FOREX Fundamental analysis for EUR/USD on June 1, 2023
Markets often run ahead of the news, which brings traders losses. Despite the lack of consensus in the FOMC on the rate hike in June, derivatives give over 60% probability of such a step, though the day before the Vice-President of the Fed Philip Jefferson quite clearly hinted at a pause in the cycle of monetary restriction, which cooled the fervor of the EUR/USD "bears" a bit.
After the Eurozone inflation report showed a slowdown in prices and rising jobless rates in the U.S., the major currency risk tested a 9-week low.
Pic. 1. Inflation trends in Italy and France.
There is no point for the European Central Bank to depress the Eurozone economy with hawkish actions, so the regulator is likely to complete its monetary tightening cycle in July by raising the rate to 3.75%.
In the United States, the number of job openings rose from 9.75 million to 10.1 million in April, which means there are 1.8 job openings per American unemployed. This is a very good number since 1951. In other words, the US labor market will not prevent the Fed from continuing to raise the federal funds rate.
However, it is possible that in June the Fed will pause in its monetary restriction in order to get more data on the effectiveness of measures taken by the regulator. At any rate the Central Bank's management is in a mood to make a pause and look around, which lowers interest to the dollar in forex trading.
Pic. 2. The dynamics of the supposed change of the Fed's rate.
The positioning on the currency market has changed somewhat on the eve of the release of the US labor market report. While previously it was thought that a strong NFP would strengthen the dollar, now we are more expecting the pair to consolidate. We closed short positions on EUR/USD and we will look for an entry to buy at a breakout of resistances 1.0715 and 1.0735.