(News Bulletin 247) – The single currency continued to form a bullish reaction above parity against the Dollar, on hopes of a slowdown in the pace of price increases across the Atlantic. The main meeting point for currency traders is clearly, at 2.30 p.m., the publication of the consumer price indices.
For the strategists of Lazard Frères Gestion, the drop in tensions on the supply chains which continues, is a step in the right direction. “Gradual standardization of supply chains should allow this figure [inflation sur les prix des biens] to continue its decline. However, this will not provide a comprehensive solution to the problem of inflation in the United States, which today stems more from services.
Expectations are in any case optimistic, especially for the largest basket of products (-0.1% monthly). Corrected for volatile elements, the CPI is expected to rise slightly by +0.3% for the month of August. This was already the pace of progress in July.
While a downside surprise would favor the continuation of the “risk-on” sentiment that began last week, this should not call into question the Fed’s next moves, which could just as quickly signal the end of recess,” warns Thomas Giudici, co-head of bond management at AURIS Gestion.
For the time being, currency traders are dealing with a further decline in the ZEW index, more deeply than the economists and analysts surveyed had anticipated. The confidence index in the leading economy in the Euro Zone is at its lowest level since October 2008.
“Along with the more negative assessment of the current situation, the outlook for the next six months has deteriorated further. The prospect of winter energy shortages has made expectations even more negative for much of German industry. “In addition, growth in China is assessed less favourably. The latest statistical figures already show a decline in incoming orders, production and exports,” commented ZEW Chairman Professor Achim Wambach.
At midday on the foreign exchange market, the Euro was trading against $1.0160 about.
KEY GRAPHIC ELEMENTS
the spot is back in touch with a moving average (50-day, in orange), which is not just any technical momentum level. This is a resistance level that has made sense since February 23rd. The initiation of short positions, with placement of short stops, is judicious in terms of risk/reward matrix analysis. We will also be attentive to the position of the daily “closing” in relation to the positioning of the 50-day moving average.
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 1.0166 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 1.0275 USD.
The expected return of this Forex strategy is 465 pips and the risk of loss is 109 pips.
CHART IN DAILY DATA
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