EUR / USD: Both currencies suffer together

(News Bulletin 247) – Between a Euro compressed by the sudden loss of appetite for risk and a Dollar whose “potential” for remuneration is revised downwards for next year, the spot EURUSD was balancing not without nervousness, under very significantly bearish short and long moving averages.

The stress of the markets, caused by the discovery of a new variant of the coronavirus potentially more dangerous than the Delta, is reflected in a tension in the foreign exchange market.

“The rapid contagion is of concern, although the effects appear to remain mild and vaccination rates across the world may avoid facing too severe restrictions and too severe an impact on the economic recovery.” notes Vincent Boy (IG France).

While the question of the pace of the normalization of US monetary policy is called into question, inflation data (consumer prices) will be released on Thursday. Enough to serve as raw material for the Fed’s decision, expected week 50. Valuable benchmarks on employment were also published on Friday. The report shows that the US economy created over the period “only” 210,000 jobs in the private sector (excluding agriculture).

With wage dynamics showing no signs of overheating, the report gives J. Powell a bit of slack. Already earlier in the week, Jean-Jacques Friedman – Investment Director of VEGA Investment Managers, a subsidiary of Natixis Wealth Management, wondered whether the appearance of this new variant would not ultimately grant the most precious asset to the big money manager: the time ?

In any case, the discovery of the Omicron variant of Covid 19 is […] the warning that at least as much as inflation, the virus remains a determinant of the markets which must be approached not as a hypothesis, but as a certainty with an unknown temporality “, summarizes Alexandre Hezez, strategist for the Richelieu Group.

On the European side on Friday, currency traders took note of the final data of the PMI Services activity indicators. For the Eurozone as a whole, the index stands at 55.9, slightly below expectations. Composite data (with industry included) is therefore available. Chris Williamson, chief economist at the institute, warns: “An improvement in the economic growth rate reported by the euro area PMI is likely to be shortlived. Not only has demand growth weakened, but demand growth has weakened. Business expectations for future growth also declined as concerns about the pandemic escalated again. With data collected before the Omicron variant was announced, sentiment about the near-term outlook will inevitably have been further more shaken, for both industry and services. More resilient expansions are being recorded in Spain and Italy, although even here recent gains are at risk if social distancing restrictions are to be tightened. “

In the immediate future, this morning was published the Sentix index of investor confidence in the Eurozone. It is clearly down to 13.5, below expectations.

At midday on the forex market, the Euro was trading against 1,1290$ 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 neutral opinion 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

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