(News Bulletin 247) – In a foreign exchange market, like shares moreover, very bumpy, the appetite for risk contracted more, in full annual forum of the ECB in Sintra (Portugal).
The European Central Bank remains determined to fight against inflation, the level of which should remain “excessively high”, warned Christine Lagarde at the opening of the Forum of Central Banks in Sintra. The President of the ECB also gave some indications on the arsenal intended to reduce the gap in yields between the member countries of the euro zone.
Currency traders also have their eyes nervously glued to the statistical releases for the week, which will be marked by numerous inflation indicators. To follow for the moment, this afternoon the final data of the American GDP in the first quarter, at 2:30 p.m. What take benchmarks on a growth threatened by inflation that affects the morale of households. Exactly yesterday, the American consumer confidence index (Conference Board) had the effect of a bomb on Wall Street. now stands at 98.7, below the symbolic bar of 100. Bar which moreover was the starting measurement when the index was created in 1985.
“Consumer confidence fell for the second straight month in June,” said Lynn Franco, senior director of economic indicators at The Conference Board. “While the current situation index remained relatively unchanged, the expectations index continued its recent downward trajectory, falling to its lowest point in nearly a decade. by growing concerns about inflation, particularly rising gasoline and food prices.Expectations have now fallen well below an 80 reading, suggesting weaker growth in the second half of 2022 as well as ‘a growing risk of recession by the end of the year.’
“This inflationary shock is mainly borne by households. This already visible decline in purchasing power is leading to a contraction in retail sales. This contrasts with the morale of companies, whose PMI activity indicators are still expanding (at above 50) despite an emerging deceleration. This could amplify in response to the worrying drop in confidence among US CEOs, back to March 2020 levels”, warns Vincent Manuel, Chief Investment Officer, Indosuez Wealth Management.
At midday on the foreign exchange market, the Euro was trading against $1.0520 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 1.0520 USD. The price target of our bearish scenario is at 1.0251 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0616 USD.
The expected return of this Forex strategy is 269 pips and the risk of loss is 96 pips.
CHART IN DAILY DATA
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