(News Bulletin 247) – The Euro maintained a marked downward bias, both in the short and medium terms, against the Dollar, against a backdrop of recurring fears of the US economy entering recession over the course of next year, scenario weighing heavily on risk appetite. The resolutely offensive tone of the major central banks to fight against galloping inflation, against a backdrop of indecision as to the outcome of the conflict in Ukraine, weighs down an already very fresh atmosphere…
The single currency suffered precisely at midday from a salvo of activity indicators (the famous PMI, surveys of purchasing managers), all off target… In summary data for all In the Euro Zone, 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.
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.”
Across the Atlantic, the battle against inflation initiated by the central bank of the United States risks causing a recession in the world’s largest economy, as Jerome Powell, the head of the Fed, has half-acknowledged. The second part of the hearing of the head of the US Federal Reserve is scheduled for Thursday before the House of Representatives. The content of the speech will probably be modeled on that made during the great oral in front of the parliamentarians the day before.
To follow at 2:30 p.m. the new weekly registrations for unemployment benefits.
At midday on the foreign exchange market, the Euro was trading against $1.0500 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.
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 1.0503 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 1.0607 USD.
The expected return of this Forex strategy is 252 pips and the risk of loss is 104 pips.
CHART IN DAILY DATA
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