FOREX Fundamental analysis for EUR/USD on October 24, 2022
In order to make forex trading profitable, it is not enough to determine the correct direction of the current trend. It is necessary to be able to enter the market very accurately and exit the transaction at the right time. For this purpose one should be guided by macroeconomic reports and follow the policy of the major central banks, remembering that the actions of regulators affect the economy through a time lag, which may be several months or even years.
According to the International Monetary Fund, interest rate adjustments will have an impact on GDP dynamics in a year and on inflation in 3-4 years. In 1979, the Federal Reserve raised the federal funds rate to 20% very quickly, almost immediately driving the economy into recession, and it took three years for inflation to begin to return to the target.
The Bank of England estimates that a 1.00% rate hike will cut GDP by 0.6% and consumer prices by 1.0% in 2-3 years.
Investors are now surprised by the growth in core inflation and the strength of the U.S. economy despite the Fed's tightening of monetary policy. Bloomberg predicts that the United States economy will expand 2% in the third quarter. The Atlanta Fed expects growth of 3%. It is assumed that the main driver of economic growth will be the foreign trade, the dynamics of which is improving every month.
Based on the IMF analysis, the U.S. will not be able to cope with inflation in 2023 but has a good chance of going into recession. But this is unlikely to change the Fed's plans. The economic downturn would have to be very deep to make the Fed return to its quantitative easing program or start cutting rates. But the macroeconomic statistics do not confirm a deep downturn in the economy. Most likely, we will see a "soft landing", which will once again support the dollar. Consequently, EUR/USD will continue its downward trend.
In the short term, of course, anything can happen. Intervention of the Bank of Japan, a rally of stock indices, and through the correlation of currencies and risky assets, an ECB rate hike.... But these are all temporary factors.
Judging by the Bank of Japan's intervention in forex trading in September, the yen will not appreciate for long. The ECB, even if it raises the rate by 75 basis points, will not catch up with the Fed. In other words, there is no reason to move away from the bearish scenario for EUR/USD. We continue to sell the pair on the ascending octets. If the buyers fail to consolidate above 0.9845, we will get a new sell signal.
If you are interested in EUR/USD analytics, we recommend you to visit the analytics page, where you can find the latest analytics on Forex from top traders from all over the world. These analytics will be useful both for beginners and professional traders. The Forex signals service makes it much easier for beginners to make their first steps in trading on the financial markets. The latest EUR/USD forecasts and signals contain support and resistance levels, as well as stop-loss levels.