(News Bulletin 247) – The dynamics of risky assets, a family including equities, oil and the Euro, converged over this first part of the week, taking advantage of a lull in rates to undertake a strong reaction, while remaining rooted in a trend (the trends) background bearish. Classically, in a basic downward movement, and at the approach of an abdication movement, the entry into erratic phases, with a succession of short episodes of very strong increases and very strong decreases, is observed.. We are approaching this phase, in particular on the single currency.
“Volatility and uncertainty are being generated by a combination of important economic data, escalating political agendas and hawkish central bank communications,” said Warren Hylan, Emerging Markets Portfolio Manager at Muzinich, who relies on behavioral analysis: “Investors have lost the anchor of forecasting and must adapt their investment expectations to their worst fears or greed.”
In terms of statistics yesterday, let’s recall the disappointment caused by the publication, in final data, of the German industrial PMI, which came out at 47.8, against 48.3 in the first estimate. An activity indicator that alone militates for the imminent entry into recession of the first economy in the Euro Zone. Phil Smith, Economics Associate Director at S&P Global Market Intelligence, coolly commented on the figures: “Soaring energy prices have ended the slowdown in input cost inflation seen in recent months, the leading to a reacceleration in September. If demand continues to fall in the coming month as companies expect, sustaining higher costs will inevitably become increasingly more difficult, which will mechanically squeeze margins. Indeed, we We’re already getting reports of some manufacturers trying to improve cash flow by depleting inventory from purchases.”
On Tuesday, the producer price index in the Euro Zone showed a monthly increase of 5.0% in August, an increase in line with expectations. To follow at 4:00 p.m. the new JOLTS job offers in the United States, the first figure of a rich week in this regard, with the ADP survey tomorrow, registrations for unemployment benefits on Thursday and the federal monthly report NFP on Friday.
At midday on the foreign exchange market, the Euro was trading against $0.9890 about.
KEY GRAPHIC ELEMENTS
The Euro challenge bounce, developed on September 28 and 29 in significant volatility, is already showing signs of running out of steam as it approaches the 20-day moving average (in dark blue). We would prefer to stay out of spot as long as the signs of return to the trends bearish are not clearer, however. Particularly with regard to the positioning of the 50-day moving average (in orange), a particularly valuable benchmark since mid-February.
MEDIUM TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).
We will maintain this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 0.9500 USD and the resistance at 1.0000 USD.
CHART IN DAILY DATA
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