EUR / USD: Complex equation, between settling inflation and pandemic fears

(News Bulletin 247) – If the underlying bias remains undoubtedly bearish on the EURUSD spot, the state of strength in the short term is reflected in a rebalancing, the Euro continuing to lose points in a context of loss of appetite for the risk, and the Dollar … also, against a backdrop of violent ebb in crude prices, and in the perspective of an adjustment of monetary policy in 2022 with the appearance of the new “Omicron” variant.

This variant, about which scientists still know very little, is a thorn in the side of the big “money-makers” of the planet, who for the main ones, are just beginning their path towards monetary normalization. Federal Reserve boss Jerome Powell again cast a chill by acknowledging, in response to a question about the appropriateness of retaining the term “transient” to qualify the current spike in inflation, that the time has come to withdraw that word. … For the president of the Fed, recently chosen for a second term, if the price increases are broadly linked to supply problems, these increases have spread more globally and the risk of durably higher inflation s ‘is increased. In other words, it is a bit of the whole scenario put forward in recent months that has been demolished, and the banker recognizes that we will have to discuss a more rapid withdrawal of unconventional support measures, without even talking about a rate tightening.

A scenario of two federal rate hikes instead of three in 2022 now has the advantage. Basically, the appearance of this new variant would not ultimately grant the most precious good: time? This is the thesis defended by Jean-Jacques Friedman – Investment Director of VEGA Investment Managers, a subsidiary of Natixis Wealth Management. “If caution is needed in the short term, Omicron is giving back time by allowing J. Powell not to succumb to the pressure of recent statistics and to settle for more aggressive monetary tightening. In fact, investors are forecasting now two key rate hikes by the Fed in 2022, compared to three previously. “

Yesterday the forex traders took note of the final data of industrial PMI indicators (surveys of purchasing managers) in Europe. For the Eurozone as a whole, the data hardly deviates from the consensus (58.4 against 58.6 in the first estimate for November). Chris Williamson, Chief Business Economist at IHS Markit, comments on the latest survey figures: “The sustained growth in the eurozone’s manufacturing sector shown by the PMI Index in November masks the severe difficulties manufacturers are currently facing. Indeed, while demand remains high, as evidenced by the further sustained rise in new orders, supply chain disruptions have intensified at an alarming rate. Hindered by input shortages, the average growth rate of production for the fourth quarter as a whole is currently at its lowest level in a year and a half. “

At the same time, he adds, “the upsurge in the Covid-19 epidemic darkens the outlook for short-term activity, risking indeed reinforcing disruptions in supply chains and causing further displacement. spending from consumer services to consumer goods, thus exacerbating the imbalance between supply and demand. “

Yesterday on the other side of the Atlantic, the PMI (ISM) hardly deviated from the target either, at 61.3 for the month of November. In addition, the survey on employment by the human resources firm ADP reported 534,000 job creations in the private sector, excluding agriculture. Verdict tomorrow with the Federal NFP (Non Farm Payrolls) monthly report.

In the immediate term, the two main landmarks of the morning, statistical side, are on the one hand the confirmation of an unemployment rate of 7.3% of the working population in the Euro Zone, but above all a surprise increase of 5.4% in prices. “producers” on a monthly basis in the Euro Zone, ie in comparison with the month of October over the month of September. If we compare to October 2020, the outbreak is 21.9%.

At midday on the forex market, the Euro was trading against 1,1330$ about.

KEY GRAPHIC ELEMENTS

The short current was strongly reinforced by the break of a technical zone at 1.1530, on marubozu on November 10th. This is a major fact, which resulted in a massive release of selling energy. The short term is aligned with the medium term, bearish, on the Euro / Dollar currency pair, but the entry point is no longer optimal, as the probabilities of the formation of a protest rebound increase at this stage. Traders will temporarily prefer to stay out of the spot while waiting for a suitable entry point.

MEDIUM-TERM FORECAST

In view of the key graphical factors that we have mentioned, our opinion is neutral in the medium term on the pair Euro Dollar (EURUSD).

We will keep this opinion neutral as long as the price of the pair Euro Dollar (EURUSD) is positioned between the support at 1.1150 USD and the resistance at 1.1360 USD.

DAILY DATA CHART

©2021 News Bulletin 247