(News Bulletin 247) – The Euro/Dollar currency pair has just made a pullback (chart rejection) perfect on the parity zone, at a level of convergence with its 50-day moving average (in orange), the underlying trend line which has acted as chart resistance for many months. The technical rebound of the Euro, fueled by a lull in the interest rate markets, and therefore a renewed appetite for equities, has already been thwarted.
This lull in the fixed income markets was particularly noticeable in the Treasuries 10 years, in particular since the publication on Monday of the ISM manufacturing activity indicator, which clearly missed expectations, at 50.9 against 52.8 the previous month. “The “prices paid” component fell to its lowest level since June 2020” noted Alexandre BARADEZ (IG France). “And the markets have been sensitive to it. […] This does not mean that the equity markets will immediately move forward without turning around, because other price data will be needed to confirm a trend slowdown.” We should therefore not count on a sharp bullish extension from Wall Street, DAX and CAC to support the single currency.
Another element to watch closely this week is the degree of tension on US employment, a leading indicator of inflation to which the Fed is naturally very sensitive. We will have a decisive meeting on Friday with the NFP report (No Farm Payrolls), a traditional monthly report on the health of employment across the Atlantic. And we will have a “taste” this Wednesday with the publication of the no less traditional survey of the private firm ADP (Automatic Data Processing). The consensus figures the number of job creations in the private sector (excluding agriculture) at 200,000.
To follow the ISM services at 4 p.m.
At midday on the foreign exchange market, the Euro was trading against $0.9905 about.
KEY GRAPHIC ELEMENTS
We resume our bearish work on the Euro/Dollar currency pair, with a suitable entry point, following pullback on parity AND 50-day moving average. With the advantage of having a level of stop-loss clearly defined.
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 0.9908 USD. The price target of our bearish scenario is at 0.9501 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 407 pips and the risk of loss is 93 pips.
CHART IN DAILY DATA
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