(News Bulletin 247) – Like the main equity indices in the Euro Zone, the CAC and the DAX, the single currency released significant selling energy at the heart of the week, with risk appetite contracting as fears of an onset of recession in the main economic poles on both sides of the Atlantic was taking shape. The confidence barometer macroeconomic data published very recently (business climate in Germany, US consumer confidence) weigh heavily, in a climate overshadowed by the prospect of persistently high inflation. The latest figures published this morning by INSEE confirm this for France, with a CPI at +0.7% month on month.
On the other side of the Atlantic, the fear of an entry into a price/wage spiral has not been ruled out, just like that of a marked slowdown in industry. “Probably, the next ISM publication should not yet be at 50 (it is at 56.1 in May). However, the business climate is taking this direction slowly but surely. Above all, this slowdown in activity must be reflected in the publications of results which should surprise on the downside from the second half of 2022.” notes Christophe Morel (Groupama AM).
Watch for PCE prices, the Fed’s go-to measure of price momentum, and weekly jobless claims at 2:30 p.m., as well as Chicago PMI at 3:45 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.0390 about.
KEY GRAPHIC ELEMENTS
The failure at the contact of the 50-day moving average (in orange) is now recorded, and the bearish targets in the direction of $1.0350 and $1.0250 are locked. A close at the weekly lows in week 23 reinforced the bearish message. A new contact with the aforementioned trendline would further strengthen the quality of the entry point. This is exactly what happened last Wednesday, on a convergence zone of two remarkable moving averages. Next test: $1.0350, then $1.0250. Below, the perfect parity (1 Dollar per Euro), would act like a magnet.
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 1.0394 USD. The price target of our bearish scenario is at 1.0001 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0485 USD.
The expected return of this Forex strategy is 393 pips and the risk of loss is 91 pips.
CHART IN DAILY DATA
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