empty
 
 
You are about to leave
www.instaforex.eu >
a website operated by
INSTANT TRADING EU LTD
Open Account

05.07.202416:02 Forex Analysis & Reviews: The dollar sets priorities

This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here.

Non-farm payroll employment in the US rose by 206,000 in May, surpassing Bloomberg experts' consensus forecast of +190,000. However, unemployment unexpectedly increased from 4% to 4.1%, and average wages showed the slowest growth in three years at 3.9%. This data did not cause a significant reaction in EUR/USD, but the trend of these indicators brings the Fed closer to lowering the federal funds rate. This is bad news for the US dollar.

The minutes of the last FOMC meeting noted that high immigration creates imbalances in the labor market. Employment is rising even amid increasing unemployment. For the Fed, the latter is more important. Once unemployment rises, it can gain momentum and become uncontrollable. In this regard, June's statistics increased the chances of a federal funds rate cut in September from 74% to 78%.

Against this backdrop, the US dollar risks entering a wave of sell-offs, especially against the oversold euro. The political drama in France pushed EUR/USD quotes to 9-week lows, but investors are beginning to realize that the situation may not be as dire as it seems.

Expected Positions of Parties in the French Parliament

Exchange Rates 05.07.2024 analysis

According to the latest polls, the National Rally is expected to secure between 190 and 250 seats in the National Assembly, falling short of the absolute majority of 289. A fragmented parliament will prevent the right-wing from dictating their will, including in relations with the European Union. Significant increases in government spending, budget deficits, and national debt will likely be off the table. Similarly, Frexit and parity in EUR/USD seem unlikely. Isn't that a reason to start buying euros?

Of course, the US dollar still has a trump card in the form of Donald Trump's likely victory in the US presidential election. The Republican's protectionist policies and additional fiscal stimuli and debt would push EUR/USD quotes down. However, investors will likely start factoring in the Trump effect on the main currency pair in the second half of August to early September. For now, the euro can rise on the Fed's monetary easing expectations.

Exchange Rates 05.07.2024 analysis

FOMC officials have yet to signal a rate cut. For example, New York Fed President John Williams noted that the central bank has seen progress in reducing inflation to approximately 2.5% but still needs to reach the 2% target. Neutral rhetoric is slowing EUR/USD, but facts are facts.

Technically, on the daily chart of the main currency pair, both targets for the previously mentioned long positions at 1.0800 and 1.0835 have been met. As long as EUR/USD remains above the upper boundary of the fair value range of 1.0670-1.0800, preference should be given to purchases towards 1.0900 and 1.0945.

Marek Petkovich
Analytical expert of InstaForex
© 2007-2024

Open trading account

InstaForex analytical reviews will make you fully aware of market trends! Being an InstaForex client, you are provided with a large number of free services for efficient trading.




You are now leaving www.instaforex.eu, a website operated by INSTANT TRADING EU LTD
Can't speak right now?
Ask your question in the chat.

Turn "Do Not Track" off