(News Bulletin 247) – Bearish signals triggered once again on the Euro against a Dollar cheered up by a rather encouraging start to the week on the front of macroeconomic publications. On Tuesday, in addition to the Chicago PMI index and the S&P Case Schiller real estate index of prices in 20 cities, both of which exceeded expectations, traders will have appreciated the score of the consumer confidence index (Conference Board ), down slightly but above expectations at 106.4.
Lynn Franco, senior director of economic indicators at the Conference Board, qualified the survey result, however, noting that “purchase intentions for cars, homes, major appliances, have all contracted, which likely reflects rising interest rates and consumers shifting from big ticket items to spending on services Holiday plans have also eased due to rising prices, indeed inflation remains a major concern for consumers, with their inflation expectations in May virtually unchanged from the high levels in April.”
No surprise to report this morning concerning the final data for the industrial PMi in the Euro Zone, very close to the first estimate, at 4.6 points above the 50-point mark, which, as a reminder, separates a contraction from an expansion of the sector considered.
Currency traders are still tormented by the question of the timing of the peak (or peaks) of inflation, in the United States as in Europe. While several indicators suggest that the United States is about to cross it, particularly with regard to real estate sales volumes, the question is quite different for a Euro Zone that is highly dependent on external energy. The sixth package of economic sanctions against Russia will inevitably weigh on energy prices.
China will also continue – the two subjects are moreover linked – to attract the attention of the trading rooms, while the gradual lifting of restrictions continues, “with the prospect that the worst is behind us […], for Vincent Boy (IG France). “Thus, the country announced the lifting of certain restrictions in Shanghai and Beijing, as well as new support measures, which this time could have a positive effect on the markets.” And therefore on risk appetite, which the Euro faithfully reflects.
At midday on the foreign exchange market, the Euro was trading against $1.0710 about.
KEY GRAPHIC ELEMENTS
the spot has just fallen below its 50-day moving average (in orange), a bottom trend line with a persistent bearish bias. A daily candle close well below the lower shadow of Tuesday’s candle would further flesh out the bearish scenario. The opinion therefore remains bearish but without a clear sign at this stage of a potential increase in volatility.
MEDIUM TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).
Our entry point is at 1.0715 USD. The price target of our bearish scenario is at 1.0455 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0856 USD.
The expected return of this Forex strategy is 260 pips and the risk of loss is 141 pips.
CHART IN DAILY DATA
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