FOREX Fundamental analysis for EUR/USD on October 18, 2022
A small burst of optimism allows buyers of risky assets to spread their shoulders. The repeal of the UK's tax reform, a drop in gas prices in Europe to the lows of June and good, contrary to expectations, reports from US banks gave EUR/USD an opportunity to show the best upward dynamic over the past two weeks.
British Chancellor of the Exchequer Jeremy Hunt is decisively cancelling his predecessor's tax cut orders and plans to cut support for households hit by the energy crisis. All these unpopular decisions are aimed at stabilizing financial markets, which, it must be admitted, have indeed calmed down, as can be seen in the dynamics of sterling and the euro. However, most analysts think that this is a temporary lull. The increase of interest rates by the Bank of England amid shrinking fiscal stimulus is bringing forward an economic recession, so the growth of the pound will obviously not last long.
In Europe, consumers are rejoicing at the sharp decline in the cost of gas. The energy crisis was incorporated in the EUR/USD quotes, so reducing risks supported the single currency, although prices for the "blue fuel" remain several times higher than last year. The increase in the cost of the fuel component is quite significantly reflected in economic indicators. According to forecast by Bloomberg, German GDP in 2023 will decline by 0.5%, which will pull the composite GDP of Euroblock.
The U.S. stock market is also seeing a bull run. Losses posted by banks were lower than expected. At the same time corporate earnings season has barely started and it is not certain that all further releases will come out positive. Well, the rising risk of recession in the United States economy will only fuel interest in the dollar.
Three growth drivers - stabilization of the British markets, decline in gas prices in Europe and good US reports helped EUR/USD to recover. However, all the positive factors are temporary, so I do not think that the growth of the pair will be long. Trading from levels on forex suggests selling from resistances 0.9890; 0.9920 and 0.9955
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