FOREX Fundamental Analysis for EUR/USD for November 1
If an asset does not go one way, it will go the other way - the golden rule of forex currency trading. October's rally in US bond yields did not help the dollar, and neither did strong macroeconomic reports. NAB believes that most of the factors of the greenback strengthening are already taken into account by prices, so any surprise immediately gives a powerful opposite impulse. As it was the case with the release of rather average Eurozone statistics, which nevertheless helped EUR/USD to recover.
Indeed, inflation in the Eurozone is noticeably declining, which speaks about the effectiveness of the ECB. The regulator has conducted 10 acts of monetary restriction, which of course reduced consumer demand, and Christine Lagarde's critics are already starting to talk about the political mistakes of the Central Bank. Actually, the Euro bloc economy has been lagging behind the US economy in terms of growth since the 2008 crisis. Later, pandemic, war in Ukraine and risks of energy crisis were added.
Despite the fact that the demand for the dollar has somewhat decreased, the greenback remains the most interesting asset among the currencies of developed countries. There is nothing else to buy, and this exclusivity of the US currency supports EUR/USD sellers.
Rumors about the demise of the dollar, periodically appearing on the market, are somewhat exaggerated. The current moment is very similar to the situation in the 70s of the last century. At that time there was an unrestrained growth of inflation, conflict in the Middle East, and the Federal Reserve conducted one rate hike after another. But a small error in calculations led to a repeated rise in consumer prices and leveled all the work of the regulator.
FOMC members remember history well and do not exclude the possibility of another act of monetary restriction in 2023. According to Richard Clarida, it is better to overreact with another rate hike in December than to let the scenario of the last century repeat itself.
In this regard, the October 31-November 1 meeting will be very important for investors. The markets will probably get most of their questions answered today. But we can already assume that the Fed is unlikely to announce the end of the hawkish course. That would be tantamount to suicide.
Investors do not want to buy either the dollar or the euro, therefore, we believe that EUR/USD will remain in the range of 1.05-1.07. We emphasize selling at every growth wave. If the pair consolidates below 1.055, we will increase short positions.