(News Bulletin 247) – The Euro was in danger pullback on the perfect parity against the dollar, in a context of sharp contraction in appetite for risk since the publication of US inflation in August, inflation which has largely missed expectations, sweeping away the hope of a slowdown in price dynamics across the Atlantic. What even make credible the scenario – not shared by the majority but far from being eccentric – of a increase in key rates by 100 basis points next week after the FOMC (Fed Monetary Policy Board).
Excluding volatile elements (food and energy), prices increased in August by 0.6%, or 6.3% on an annual basis.
“The gradual standardization of supply chains should enable [l’inflation sur les biens] to continue its decline”, for the strategists of Lazard Frères Gestion. “However, this will not make it possible to solve in a global way the problem of inflation in the United States, which today comes more from services.”
the spot EURUSD therefore suffered a “scissors effect”, consisting of two forces:
– a fall in the Euro linked to the need to get rid of risky assets in favor of safe havens
– a rise in the Dollar linked to the mechanical forecast of a stronger “remuneration” trajectory for the greenback.
Yesterday in terms of statistics, the producer price index in the United States came out in line with expectations, contracting 0.1% month-on-month in August. Excluding food and energy (+0.4%), it even slightly exceeded expectations. Currency traders also took note of particularly disappointing industrial production, which contracted sharply by 2.3% month-on-month in July, completely missing expectations that were moreover pessimistic.
To be monitored this afternoon for the United States, retail sales, the Philly Fedthe index Empire State as well as new registrations for unemployment benefits, at 2:30 p.m.
For the time being, currency traders 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%.
At midday on the foreign exchange market, the Euro was trading against $0.9990 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 0.9989 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 288 pips and the risk of loss is 112 pips.
CHART IN DAILY DATA
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