(News Bulletin 247) – In a climate of risk aversion, and speculation around a 100 basis point rise in Fed Funds On Wednesday, the Euro Dollar currency pair fell back below perfect parity against the Dollar, at the dawn of a week which will revolve around two major meetings: firstly the Monetary Policy Committee, on Wednesday, and a battery of activity indicators (PMI) on Friday.
The FOMC will be scrutinized especially since the latest US inflation figures were particularly disappointing. “The persistence of core inflation [corrigée des éléments volatils] obliges the Fed to continue its giant steps”, for the strategists of Dorval Asset Management. [Les marchés] “are finally beginning to better integrate the reaction function of central banks. They now anticipate a rate of 4.5% for the Fed in March 2023, and 2.5% for the ECB.”
Friday, statistics side, to report important figures, but without impact in this case, because without deviation from the target. The consumer price indices in final data for August in the Euro Zone did not deviate from the initial estimates. Namely that in data corrected for volatile elements (food, energy, alcohol and tobacco), prices rose by 4.3% at an annualized rate. Across the Atlantic, the consumer confidence index (U-Mich, preliminary data) came out slightly up, at 59.5.
At midday on the foreign exchange market, the Euro was trading against $0.9975 about.
KEY GRAPHIC ELEMENTS
The passage, again, below parity with the Dollar is symbolic. It strengthens the character bearish background bias. Especially since it is following the formation of two consecutive high shadows above the 50-day moving average (in orange), that volatility has increased. This bottom trend line is definitely a dynamic level of resistance that is as reliable as it is valuable. In the immediate future, we are witnessing a short pullback on parity.
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 0.9972 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 1.0101 USD.
The expected return of this Forex strategy is 271 pips and the risk of loss is 129 pips.
CHART IN DAILY DATA
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