Euro / U.S. DollarShort
EURUSD very real deepening of falls
Fundamental analysis: EUR/USD
Inflation
Monthly inflation in the EU fell by 0.1%, as did core inflation.
CPI in the US is still positive, but we'll have to wait and see if PCE is the same. PCE is more important to the Fed.
If monthly inflation in the US remains at the current level or higher, we can forget about the Fed's target of 2.0%.
In Jackson Hole, Powell made it clear that there is no option to raise the target.
This means that Powell could either raise rates further or keep them higher for longer than in the EU.
Point for the dollar.
The largest economy in the EU, Germany, is facing serious problems.
The industrial sector has been suffering for some time, due to the cutoff of cheap gas from Russia and the total failure in the electric car sector.
German companies are a few years behind in this sector. We'll see how quickly they can catch up.
Recent PMI data showed that the services sector is starting to join the recession.
Equivalent data in the US is not as bad. PMI Composite is still above 50 points, at 50.4 for the last month.
Retail sales in the EU and the US are also favorable to the US.
Charts
https://www.tradingview.com/x/00bTmMYA/
The last upward movement strengthened the EUR by 18.25%, which was very consistent with previous corrections on this currency pair.
The correction was also ideal in terms of the price range, with a 1:1 ratio, as in the last correction from March to December 2020.
From the perspective of the weekly chart, the key level for further decline is 1.0635. Breaking this level could significantly deepen the losses. I'll come back to why I think so at the end.
https://www.tradingview.com/x/CieEILTa/
The daily chart is really interesting. We can identify a head and shoulders reversal pattern here, with two targets of 1.0700 and 1.0476. This fits in well with the picture described above.
But to make things not so simple, we have one more important factor in the game. Namely, the big boys, the COT report. And here, long positions on EUR contracts still outweigh.
Therefore, I assume that breaking the above-described level of 1.0635 on spot could lead to a long squeeze and significantly deepen the losses in the long term.
Of course, for such a scenario to be realistic, the divergence between these economies must continue to deepen and a soft landing scenario must appear in the US and a recession in the EU.
This is my view of the market in a broader perspective, but I trade most situations on shorter time frames, so I can also freely have long positions. However, it's good to keep the general context in mind.
And the most important thing in my trading is that I trade what I see, not what I would like to see on the chart.
Inflation
Monthly inflation in the EU fell by 0.1%, as did core inflation.
CPI in the US is still positive, but we'll have to wait and see if PCE is the same. PCE is more important to the Fed.
If monthly inflation in the US remains at the current level or higher, we can forget about the Fed's target of 2.0%.
In Jackson Hole, Powell made it clear that there is no option to raise the target.
This means that Powell could either raise rates further or keep them higher for longer than in the EU.
Point for the dollar.
The largest economy in the EU, Germany, is facing serious problems.
The industrial sector has been suffering for some time, due to the cutoff of cheap gas from Russia and the total failure in the electric car sector.
German companies are a few years behind in this sector. We'll see how quickly they can catch up.
Recent PMI data showed that the services sector is starting to join the recession.
Equivalent data in the US is not as bad. PMI Composite is still above 50 points, at 50.4 for the last month.
Retail sales in the EU and the US are also favorable to the US.
Charts
https://www.tradingview.com/x/00bTmMYA/
The last upward movement strengthened the EUR by 18.25%, which was very consistent with previous corrections on this currency pair.
The correction was also ideal in terms of the price range, with a 1:1 ratio, as in the last correction from March to December 2020.
From the perspective of the weekly chart, the key level for further decline is 1.0635. Breaking this level could significantly deepen the losses. I'll come back to why I think so at the end.
https://www.tradingview.com/x/CieEILTa/
The daily chart is really interesting. We can identify a head and shoulders reversal pattern here, with two targets of 1.0700 and 1.0476. This fits in well with the picture described above.
But to make things not so simple, we have one more important factor in the game. Namely, the big boys, the COT report. And here, long positions on EUR contracts still outweigh.
Therefore, I assume that breaking the above-described level of 1.0635 on spot could lead to a long squeeze and significantly deepen the losses in the long term.
Of course, for such a scenario to be realistic, the divergence between these economies must continue to deepen and a soft landing scenario must appear in the US and a recession in the EU.
This is my view of the market in a broader perspective, but I trade most situations on shorter time frames, so I can also freely have long positions. However, it's good to keep the general context in mind.
And the most important thing in my trading is that I trade what I see, not what I would like to see on the chart.
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