FOREX Fundamental analysis for EUR/USD on April 6, 2023
If the crowd is buying, the big players begin to sell. On the eve of the release of Non-farm Payrolls speculators recorded profits in long positions on EUR/USD.
The previous day another nail was hammered into the dollar's coffin by macroeconomic statistics - the ADP labor market report and business activity index of the service sector. Both indexes were worse than expected.
Eurizon SLJ Capital believes that the greenback will lose another 10-15% over 12-18 months in the expectation that the Fed, fearing recessionary pressures, will begin to lower the rate already this year. Aggressive tightening has allowed the regulator to reduce inflation, and analysts hope that the process will continue for some time, but the economy is giving rather alarming signals, if not cracking at the seams.
After jobless claims fell to a two-year low, the next disappointment for investors was the ADP Employment and Services Business Activity Index. Employment fell from 261,000 to 145,000 in March, well below Bloomberg's pessimistic forecast of 200,000. Treasury yields fell to a 7-month low.
Fed Funds Rate and Treasury Yields
Fears of an economic downturn have overshadowed the crisis in the banking sector, although the financial system continues to be in dire straits. Capital outflows continue and deposits have fallen by $363 billion since the beginning of March, while assets of funds offering risk-free repurchase transactions have expanded by $304 billion.
Dynamics of assets of money market funds
Since the beginning of the year, investors have been discussing the exclusivity of the U.S. economy, which has actually proven to be quite vulnerable. The fundamental backdrop is negative for the greenback and supports the European currency. Our forex trading strategy suggests to continue buying, using downward corrections for a better entry. We consider longs from 1.085; 1.083 and 1.076 and wait for the labor market report on Friday.