(News Bulletin 247) – “It is not so much the Euro which is weak as the Dollar which is strong”, counterbalanced this morning François François Villeroy de Galhau, Governor of the Banque de France, on the national airwaves. Be that as it may, by reaching parity with the dollar – a first in nearly 20 years – the single currency reflected a massive contraction in risk appetite against the greenback, asserting its attributes as a safe haven, on background of fears of a marked slowdown in the economy, in parallel with galloping inflation.
Inflation will be discussed at 2:30 p.m. with the highly anticipated CPI (Consumer Price Indices) figures in the United States. “For the Fed, this Wednesday’s inflation figure will determine the extent of the rate hike for the next meeting in July,” notes Thomas Giudici (Auris Gestion). “Thus, a (new) bad figure would lead to a further rise of 75 bps. its fight against inflation, which could lead to a change in consumer psychology capable of self-sustaining the inflationary phenomenon.”
Yesterday traders took notice of Germany’s ZEW Business Sentiment Index, at -53.8, completely missing already pessimistic expectations, plunging to the lowest since December 2011. Gas supply fears were not there. are of course no strangers.
ZEW Chairman, Professor Achim Wambach, provided the following additional insights: “The main current concerns regarding Germany’s energy supply, the interest rate hike announced by the ECB and the new pandemic-related restrictions in China have led to a considerable deterioration in the economic outlook. Experts assess the current economic situation significantly more negatively than in the previous month and have further revised down their already unfavorable forecasts for the next six months. Expectations for energy-intensive and export-oriented sectors of the economy have particularly fallen, and private consumption is also assessed as significantly weaker. »
It should be noted that industrial production in the Euro Zone significantly beat expectations in May (+0.8%), according to a fresh publication by EuroStat.
At midday on the foreign exchange market, the Euro was trading against $1.0040 about.
KEY GRAPHIC ELEMENTS
An attitude “contrarian” (against the tide) is to be adopted to play the scenario of a powerful rebound in the direction of the 50-day moving average (in orange), without however calling into question the underlying bearish framework.
MEDIUM TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is positive in the medium term on the Euro Dollar (EURUSD) parity.
Our entry point is at 1.0038 USD. The price target of our bullish scenario is at 1.0349 USD. To preserve the capital invested, we advise you to position a protective stop at 0.9949 USD.
The expected return of this Forex strategy is 311 pips and the risk of loss is 89 pips.
CHART IN DAILY DATA
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