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Forex Analysis & Reviews: EUR/USD: bullish counterattack failed
The report on American inflation for September brought the "bulls" on EUR/USD back down to earth. In annual terms, the CPI grew at the same pace as in August, at 3.7%. Core inflation, as expected, slowed down to 4.1%. However, the monthly data convinced investors that it's still too early to close the door to a federal funds rate increase to 5.75%. The likelihood of such an outcome in December jumped from 28% to 40%, and the dollar and Treasury bond yields once again rose in unison. Dynamics of U.S. core inflation
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In October, Federal Reserve officials began discussing how the rally in debt rates had tightened financial conditions. In other words, the bond market had done part of the central bank's job. Investors interpreted this rhetoric as a signal that the monetary tightening cycle was coming to an end. CME derivatives implied a 91% probability of maintaining the federal funds rate in November and 72% in December.
Furthermore, discussions about a dovish pivot have resumed in the Forex market. BNP Paribas, in particular, noted that for the federal funds rate to remain at 5.5%, inflation would have to remain flat for a long time. If it slows down as rapidly as it has in the past, the chances of the Fed easing monetary policy in 2024 will increase dramatically.
The U.S. inflation report for September has made significant corrections to this theory. Consumer prices do not necessarily have to slow down; they could accelerate. As a result, the theme of monetary policy divergence, which underpins the downward trend in EUR/USD, has returned to the market.
Indeed, the minutes of the latest European Central Bank meeting expressed concerns about the state of the Eurozone's GDP. It is difficult to bring inflation back to the 2% target without causing significant harm to the economy. The ECB now believes that the risks of overdoing monetary policy tightening outweigh the risks of doing too little and letting the inflation genie out of the bottle again. The regulator noted that inflation expectations are anchored. This is another piece of evidence supporting the end of the monetary tightening cycle.
Indeed, the minutes of the latest European Central Bank meeting expressed concerns about the state of the Eurozone's GDP. It is difficult to bring inflation back to the 2% target without causing significant harm to the economy. The ECB now believes that the risks of overdoing monetary policy tightening outweigh the risks of doing too little and letting the inflation genie out of the bottle again. The regulator noted that inflation expectations are anchored. This is another piece of evidence supporting the end of the monetary tightening cycle.
Dynamics of European inflation expectations
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Therefore, the bears for EUR/USD have played the old but effective card of divergence in monetary policy. Markets do not rule out the possibility of a federal funds rate hike and are practically certain of a deposit rate ceiling of 4% at the ECB. Along with the divergence in economic growth between the U.S. and the Eurozone, this driver could push the main currency pair towards 1.02, if not parity.
From a technical perspective, the EUR/USD daily chart is currently implementing the Holy Grail strategy. Unsuccessful attempts by the bulls to establish themselves above the red EMA and the fair value indicate their weakness. A return to the breakout bar's low near the 1.0575 level is usually used for forming short positions. As long as the pair trades below this level, the focus is on selling.
Analysis are provided by InstaForex.
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USDCHF H4 I Potentail bullish reversal?
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The USD/CHF chart currently displays bullish momentum, suggesting a possible bounce from the first support towards the initial resistance. The first support at 0.8998 aligns with a prior swing low and the second support at 0.8934 coincides with the 161.80% Fibonacci Retracement, providing strong support potential. On the resistance side, the first resistance at 0.9085 represents a multi-swing high resistance, followed by the second resistance at 0.9116, which is an overlap resistance. Additionally, there's an intermediate resistance at 0.9039, also acting as an overlap resistance.
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USDCHF H4 I Potentail bullish reversal?
https://forex-images.ifxdb.com/userf...e0465ee16a.jpg
The USD/CHF chart currently displays bullish momentum, suggesting a possible bounce from the first support towards the initial resistance. The first support at 0.8998 aligns with a prior swing low and the second support at 0.8934 coincides with the 161.80% Fibonacci Retracement, providing strong support potential. On the resistance side, the first resistance at 0.9085 represents a multi-swing high resistance, followed by the second resistance at 0.9116, which is an overlap resistance. Additionally, there's an intermediate resistance at 0.9039, also acting as an overlap resistance.
Analysis are provided by InstaForex.
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Forecast for EUR/USD on October 18, 2023
EUR/USD
Yesterday, the euro settled above the target level of 1.0552. The Marlin oscillator is also in the positive territory. Now, the price needs to gather strength to overcome the strong resistance level at 1.0613, as at the anticipated breakout point, the level intersects with the Fibonacci Fan line.
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Breaching this level opens the next target at 1.0687. This level is also strong because the MACD indicator line is approaching it. This will determine the euro's direction in the medium-term - either a breakout with subsequent target realization, as indicated on the daily chart, or a reversal towards 1.02. On the 4-hour chart, the price has settled above the MACD indicator line, but the attempt to break above the balance line was unsuccessful.
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The Marlin oscillator is in the uptrend territory, so we expect the price to try and break above the balance line. Without the price consolidating above the balance line, which requires an impulsive initial rise, overcoming the 1.0613 resistance will be extremely challenging.
Analysis are provided by InstaForex.
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Forecast for EUR/USD on October 19, 2023
EUR/USD
Yesterday, the euro lacked the courage to initiate consolidation ahead of the strong resistance level at 1.0613. The price retreated from the daily balance indicator line and dropped below the support level at 1.0552. However, the Marlin oscillator managed to stay in the positive territory. Therefore, consolidation to attack the Fibonacci ray at 1.0613 may form above 1.0552.
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The reason for this could be today's US data; weekly jobless claims are expected to increase from 209,000 to 212,000, and existing home sales for September could decrease from 4.04 million to 3.89 million.
On the 4-hour chart, the price is now below the level of 1.0552 and below the balance and MACD indicator lines. The Marlin oscillator has entered the downtrend territory.
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The situation appears bearish, but the general trend may lift the quote above the MACD line, where strategic consolidation will take place. If the price stays below yesterday's low at 1.0524, it could push the euro towards the support level at 1.0483. Below this we can find the price channel line at 1.0456.
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Forecast for AUD/USD on October 20, 2023
AUD/USD
The Australian dollar continues to consolidate within the 0.6295-0.6388 range, and this consolidation is increasing the bearish potential every day as the Marlin oscillator's signal line tilts downward in a triangle.
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Consolidating below the level of 0.6295 means that the next target will be 0.6171. To initiate an upward movement, the price should rise above the MACD line around 0.6426. The first target will be 0.6514, followed by 0.6612.
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A downtrend on the 4-hour chart, and there's a low chance of a reversal. The first sign of a reversal would be the price surpassing the previous day's high of 0.6359, which would automatically lead to breaching the MACD line. We await further developments.
Analysis are provided by InstaForex.
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XAUUSD H4 I Reacting off Resistance?
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The XAU/USD chart currently shows bearish momentum, suggesting potential further decline towards the 1st support at 1947.23, which aligns with an overlap support. The 2nd support at 1931.57 adds to this bearish outlook as a pullback support.
On the resistance side, the 1st resistance at 1984.47 has historically acted as a strong barrier to upward movement, and the 2nd resistance at 2003.60 could provide additional resistance. An intermediate support level at 1963.24 might offer a temporary pause in the bearish trend
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GBPUSD H4 | Bearish Continuation Expected?
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The GBP/USD chart currently shows bearish momentum with potential for a bearish continuation towards the 1st support at 1.2106, which aligns with a multi-swing low support. The 2nd support at 1.2049, also a multi-swing low support, adds to its significance as it coincides with the 127.20% Fibonacci Extension level. On the resistance side, the 1st resistance at 1.2270 is characterized as an overlap resistance, while the 2nd resistance at 1.2340 is marked as a swing high resistance.
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USDCAD H4 I Heading into resistance?
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The USD/CAD chart currently displays bullish overall momentum, with the potential scenario of a bullish continuation towards the 1st resistance level.
The 1st resistance level at 1.3848 is identified as a swing-high resistance that aligns with the 127.20% Fibonacci extension level. Higher up, the 2nd resistance level at 1.3919 is marked as a resistance level that aligns with the 161.80% Fibonacci extension level.
To the downside, the 1st support level at 1.3786 is identified as a pullback support. Further below, the 2nd support level at 1.3736 is noted as an overlap support, potentially acting as a strong support zone.
Analysis are provided by InstaForex.
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Elliott wave analysis of EUR/USD for October 27, 2023
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After a minor correction from 1.0695, EUR/USD is ready for the next push higher towards at least 1.0805 and most likely above here too. In the long term, we are looking for EUR/USD to move towards 1.2085 as the next major upside target as wave 3 gathers strength.
Support remains seen near 1.0521 for the next push above 1.0695.
Analysis are provided by InstaForex.
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