(News Bulletin 247) – The Euro Dollar currency pair symbolically fell below the level of perfect parity the day after the outcome of a Board of Governors which, if it did not give birth to surprises, will have constituted a preparation of the minds for the last meeting of this trying year, in December. Key rates rose by 75 basis points to now stand at 2.00%.
“Certainly, the president of the ECB, Christine Lagarde, avoided talking about the neutral interest rate during the press conference”, notes Ulrike Kastens, economist Europe, DWS.
“However, in view of the high inflation rates, it did not rule out the possibility that the central bank would have to raise the policy rate beyond a neutral interest rate level in order to reach the target again. ECB inflation target. On the other hand, no statement has been made on the level of the next interest rate step in December 2022. This will largely depend on the extent of the economic slowdown. However, it is likely that ‘it is at least 50 basis points.
As a reminder, the neutral rate is a construction: it is the key rate beyond which the ECB, or any other central bank for that matter, causes a slowdown in activity. Below this, the economy continues to “warm up”.
In the immediate term this morning, traders have just taken note of preliminary data for GDP in Q3 in Germany, up 0.3% quarter on quarter, well beyond expectations made pessimistic since the first economy of the Euro Zone, confirmed that it would enter recession at the turn of the year.
To be followed across the Atlantic, the PCE consumer price index, household expenditure and income at 2:30 p.m., current home sales and the consumer confidence index (U-Mich, revised data, at 4:00 p.m.).
Next week will be very statistically oriented on the American employment front, with the monthly NFP report on Friday (for No Farm Payrolls) of October. Currency traders will have the traditional “taste”, Wednesday, with the very followed (because reliable) survey of the private firm in human resources ADP. So many opportunities to precisely measure the degree of tension on employment and wages, dials followed very closely by the Fed in the construction of its monetary policy.
At midday on the foreign exchange market, the Euro was trading against $0.9950 about.
KEY GRAPHIC ELEMENTS
In significant volatility, the currency pair has successively drawn two marubozus in daily data, of equal magnitude, and of comparable level, around the perfect parity, which continues to constitute a pivot level in the immediate future.
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 0.9954 USD. The price target of our bearish scenario is at 0.9666 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0095 USD.
The expected return of this Forex strategy is 288 pips and the risk of loss is 141 pips.
CHART IN DAILY DATA
©2022 News Bulletin 247
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
