(News Bulletin 247) – The Euro/Dollar remained under strong pressure, below perfect parity, as the Board of Governors of the European Central Bank approaches. The latter will end tomorrow with a decision to raise rates (+75 bps in all likelihood), at a time when inflation is becoming chronic, especially since Moscow has now clearly enacted the use of gas exports as a political weapon.
The gas tap via the NordStream1 gas pipeline was to be reopened on Saturday after three days of “maintenance operations”, but the commitment was not kept by the Kremlin. So certainly some Russian gas continues to arrive in Europe by other routes, and the Europeans did not wait for this situation to sign new contracts with other suppliers, but it is clear that additional pressure takes place, pushing the energy crisis on the Old Continent up a notch.
Some managers even have a particularly pessimistic view of the situation, like Charles MONOT (Monocle AM): “Dependence on Russian gas in Europe is real (up to 45%). We talk a lot about Germany, but Italy is also very concerned. In addition to heating us, gas allows us to produce electricity. Our network and our stocks should protect us until March 2023. If the following months are cold, it will have to make a choice: cut off the gas or cut off the electricity. Cutting off the gas network is dangerous, so the choice will be quickly decided: we will cut off the electricity.”
In terms of statistics, across the Atlantic, the ISM Services index in the United States stood at 56.9 points in August, after 56.7 in July, and well above the expectations of analysts who were counting on 55.5, a sign that the US economy is holding up despite inflation and rising interest rates.
For the time being, the revision of growth in Q2 in the Euro Zone, to +0.8% quarterly, allows the single currency to control its hemorrhage.
At midday on the foreign exchange market, the Euro was trading against $0.99 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. This is the reason why the money management invites us to bring the protective stop closer.
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 0.9897 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 196 pips and the risk of loss is 104 pips.
CHART IN DAILY DATA
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