Fundamental analysis

Hot forecast for EUR/USD on 3/11/2022

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Formally, the results of the meeting of the Federal Open Market Committee fully coincided with expectations, and the Federal Reserve raised the refinancing rate by 75 basis points. In the very same press release, there were hints of a decrease in the growth rate of interest rates, as inflation has been slowing for the third consecutive month. And against this background, the dollar was clearly losing its position. But then Fed Chairman Jerome Powell came out and the market turned around a hundred and eighty degrees. Even before answering the questions, it became clear that the US central bank was not even thinking about ending the cycle of interest rate hikes, which many had hoped for even before the meeting. It was assumed that the first reduction in interest rates could occur as early as the end of spring next year. Now you can forget about that. Powell made it clear that inflation is still quite high, and the central bank will take any measures to reduce it, so it is difficult to say to what limits the refinancing rate will eventually be raised. Justifying this statement, Powell said that if this is not done, then inflation will remain at a high level for a long period of time, which will lead to devastating consequences for the economy. First of all, this will affect the labor market, where, according to him, signs of an imminent deterioration of the situation are already visible. Although at the moment, unemployment is at its lowest level in the last fifty years. In other words, the Fed will certainly slow down the rate of interest rate growth somewhat, and already in December the refinancing rate will be raised by only 50 basis points. But apparently, the cycle of their hike may stretch until the end of next year, which means that it will be significantly higher than expected. Basically, Powell said it almost in plain text. The main conclusion that follows from Powell is that you should not wait for the moment when interest rates in Europe will be higher than in the United States. Consequently, the dollar will continue to strengthen for a long time.

Refinancing rate (United States):


For the euro, the situation is also aggravated by its own statistics, which clearly loses to the American one. For example, data on the labor market will be published today, and the unemployment rate is likely to rise from 6.6% to 6.7%. So not only is the unemployment rate higher in Europe than in the United States, it is also growing. There is certainly no reason for optimism.

Unemployment rate (Europe):


However, the single currency will have an opportunity to improve its position somewhat today. Due to the pound, which will grow due to the Bank of England’s decision to raise the refinancing rate by 75 basis points. And it’s not even the fact that interest rates are rising that matters here, the market has been ready for this for a long time, but the fact that the pound has fallen considerably in price over the past few days. However, so is the euro. And the market needs a reason for a local correction. And an increase in the refinancing rate fits this role as well as possible.

Refinancing rate (UK):


The EURUSD currency pair showed high activity, as a result of which the variable support level of 0.9850 was broken. As a result, the day closed at 0.9815, which prolongs the current downward cycle from the middle of last week.

During such an intense downward move, the RSI indicator H1 and H4 came close to the oversold zone. This technical signal indicates overheating of short positions in the euro, which allows for a pullback. RSI D1 crossed the 50 midline from top to bottom, which indicates a change of trading interests.

The moving MA lines on Alligator H4 are directed downwards, which corresponds to a descending cycle. Alligator D1 has an unstable signal, an intersection between the MA lines is possible soon.


Expectations and prospects

Based on the local oversold euro, a pullback could form above the value of 0.9850. This movement may well be temporary in the market. As for the bearish scenario, a new round of growth in the volume of short positions is expected after keeping the price below 0.9800.

Comprehensive indicator analysis in the short-term and intraday period is focused on a downward cycle, this is a signal to sell the euro.

The material has been provided by InstaForex Company –