Fundamental analysis of FOREX on July 4, 2022
No matter how scared the markets are by the recession in the United States, but the American economy is much more stable than the economies of other developed countries. This factor, combined with the high demand for protective assets and the confident tightening of the Fed's monetary policy, makes the dollar the leader in forex currency trading.
The United States does not depend on energy supplies from Russia and is at a considerable distance from the war zone. In this regard, the Fed has a simpler position. He is struggling with rising inflation and monitoring economic indicators. The ECB is much more complicated. The European regulator needs to deal with the risk of fragmentation of the Euroblock and carefully monitor the debt bond market by adjusting yield spreads.
Dynamics of the Italian and German bond yield differential
Of course, things are not so simple in the US, and the risks of an economic downturn have already reached 80%, but, as Nomura predicts, the Eurozone, the UK, Canada, Australia and even South Korea will also not be able to avoid a recession. However, the Fed's intentions to raise the rate several times before the end of the year support the demand for the dollar, unlike other currencies.
At the same time, 40% of analysts surveyed by JP Morgan believe that the dollar index has peaked and will begin a downward correction around 105.00. From a fundamental point of view, this scenario is justified by the actions of other Central Banks that have begun to tighten the monetary policy rate, as well as the slowdown in the growth rate of US inflation.
In the Eurozone, inflation growth has set a record of 8.6%, and many experts call the ECB's statement on raising the rate in July by 25 basis points a mistake, believing that with such introductory measures, the regulator should act more decisively.
Dynamics of European inflation
Forex trading time is quite complicated. It is necessary to consider both options for strengthening EUR/USD when breaking above 1.049, and a decline in the pair when updating the local minimum of 1.0365. The bears' next target is 1.02.