(News Bulletin 247) – The Euro remained deprived of oxygen, below the threshold of perfect parity against the Dollar, after the disappointment caused this weekend by the decision, on the part of the Kremlin, not to reopen the gas supply via the NordStream 1 gas pipeline, after a three-day outage for “maintenance operations”. The gas shock in Europe is weighing heavily on risk appetite. “Investors could turn more towards Europe this week with many meetings planned, but also the risks concerning energy and the total shutdown of Nord Stream 1 announced on Friday, after 3 days of maintenance” notes Vincent Boy (IG France), which expects increased market volatility.
This nervousness was perfectly felt Friday after the publication of the federal report on US employment. This NFP report (for No Farm Payrolls), which showed signs, albeit timid, of easing on the employment front, and therefore in the direction of an easing on the inflation front, did not have a positive effect on the equity markets only for a few hours, Wall Street returning to significant losses at the close. The opportunity to report that Wall Street will remain closed on Monday due to a holiday (Labor Day).
The unemployment rate rose slightly to +3.7% of the active population, which remains close to full employment, but augurs well for a larger labor pool. Hourly wages (+0.3%) are not slipping, even slowing their rate of increase, and job creations in the private sector (excluding agriculture) exceed expectations at 315,000 creations.
The week will be very dense on the statistical and macroeconomic front, culminating in the conclusion of a Council of Governors of the ECB (Thursday). A very large screw (75 bps) is expected by a large fringe of forex traders, which would bring the “rent” of the Euro to 1.25%. “The ECB seems determined to put the fight against inflation before growth concerns, the macroeconomic configuration remains complex and the political risks high.” summarizes Konstantin VEIT, portfolio manager at PIMCO.
For the time being, currency traders are coping with two notable disappointments: the services PMI in the Euro Zone, which symbolically fell below 50 points in final data for August, and the Sentix investment confidence index, which -31.8, sinks further, completely missing the target.
At midday on the foreign exchange market, the Euro was trading against $0.9920 about.
KEY GRAPHIC ELEMENTS
The bottom bias remains powerfully bearish, below a 50-day moving average (in orange) which exerts significant chart weight. In the immediate future, nervous oscillations around the parity are considered. Note the downward acceleration of the aforementioned background trend curve. The closer the 20-day moving average gets to the 50-day moving average (in orange), the more attractive the bearish entry point looks to us.
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) parity.
Our entry point is at 0.9927 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 1.0080 USD.
The expected return of this Forex strategy is 226 pips and the risk of loss is 153 pips.
CHART IN DAILY DATA
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