FOREX fundamental analysis for EUR/USD on October 17, 2022
The only thing that can resist the strengthening of the U.S. dollar is a common policy of all central banks. But the regulators, first of all, focus on their own problems and "pull the blanket over themselves. Under such conditions, the dollar is invincible.
The replacement of the UK Chancellor of the Exchequer, who is not in favor of tax cuts, but of tax hikes, has supported sterling and the euro. At the same time, demands for Liz Tran to step down increase political uncertainty, which is a negative factor for the pound, as well as the growing risks of recession. Of the 452 analysts surveyed by MLIV Pulse, 47% believe the British economy will be the first among European economies to experience a recession.
The Wall Street Journal has a different point of view. It predicts that the United States economy will be the first to experience a recession. The likelihood that the U.S. economy will begin to decline over the next 12 months has risen from 49% to 63%. This is the maximum since the summer of 2020. Experts expect the start of the recession to be in the 1st-2nd quarters of 2023. In their view, the Fed will raise the rate to 4.267% in December and to a high of 4.551% in June. The futures market expects a more aggressive rate hike, as evidenced by statements from a number of FOMC members.
Despite the fact that in the short term sterling is pulling up the single currency, the fundamental background to the EUR/USD downtrend remains unchanged. Eurozone problems, the strength of the US economy and the demand for protective assets will push the pair down.
Moreover, the strong dollar at this stage suits the U.S. authorities. Joe Biden does not think that the strengthening of the greenback causes problems for the global economy. The same opinion is held by Janet Yellen. Fighting inflation remains a priority for the Fed, which means that the dollar index will continue to grow, outperforming other forex indices.
We consider the formation of short positions to 0.97. on the rebound from the resistance or the support breakthrough.
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