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Forex. EUR/USD: the news come and go, but the dollar is growing

EUR/USD, currency, Forex. EUR/USD: the news come and go, but the dollar is growing

FOREX Fundamental analysis for EUR/USD on October 20, 2022

Some investors are waiting for a "dovish" U-turn of the Fed or at least a hint at the lowering of the pace of monetary policy tightening. Others reinforce bearish positions on stock indices and other risky assets. In fact, the Fed is doing the same thing, and you know the road is better with a good fellow traveler.

But there's no smoke without fire. Some FOMC members think that the flight of "hawks" should be interrupted. In particular, Charles Evans, the head of the Federal Reserve Bank of Chicago, is worried that tougher financial conditions will be painful for the prospects of the American economy and thinks the rate of 4.6% is quite enough to defeat inflation.

True, history and statistics suggest otherwise. As a rule, the period of raising the rates was much longer, and taking into account the current prices, it is possible that monetary restriction will have to be carried out in 2023, and even in 2024. Moreover, the U.S. economy is not signaling recession, but rather is suffering from overheating, which is confirmed by the GDP forecast from the Federal Reserve.

The head of the Minneapolis Federal Reserve Bank, Neel Kashkari, believes that the regulator has done very little to reduce the PCE to the 2% target.

It should be noted that it is not only the Fed that is struggling with high inflation. The banks of England, Canada, New Zealand and others are tightening their monetary policies, which suggests that risks of a global recession are growing and there is a new round of demand for the dollar as the most popular protective asset.

News about the stabilization of the UK financial markets and reduction of the gas prices in Europe are in the past, while the tightening of the monetary policy by the world CBs continues. The world economy is approaching the abyss thereby supporting greenback demand.

Neither expectations of a 75 basis point ECB rate hike at two consecutive meetings in 2022, nor UK stabilization or lower gas prices can change the EUR/USD positioning. The pair maintains its downtrend and we continue to use bearish forex trading techniques and sell the pair towards 0.95.

 

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EURUSD: Will the Fed consider the risks of the banking crisis?
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Mar 21, 2023 Read
EUR/USD: markets return to stability
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Mar 17, 2023 Read
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Mar 16, 2023 Read
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Forex pair EURUSD: The Fed cedes leadership to the European Central Bank
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Mar 15, 2023 Read
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Mar 14, 2023 Read
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