(News Bulletin 247) – The short technical rebound of the Euro yesterday was early thwarted by the ZEW index of confidence in the German economy, which at -55.3, indeed missed expectations that were nevertheless highly pessimistic. Dr. Michael Schröder, ZEW researcher and head of the survey, provided the following insights: “ZEW economic expectations are falling slightly again in August after a sharp drop in the previous month. Financial market experts therefore expect a further decline in already weak economic growth in Germany.Continued high inflation rates and expected additional costs for heating and energy lead to lower earnings forecasts for the household consumption sector. for the financial sector are improving due to the assumed further increase in short-term interest rates.”
And the first estimates of GDP in the Euro Zone in Q2, at +0.6% against a target of +0.7%, do not help to stimulate the barometer of appetite for the risk represented by the single currency. Currency which “lateralizes” in the very short term towards $1.0175, in the nervous expectation of Minutes from the Fed, tonight at 8:00 p.m. The minutes of the last FOMC meeting will be particularly followed, in the wake of an oh so much appreciated slowdown in inflation across the Atlantic.
“If the CPI inflation rate for July has indeed come out in sharp slowdown”, notes Sébastien GRASSET (Auris Gestion)”, below expectations (+0% month-on-month against +0.2% expected and +1.3 % in June), and this, even for its Core component (+0.3% month-on-month against +0.5% expected and +0.7% in June), “you have to know reason to keep because the prices of services (supported by the strong tensions on the labor market and the related wage increases) and food products continue to progress”.
“Neel Kashakari even added that it would be necessary for the FED to raise its key rates to 4% this year and to continue in 2023 towards 4.5%.” The market is, however, expecting a downward turn in the dollar’s rent from the second half of next year.
To follow at 2:30 p.m. retail sales across the Atlantic for the month of July.
At midday on the foreign exchange market, the Euro was trading against $1.0180 about.
KEY GRAPHIC ELEMENTS
The bearish message is immediately reinforced by the attitude of the spot in contact with the 50-day moving average (in orange), resistance since February 23. This basic trend curve is also seeing its slope increase.
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 1.0178 USD. The price target of our bearish scenario is at 0.9801 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0256 USD.
The expected return of this Forex strategy is 377 pips and the risk of loss is 78 pips.
CHART IN DAILY DATA
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