Top.Mail.Ru
empty
22.10.2024 03:28 PM
US dollar holding upper hand

The US dollar is still holding the upper hand in the Forex market. EUR/USD has been declining for 13 out of the last 16 trading days. Asset managers and hedge funds have taken their $13 billion bearish position on the US currency to neutral over the past three weeks. The talk of parity in the major currency pair has resurfaced. Who's to blame for this? Jerome Powell or Donald Trump?

It almost feels like the Republican is envious of the Federal Reserve Chairman. His latest critique touches on the question of what is the easiest job in the world: "Show up at the office once a month, flip a coin to decide the fate of interest rates, and the whole world thinks you're a god." In this sense, what's happening in the markets in October is a balm for Trump's wounds. The rising probability of his victory in the presidential election is pushing up US Treasury yields. The growing appeal of US assets is great news for the dollar.

Dynamics of Donald Trump's popularity and US Treasury yields

This image is no longer relevant

But it's not just Trump-driven trading that determines market sentiment. Jerome Powell has also played a part in the EUR/USD slump. When the Federal Reserve began its monetary policy easing cycle—and did so quite swiftly—derivatives markets assumed that the federal funds rate would drop by 100 basis points over the next three FOMC meetings in November, December, and January. This suggested at least one more significant move.

However, the US nonfarm payrolls for September turned everything upside down. Now the futures market expects borrowing costs to decrease by only 50 basis points between November and January, meaning the Fed will likely pause at one of its meetings.

Market expectations for US funds rate

This image is no longer relevant

This shift in market outlook wasn't driven entirely by macroeconomic data. Recently, FOMC officials have been unanimously underscoring the need for a cautious approach to monetary easing. The brisk pace of rate cuts is now a thing of the past, and it's no surprise—the US economy remains robust. In a strong economy, the risk of accelerating inflation is high. The Federal Reserve doesn't want a repeat of the 1970s when a prematurely declared victory over inflation led to renewed monetary tightening and a double-dip recession.

This image is no longer relevant

History from half a century ago could repeat itself, especially if Donald Trump returns to power in the US. His protectionist policies threaten to disrupt supply chains and drive higher inflation. A combination of a strong economy and trade wars is a potent mix, highly beneficial for the US dollar. While the 45th US president and the Federal Reserve Chair pull the blanket in different directions, the USD index continues its confident rise.

Technical outlook for EUR/USD

Technically, on the daily chart, EUR/USD is now within arm's reach of the lower border of a fair range between 1.0805 and 1.1135. A decisive break through this level will open the path downward for the instrument, toward 1.0710 and 1.0600. Isn't this a perfect reason to add more short positions?

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Summary
Urgency
Analytic
Igor Kovalyov
Start trade
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

Fed Meeting Results and Another Victory for Donald Trump (Potential Renewed EUR/USD Decline and #NDX Rally)

On Wednesday, as expected, the Federal Reserve left all parameters of its monetary policy unchanged, but this did not disappoint market participants. On the one hand, this was anticipated;

Pati Gani 09:59 2025-07-31 UTC+2

The Market Took Wishful Thinking for Reality

"I heard the Fed is going to cut rates in September." Once again, Donald Trump is presenting wishful thinking as fact. The futures market, on the contrary, reduced the probability

Marek Petkovich 09:09 2025-07-31 UTC+2

What to Pay Attention to on July 31? A Breakdown of Fundamental Events for Beginners

A relatively large number of macroeconomic reports are scheduled for Thursday, but only a few of them are of significant importance. Unemployment rates will be published in Germany

Paolo Greco 07:40 2025-07-31 UTC+2

GBP/USD Overview – July 31: The U.S. Inflation Spiral Begins to Unwind

On Wednesday, the GBP/USD currency pair made only a minimal upward retracement, and for most of the day, trading was dull and calm. As we predicted on Wednesday morning

Paolo Greco 04:29 2025-07-31 UTC+2

EUR/USD Overview – July 31: Is the EU–U.S. Agreement a Fiction?

The EUR/USD currency pair maintained its bearish bias on Wednesday. We will discuss all the day's macroeconomic reports in our other articles; this article focuses on the key event

Paolo Greco 04:29 2025-07-31 UTC+2

Trading Recommendations and Trade Breakdown for GBP/USD on July 31: The Pound Fails Under Pressure Again

The GBP/USD currency pair also continued its downward movement on Wednesday, for the same reasons as the EUR/USD pair. The U.S. economy grew by a full 3% in the second

Paolo Greco 04:29 2025-07-31 UTC+2

How Long Will the Euro Keep Falling?

The answer to this question lies in the news backdrop, Donald Trump's trade policy, overall U.S. policy, and the Federal Reserve's stance on interest rates. I completely understand many

Chin Zhao 00:42 2025-07-31 UTC+2

Kiwi Turns Southward

As we previously noted, to confidently forecast the Reserve Bank of New Zealand's (RBNZ) actions at its upcoming August meeting, two key reports were needed — on inflation

Kuvat Raharjo 00:42 2025-07-31 UTC+2

The Dollar Returns to Divergence

Donald Trump's tariffs are already starting to bite. The eurozone narrowly avoided stagnation, while the German economy contracted by 0.1% in the second quarter due to U.S. protectionist policies

Marek Petkovich 00:42 2025-07-31 UTC+2

Gold Avoids Doomsday

For gold enthusiasts, the glass is always half full. When asked why the precious metal hasn't yet surged to $4,000 per ounce, they turn the question around: why hasn't

Marek Petkovich 00:42 2025-07-31 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.