the indicator was 0.1% month-on-month against 0.3% earlier, and remained at 2.8% year-on-year, falling short of the projected 2.9%. The income of the population also slowed down from 0.7% to 0.3% during this period.USD/CHF technical analysis for todayOn the daily chart, technical indicators confirm the buy signal. The fast EMAS of the alligator indicator show a break from the signal line, and the awesome oscillator (AO) histogram forms correction bars in the positive zone.Trading recommendationslong positions when the price is fixed above the level of 0.8960 with a target of 0.9090. The stop loss is placed at 0.8900.sale is possible when the level of 0.8900 is broken down and fixed below, with a target of 0.8780. The stop loss should be set at 0.8950.