(News Bulletin 247) – The Euro remained stuck in perfect parity against the Dollar, in a precarious balance on the eve of the outcome of a new Fed Monetary Policy Committee. Since the publication of inflation figures for August (in particular the “core” CPI), the scenario of a 100 basis point hike is no longer excluded, even if 75 bp remains the most cited option by the economists and analysts surveyed.
For Vincent Manuel, Chief Investment Officer, Indosuez Wealth Management, the Dollar, with the confirmation of the maintenance of an “ultra-aggressive” monetary policy, retains a decisive advantage. “Propelled by the rise in interest rates, the dollar was also supported by the risk aversion environment accompanying this rate hike, as investors sought the safety of the global reserve currency – which happens to be the currency developed markets offering the best return.”
For its part, the euro suffers from its character as a risk appetite barometer. As such, the publication of the PMI indicators on Friday will be decisive (preliminary data for the current month). The German industrial component will be scrutinized in particular. As a reminder, the PMI (for Purchasing Managers’ Index) constitute a barometer of economic health, calculated after analysis of a past survey of purchasing managers. This is a valuable leading indicator for forex traders.
The gloomy geopolitical framework does not plead in favor of the Euro, in particular for its repercussions on gas prices, whose decline since the beginning of the month must be confirmed. “Faced with European winter consumption of approximately 250 billion cubic meters, current reserves do not allow us to be protected from the risk of shortages. In the event of a total stoppage of Russian gas deliveries, restrictions will apply. will impose in certain countries, in particular in Germany”, warns Régis Bégué, of Lazard Frères Gestion.
“President Xi has said that China is “ready to work with Russia to defend the fundamental interests of both countries,” said César Perez Ruiz, Chief Investment Officer and CIO at Pictet Wealth Management. “The decoupling between the United States and China thus seems to be accentuated, while the polarization of the world is increasingly clear.” An additional source of volatility on risky assets…
To be continued at 2:30 p.m., in the statistical chapter, housing starts and building permits in the United States.
At midday on the foreign exchange market, the Euro was trading against $1.
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. The return to high volatility is near.
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 1.0009 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 308 pips and the risk of loss is 92 pips.
CHART IN DAILY DATA
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