(News Bulletin 247) – Under the weight of an energy crisis threatening to plunge the Euro Zone into recession, and against a backdrop of fears of a hardening of the tone of J. Powell at Jacskon Hole at the end of the week, the Euro validated fully breaking the perfect parity against the dollar. The European currency, one of the most reliable barometers of risk appetite in the financial markets, returned to levels not seen since 2002, the year of its introduction.
The single currency is particularly shaken by the announcement on Friday of the interruption of gas deliveries by Gazprom via the Nord Stream 1 gas pipeline from August 31 to September 2, the Russian group citing maintenance requirements. This announcement had propelled gas prices, which continue to rise.
In Jackson Hole on Thursday, the main “funders” of the planet will discuss the difficulties of the profession… Namely to fight against inflation without penalizing economic activity too much. Initially, currency traders will try to refine their forecasts of a rise in federal rates for the September deadline (+50 or +75 bps). The 75bp option holds the rope for now, and it would only increase the difference in “remuneration” to the benefit of the Dollar, whose safe haven characteristics are moreover fully expressed.
“In the United States, the minutes of the recent Fed meeting showed that its members were considering a slowdown in monetary tightening at some stage, even if rates must remain at levels that are dragging the economy for a while. “, notes César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management. “These statements came as a surprise to the markets, as Fed officials had been displaying an aggressive tone for some time.”
To follow at 4:00 p.m. the manufacturing index of the Richmond Fed and sales of new homes across the Atlantic. For the time being, forex traders are dealing with the PMI activity barometers in the Euro Zone, which came out quite mixed, even exceeding expectations for the German industrial component, in data flash for the current month, at 49.8. As a reminder, the bar of 50 separates, by construction, an expansion from a contraction of the sector considered on this type of indicator calculated after analysis of surveys of purchasing managers.
At midday on the foreign exchange market, the Euro was trading against $0.9920 about.
KEY GRAPHIC ELEMENTS
Below the 50-day moving average (in orange), major dynamic resistance, the trends The bottom line is experiencing further development, with the now validated break of perfect parity (1 Dollar per Euro), a highly psychological threshold. The opinion remains negative below this threshold, pending the appearance of signs of a technical rebound.
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 0.9930 USD. The price target of our bearish scenario is at 0.9701 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0001 USD.
The expected return of this Forex strategy is 229 pips and the risk of loss is 71 pips.
CHART IN DAILY DATA
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