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The euro zone, Sweden, Denmark and Canada have cut interest rates, while Switzerland has already cut them twice. If you hesitate to join your counterparts, you risk seeing your national currency unified. It is not surprising that the US dollar index is growing. Let’s discuss this and make a trading plan for Euro against the US dollar.
Weekly fundamental forecast for the dollar
The Fed is not a hawk among doves, but it appears to be the dove with the sharpest claws, or rather, FOMC officials are trying to portray the central bank as such. Chicago Fed President Austan Goolsbee and Richmond Fed President Thomas Barkin said more data is needed to start cutting interest rates amid more signs of a slowing US economy and easing of other regulatory policies, allowing the US dollar index to… Heading for the third consecutive closure in the green zone. region. The Bloomberg Dollar Index reached its highest level since November.
Dynamics of the US dollar index
Source: Bloomberg.
When you are surrounded by doves, any attempt to delay the decision will play into the hands of your national currency. The euro zone, Sweden, Denmark and Canada have already cut interest rates, while Switzerland has cut them twice. The Bank of England provided evidence of its interest rate decision, and the odds of easing policy in August jumped to over 50%. Japan refused to withdraw quantitative easing in June, signing a death sentence for the yen. The major forex currencies are playing the “weakest link” game, and the US dollar is not in a hurry to join in. In these circumstances, Euro against the US dollar The Bears’ success is no surprise.
The Fed and other central banks stress that their policies are data-driven. If so, FOMC officials will turn cautious, which will weaken the US dollar, against the backdrop of more signs of a slowing US economy: unemployment claims exceeded Bloomberg expectations, new home construction fell to a 4-year low, and… Building permits are at their lowest levels since June 2020.
Housing market indicators in the United States
Source: Bloomberg.
However, this does not happen. Data-driven policies mean that central bankers don’t know what they are doing. Data changes quickly, and monthly statistics are volatile and deceptive. Monetary tightening affects the economy with a time lag of 9 to 12 months. Mistakes seem inevitable.
The Fed may have been willing to ease policy, but when it announced it in December, it accelerated CPI and personal consumption expenditures, undermined investor confidence, and forced it to change its rhetoric. I wouldn’t be surprised if the Fed waits until the last minute to cut interest rates only in December. If so, the US dollar will rise as markets expect more than one policy easing measure.
On the contrary, the ECB intends to continue easing even as inflation accelerates in May, as the Dutch central bank president’s speech indicates. Klaas Knot, a key hawk on the board, said market expectations of “just under three” cuts in 2024 were in line with the optimal path calculated by staff at his central bank.
Weekly trading plan for EURUSD
Thus, the Fed, the dove with the sharpest claws, is pushing toward a recession Euro against the US dollar under. Catch Shorts It opened at 1.0835-1.085 and built on bounces.
EURUSD price chart in real time mode
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