(News Bulletin 247) – On Saturday, even though the gas valve was to be reopened after three days of “maintenance operations”, the commitment was not kept by the Kremlin. At least things are clarified: the use of gas as a political weapon is assumed by Russian diplomacy.
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. Pressure capable of further fueling fears of a long-term inflationary framework, without a “peak”, but on a high plateau… And this before a Council of Governors of the key European Central Bank, which ends on Thursday .
“Several members of the ECB are now openly discussing the idea of ​​a 75 basis point hike at the meeting on September 8, probably followed by a 50 basis point hike”, recalls Raphaël THUIN, Director of Capital Markets Strategies at Tikehau Capital. “Market expectations for the summer of 2023 on ECB deposit rates now stand at 2-2.25% (given as of September 2, 2022). Fighting inflation at the cost of growth therefore seems to be the new normal for central banks.”
Yesterday, currency traders dealt with two notable disappointments: the services PMI in the Euro Zone, which symbolically fell below 50 points in the final data for August, and the Sentix investment confidence index, which at -31.8, sinks further, completely missing the target. For the PMI, the composite (industry included) in final data comes out at 48.9. below the 50 mark which, by construction, separates a contraction of activity from an expansion.
“The second consecutive monthly decline in activity seen in August in the eurozone private sector raises the likelihood of a decline in the region’s GDP in the third quarter of 2022,” commented Chris Williamson, Chief Business Economist at S&P Global Markets. Intelligence.
“The economic downturn has also broadened, with the service sector now joining manufacturing in contraction territory. After carrying the rebound in growth seen earlier in the year, direct consumer , such as those in travel, tourism and leisure, are now reporting a decline in their activity, as the rising cost of living has prompted households to reduce non-essential spending.
To be followed as a priority on the statistical agenda this Tuesday, the American services PMI (ISM) at 4:00 p.m.
At midday on the foreign exchange market, the Euro was trading against $0.9950 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 0.9947 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 246 pips and the risk of loss is 54 pips.
CHART IN DAILY DATA
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