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28.07.202209:44 Forex Analysis & Reviews: Trading plan for EUR/USD and GBP/USD on July 28, 2022

The market has long priced in a 0.75% rate hike by the Fed. Therefore, it came as no surprise. Meanwhile, the greenback's steep fall triggered by Cair Powell's comments came unexpectedly. Indeed, his statement caused panic in the market.

United States Interest Rate:

Exchange Rates 28.07.2022 analysis

Firstly, he gave no details as to the pace of a rate increase in September and said the Fed would be guided by inflation when making decisions in the future. Therefore, the rate may be lifted by another 0.75% in September, and the market has long been prepared for this. Yet, there is now no guarantee of such a rise in interest rates. On the contrary, there is a possibility of a slowdown in the pace of rate hikes.

Secondly, Powell said nothing about a looming recession. When he was asked about it, he responded that there was no recession and that the first estimate of Q2 GDP, which is published today, could be somewhat inaccurate.

Lastly, he asserted that the regulator would seek employment growth, although the first signs of overheating in the labor market appeared in the spring. This may well be a cause for a recession and an explosive growth in unemployment. In situations like this, the regulator, on the contrary, should strive to stabilize the labor market. Otherwise, the consequences will be dire. Yet, the regulator sees no signs of a recession, according to the chairman.

United States GDP:

Exchange Rates 28.07.2022 analysis

All this not just surprised investors but spooked them. Therefore, the dollar got weaker. Nevertheless, due to the difference in interest rates, the dollar is likely to rise again soon. Today, however, it will probably keep incurring losses. In the second quarter, economic growth in the US is projected to slow down, which is contrary to Chair Powell's words.

Exchange Rates 28.07.2022 analysis

EUR/USD trades in the 1.0150/1.0270 sideways range again. The euro gained over 100 pips. There has been no overbought signal made so far. In this light, growth may extend.

Exchange Rates 28.07.2022 analysis

GBP/USD moved further up, with a correction extending to new price levels. Despite signs of being overbought in the short term, demand for the sterling remains strong. Should the pair settle above 1.2150, the pound will gain another 50-70 pips. Traders will consider an alternative scenario if the price falls below 1.2150 on the H4 chart.

*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.

Mark Bom,
Analytical expert of InstaSpot
© 2007-2024
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