(News Bulletin 247) – The Euro, one of the most reliable barometers of risk appetite on the financial markets, continued to suffer against the “Dollar-safe haven”, as the Minutes from the Fed (tomorrow, 8:00 p.m.), which will inevitably take on a particular color after the publication on Friday of particularly dynamic and solid US employment figures. “Once again, in this very unique period, “good news is bad news”, “clarifies Thomas Giudici, co-head of bond management at Auris Gestion, meaning that any good news on the health of the American economy is a further step towards pursuing a belligerent monetary policy.
“The odds of a 75bp rate hike for the November FOMC, which would be the 4th in a row, are nearly 80% and 20% for a 50bp hike,” notes Vincent Boy (IG France) .
Yesterday, the growing risks of seeing the main economic poles in the Euro Zone go through the recession box penalized risk appetite, especially with the publication of a Sentix index of investor confidence at its lowest since May 2020… The barometer value indicator sank to -38.3, missing yet pessimistic expectations, to the lowest since May 2020. “The continuing uncertainties about the gas and energy situation in winter have not diminished due to the attack on the Nordstream pipelines. In addition to economic worries, there is now also a growing likelihood of an escalation of the military conflict in Ukraine. Overall, there is little reason for hope “, could we read on the cold and laconic commentary accompanying the publication of the firm specializing in behavioral finance…
The Japanese bank Nomura agrees, for which “there is little room for a respite to come”, and which remains pessimistic about the dynamics of the index, materializing a reminder of a scenario of “imminent recession”. Despite the continued deterioration in sentiment, Nomura maintains its view on the ECB. “Recent comments from members of the ECB Governing Council clearly show that they are focused on bringing inflation down to target. This confirms our view that the ECB will hike by 75 basis points at each of the next two meetings (in October and December), followed by a 25 basis point hike in February 2023.”
Note on the statistical side today, the relatively good surprise on the volume of industrial production in Italy, at +2.3% in August against a neutral consensus. The NFIB index of small American companies emerged for its part without relief, at 92.1, close to the target. It will be necessary to wait until tomorrow (producer price index, Minutes) for the agenda of the week to gain in interest. And Thursday with the consumer price indices in the United States.
At midday on the foreign exchange market, the Euro was trading against $0.9700 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 clearly defined stop loss level, which mechanically increases the quality of the money management associated with the operation.
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 0.9707 USD. The price target of our bearish scenario is at 0.9401 USD. To preserve the invested capital, we advise you to position a protective stop at 0.9821 USD.
The expected return of this Forex strategy is 306 pips and the risk of loss is 114 pips.
CHART IN DAILY DATA
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