(News Bulletin 247) – Very disappointing PMI yesterday, IFO off target this Friday: the Euro remains under pressure from the specter of contraction in activity and loss of investor confidence. However, the single currency is resisting at levels of…resistance precisely! – while the weekend rhymes with cheap purchases on the equity markets on both sides of the Atlantic.
Currency traders therefore took note yesterday of a salvo of activity indicators (the famous PMI, surveys of purchasing managers), all off target… In summary data for the entire Zone Euro, the manufacturing PMI (very first estimate) appears in June at 52.0, getting dangerously close to the 50 point mark which, by construction, separates a contraction from an expansion of the sector considered. For services, the score comes out at 52.8 against 55.6 expected.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, added the following: “Economic growth in the euro zone showed signs of flagging in June, as the impact of the thaw in demand accumulated during periods of confinement starting already fading, under the effect of the sharp increase in the cost of living and the fall in consumer and business confidence […]. “Inflation rates have indeed remained at pre-pandemic levels, and the latest survey results point to a worrying acceleration in cost inflation in the services sector. However, the moderation in demand observed recently seems to have already favored a slowdown in the rise in the prices of manufactured goods, a trend giving hope that the peak of inflation will soon end.”
This Friday morning, it is the IFO index of the business climate in the first economic power of the Euro Zone which holds 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.”
To follow at 4:00 p.m. the revised data of the US consumer confidence index at 4:00 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.0550 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 1.0552 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 1.0651 USD.
The expected return of this Forex strategy is 301 pips and the risk of loss is 99 pips.
CHART IN DAILY DATA
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