(News Bulletin 247) – Suspended pending interventions from the big moneymakers in Europe, on the occasion of the annual forum of the European Central Bank in Sintra (Portugal), the Euro / Dollar spot remained nailed under a convergence zone of its 20- and 50-day moving averages, in a delicate technical position.
Main information today for forex traders, published even before Mrs. Lagarde’s intervention: the European Central Bank is considering a mechanism for “sterilizing” its purchases of bonds from the most fragile States in the euro zone (to avoid the famous fragmentation ) by encouraging commercial banks to place more cash on deposit with it (therefore to withdraw this cash from the system) via subsidized rates, according to Reuters citing two sources.
The details of the new “anti-fragmentation” tool will be announced at the next monetary policy meeting of the Governing Council on July 21. According to information from Reuters published before this intervention by Christine Lagarde, the ECB could withdraw liquidity from the banking system in order to offset purchases of sovereign bonds (and thus limit the money supply in circulation to bring down inflation).
In terms of statistics this Thursday, the program is concentrated but dense with in particular, to tick in red, an appointment at 4 p.m. with the American consumer confidence index (Conference Board) expected to fall sharply to 100 points, after the disappointments caused last week by revised consumer sentiment data (U-Mich). Also to follow is the S&P house price index at 3:00 p.m. and the Richmond Fed manufacturing index at 4:00 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.0570 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 on Wednesday, on a convergence zone of two remarkable moving averages. Next test: $1.0350.
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 1.0574 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 1.0691 USD.
The expected return of this Forex strategy is 323 pips and the risk of loss is 117 pips.
CHART IN DAILY DATA
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