(News Bulletin 247) – The Euro returned to perfect parity against the Dollar, in a perilous position on Thursday, ahead of a major meeting for currency traders at 4:00 p.m., namely the speech that J. Powell, President of the Fed, during the Jackson Hole symposium, a traditional high mass for central bank leaders, which is entering its second day.
A symposium which “will offer Jerome Powell and his counterparts a new forum to explain the importance of ensuring the anchoring of inflationary expectations”, for the strategists of BNP Paribas AM. “This anchoring is all the more important since, while it is likely that the energy supply difficulties will cause a marked slowdown in activity in the euro zone in the second half after a good resistance in growth in the first half, the US economy is not expected to experience a recession, i.e. a phase of below-potential growth, until 2023.”
This is therefore a good opportunity to find out more about the degree of firmness desired in the short term by the Federal Reserve. The challenge is to measure the potential difference in “remuneration” between the two currencies of the spot.
In terms of statistics, the IFO index of the business climate in Germany, the leading economy in the Euro Zone, “relieved” somewhat by widening its loss by only 0.2 points, well beyond a pessimistic target. “A gloomy mood hovers over the German economy,” reads the institute’s press release. “The IFO business climate index fell in August to 88.5 points, compared to 88.7 points in July. Companies are a little less satisfied with their current activity and the strong pessimism of their prospects for the coming months is almost unchanged. Uncertainty among businesses remains high and the German economy as a whole is expected to contract in the third quarter.”
Across the Atlantic, the targets were beaten, whether on the side of new weekly registrations for unemployment benefits, or preliminary Q2 GDP data (-0.6% against -0.7% expected).
This Friday, J. Powell’s speech (4:00 p.m. as a reminder) should not overshadow a program rich in major statistics (PCE prices, household income and expenditure, wholesaler stocks and the U-Mich consumer confidence index) , among other delights…
At midday on the foreign exchange market, the Euro was trading against $1 about.
KEY GRAPHIC ELEMENTS
At this stage, the return, frank, in contact with parity, looks like a pullback (graphic rejection). The bottom bias remains powerfully bearish, below a 50-day moving average (in orange) which exerts significant chart weight.
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 1.0002 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 1.0091 USD.
The expected return of this Forex strategy is 301 pips and the risk of loss is 89 pips.
CHART IN DAILY DATA
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