(News Bulletin 247) – The forces involved tended to balance out on the Euro/Dollar pair at the approach of appointments marked in red in the agenda of forex traders, namely new benchmarks on US inflation on Friday and tomorrow’s outcome of a new Board of Governors of the European Central Bank (ECB). If a status quo on the rates themselves is acquired, the operators will inevitably want to know more about the intentions and the degree of aggressiveness for the July deadline.
For Frederik Ducrozet, Head of Macroeconomic Research, and Nadia Gharbi, Senior Economist, of Pictet Wealth Management, “the scenario of a 50 basis point hike will remain on the table. As we expect the ECB to opt For the safer option of a 25 basis point hike in July, recent inflation data has raised the likelihood of a move by 50 basis points. Ms. Lagarde did not explicitly rule out this option, neither did Philip Lane, although the chief economist backed a “gradual” normalization process in the form of a “benchmark pace” of 25 basis point quarterly hikes.”
The question of this estimated rate of increase is naturally an essential key to gauging the differential in “remuneration” to come between the two currencies of the spot.
Yesterday the bad macroeconomic surprise of the day was definitely the dynamics of German industrial orders, which contracted by 2.7% in April on a monthly basis, completely missing expectations. As a reminder in March, the contraction amounted to -4.2% (updated figures). The force is antagonistic on Wednesday with an upward revision of the growth dynamic in the Euro Zone in Q1, to +0.6 quarterly.
At midday on the foreign exchange market, the Euro was trading against $1.0720 about.
KEY GRAPHIC ELEMENTS
the spot has just fallen below its 50-day moving average (in orange), a bottom trend line with a persistent bearish bias. A daily candle close well below the low shadow of Tuesday’s 05/31 candle would further flesh out the bearish scenario. The opinion therefore remains bearish but without a clear sign at this stage of a potential increase in volatility. The stop is clearly identified, just above the weekly highs (week 22) reached on Monday 05/30.
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 1.0706 USD. The price target of our bearish scenario is at 1.0455 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0788 USD.
The expected return of this Forex strategy is 251 pips and the risk of loss is 82 pips.
CHART IN DAILY DATA
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