(News Bulletin 247) – Like the equity markets on both sides of the Atlantic, the Euro/Dollar has taken its head out of the water since Friday, and this while fundamentally the situation is n has not changed: fears of a contraction in activity, in particular in the form of an entry into recession in the United States during 2023, remain relevant. On this side of the Atlantic, the latest statistical figures have illustrated both the fragility of the recovery and the lack of investor confidence.
In detail, Thursday, forex traders took note yesterday of a salvo of activity indicators (the famous PMI, surveys of purchasing managers), all off target… In synthetic data for the n the Euro Zone as a whole, the manufacturing PMI (very first estimate) came in at 52.0 in June, dangerously close to the 50-point mark which, by construction, separates a contraction from an expansion in the sector in question. For services, the score comes out at 52.8 against 55.6 expected.
And Friday, it was the turn of the IFO index of the business climate in the first economic power of the Euro Zone to hold the attention: the index is down to 92.3. “The German business climate has darkened,” read the statement accompanying the survey results. “Companies are somewhat less satisfied with their current business situation. Their expectations have become significantly more pessimistic. The threat of a gas shortage is a big concern for the German economy.”
“Despite Jerome Powell’s speech on the continuation of monetary tightening, investors are beginning to become aware of the risk of recession and are already anticipating a slowdown in monetary tightening in the months to come”, notes Vincent Boy, market analyst IG France.
To follow as a priority on the statistical agenda this Monday, for the United States, durable goods orders at 2:30 p.m., home sales in progress at 4:00 p.m. and crude inventories at 5:30 p.m. It should be noted that the week will be rich on the statistical front, with in particular new benchmarks for inflation, German and French, respectively on Thursday and Friday.
At midday on the foreign exchange market, the Euro was trading against $1.0585 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 1.0583 USD. The price target of our bearish scenario is at 1.0351 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0674 USD.
The expected return of this Forex strategy is 232 pips and the risk of loss is 91 pips.
CHART IN DAILY DATA
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