empty
18.08.2023 05:44 PM
American exceptionalism, seasonality, and worsening risk appetite push EUR/USD down

The double advantage of the U.S. dollar, coupled with a seasonally strong period for it, makes the bulls' attempts to counterattack in EUR/USD hopeless. No matter how much the euro tries to find its footing, it just can't succeed. The strength of the U.S. economy and the decline in global risk appetite faithfully serve sellers of the major currency pair.

In the first half of the year, investors were preoccupied with discussing the potential for a recession in the U.S. However, their mood abruptly changed in August. Steady high employment growth, unemployment's reluctance to depart from half-century lows, impressive retail sales growth, and accelerating inflation all indicate that a downturn is not imminent. The leading indicator from the Federal Reserve Bank of Atlanta projects a 5–6% growth in U.S. GDP in the third quarter. Too high to leave Treasury bonds in portfolios.

Dynamics of unemployment and estimates of U.S. GDP growth

This image is no longer relevant

The rally in the yields of debt obligations has triggered another driver for the strengthening of the U.S. dollar. It is hard to imagine that with rising real rates on debts, the "greenback" would not grow. Especially as the S&P 500 is undergoing a correction process. This is traditionally perceived by investors as a deterioration in global risk appetite and serves as a basis for purchasing safe-haven assets.

Thus, if someone dislikes the factor of American exceptionalism, they can arm themselves with the loss of investor interest in risky assets. Add to this the traditionally strong months of August and September for the USD index, and the bearish picture for EUR/USD begins to look inevitable.

Much can change in the fourth quarter. Further inflation slowdown in the U.S. will bring back market talks about the dovish pivot of the Federal Reserve and thus weaken the dollar. Moreover, the current surge in bond yields, in terms of real GDP and inflation, looks like a temporary spike. It was affected by large-scale Treasury issuance. In July–September alone, the Treasury plans to sell $1 trillion worth of paper at auctions.

Dynamics of GDP, inflation, and bond yields

This image is no longer relevant

Nordea forecasts a decline in rates on 10-year U.S. debt to 4% with subsequent stabilization. If so, then after a decrease, EUR/USD will rise. However, negativity from Europe does not allow us to expect a recovery in the upward trend.

This image is no longer relevant

The weakness of the currency block's economy has forced the ECB hawks to moderate their rhetoric. While Bloomberg experts still expect the deposit rate to rise to 4%, derivatives do not believe this. It is likely that the monetary tightening cycle is over, putting pressure on EUR/USD.

Technically, on the daily chart of the pair, there is a pullback to the upward trend within the implementation of the Three Indians pattern. The inability of the bulls to hold on to the lower border of the fair value range of 1.0865–1.112 is a sign of their weakness and a reason to increase previously formed shorts in the direction of 1.08.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

AUD/USD: Analysis and Forecast

Today, the AUD/USD pair is showing positive momentum, rebounding from nearly a four-week low. Support has come from the Reserve Bank of Australia's less "dovish" stance, with the central bank

Irina Yanina 12:25 2025-04-02 UTC+2

Markets May React to New U.S. Tariffs with Growth—But Under One Condition... (GBP/USD Downside and USD/CAD Upside Possible)

The day Donald Trump declared "Liberation Day" has arrived. Markets are bracing for the U.S. to introduce comprehensive and large-scale tariffs on its trade partners and potential retaliatory measures from

Pati Gani 09:51 2025-04-02 UTC+2

The Market Needs Proof

It's too late to be afraid. Rumors are circulating in the market that the White House may implement a universal 20% levy instead of reciprocal tariffs—pushing the average import duty

Marek Petkovich 09:16 2025-04-02 UTC+2

What to Pay Attention to on April 2? A Breakdown of Fundamental Events for Beginners

There will be very few macroeconomic events on Wednesday, but yesterday showed us that even a large number of macro reports do not always trigger significant movement—even within

Paolo Greco 06:25 2025-04-02 UTC+2

GBP/USD Pair Overview – April 2: The Pound Still Stuck in Place

The GBP/USD currency pair continues to trade in a flat range. On the 4-hour timeframe, this is a classic flat; on the lower timeframes, it looks more like a "swing."

Paolo Greco 05:14 2025-04-02 UTC+2

EUR/USD Pair Overview – April 2: The Dollar Gets Unlucky Again

The EUR/USD currency pair continued trading sluggishly and reluctantly on Tuesday. The market continued anticipating new tariffs from Donald Trump, even though the macroeconomic background was very strong yesterday. While

Paolo Greco 05:13 2025-04-02 UTC+2

Bitcoin caught in bull trap

The bottom shows no strength, the top has no desire. Even the so-called "smart money" is not rushing to buy Bitcoin, citing a confluence of negative factors. Tepid trading activity

Marek Petkovich 15:58 2025-04-01 UTC+2

USD/JPY. Analysis and Forecast

Today, the USD/JPY pair is struggling to benefit from a slight intraday upward movement, especially amid expectations that the Bank of Japan may raise interest rates at a faster pace

Irina Yanina 11:37 2025-04-01 UTC+2

US stock market: bad news fully priced in

The S&P 500 had its worst quarter in three years. Investors are shifting capital from North America to Europe. Once-booming US tech stocks have collapsed. Major banks and respected institutions

Marek Petkovich 09:13 2025-04-01 UTC+2

April to play crucial role in Europe's gas future

Europe's gas sector is entering a critical phase, as the end of the heating season sets the stage for refilling storage facilities, which are now two-thirds empty after the winter

Miroslaw Bawulski 13:01 2025-03-31 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.