(News Bulletin 247) – The Euro, one of the most significant markers of risk appetite on the financial markets, fell back below parity against the Dollar, a safe haven which, moreover, saw its potential for “yield” inflate since the release earlier in the week of US inflation figures showing anything but the hoped-for slowdown. Enough to put on the table the hypothesis of a 100 basis point increase in Fed Funds next week, following the September 21 issue of a new FOMC (Federal Open Market Committee).
“Rising housing costs [et] wage increases have not slowed down, despite a slight rise in the unemployment rate”, notes Christian Scherrmann, US economist at the asset management giant DWS. “It is possible to act on these two indicators through monetary policy and a 75 basis point hike at the September meeting, and should therefore be seen as the minimum the Fed can do.”
Yesterday the operators had to deal with the publication across the Atlantic of half-fig half-grape figures. If registrations for unemployment benefits (213,000 new registrations last week) and retail sales (+0.3% thanks to car purchases) are reassuring, the Philly Fed (Philadelphia Fed manufacturing index) is sinking further, towards -10. On this side of the Atlantic, operators took note of the trade balance in the Euro Zone, with a deficit of more than 40 billion euros, very far from the consensus, the target being missed by more than 30% .
In this context, the PMI activity indicators (survey of purchasing managers), in preliminary data for the month of September, will be decisive, and therefore particularly scrutinized. The German manufacturing PMI will be placed at the top of the pile of files…
To follow this Friday the American consumer confidence index (U-Mich, preliminary data), at 4:00 p.m. High-impact indicator also, in the event of course of deviation from the consensus, in an economy where consumption is, as a reminder, the main driver of national wealth creation. In the immediate future, 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.
At midday on the foreign exchange market, the Euro was trading against $0.9955 about.
KEY GRAPHIC ELEMENTS
The passage, again, below parity with the Dollar is symbolic. It reinforces the bearish character of the bottom 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 0.9961 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 260 pips and the risk of loss is 140 pips.
CHART IN DAILY DATA
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