(News Bulletin 247) – Beneath a 50-day moving average (in orange) which has surgically acted as graphic resistance since February 24, the Euro, the risky currency par excellence, continued to suffer from entry risks imminent decline of the main economies of the Euro Zone (Germany, Italy, France) in recession, where the Dollar, thanks to its recognized characteristics as a safe haven, was gaining ground against a background of continuation, at this stage without pause, of a policy aggressive monetary policy from the Fed.
According to strategists at Pictet Wealth Management, “persistent inflation will likely lead to another 75 basis point rate hike at the November 2 FOMC meeting, bringing the average federal funds rate to 3.88%.” […] but then the Fed will broaden its horizons.”
[Elle] may reassess the impact of likely weakening labor market dynamics and deteriorating market liquidity – so a pause in rate hikes in December is possible if economic data deteriorates sharply while conditions financial tightening further.”
In terms of statistics, the ZEW index of confidence in the German economy came out deep in red territory. “The current economic situation is again rated significantly worse than the previous month. The likelihood of real gross domestic product declining over the next six months has also increased significantly. Overall, the economic outlook has deteriorated again” , comments the president of the ZEW, professor Achim Wambach, on the last publication of the eponymous index.
For the time being, core inflation data in the Euro Zone came out in line with expectations, with no deviation from initial estimates, at +4.8% year on year for the month of September. Japanese bank Nomura expects for the October Governing Council “the ECB will raise all three policy rates by 75 basis points, bringing the deposit rate to 1.50%. We continue to expect this to happen. will be followed by a 75 basis point hike in December. [Nomura] now forecasts a 50 basis point hike in February 2023 (vs. 25 basis points previously).”
“The deterioration in the economic situation remains moderate for the moment, but the signs of a reversal are multiplying and the impact of the energy crisis has probably not yet fully made itself felt, thanks to government support measures,” says Julien- Pierre Nouen (Lazard Brothers Management).
To follow housing starts and building permits across the Atlantic at 2.30 p.m., and crude stocks at 5 p.m.
At midday on the foreign exchange market, the Euro was trading against $0.9820 about.
KEY GRAPHIC ELEMENTS
We are resuming our bearish work on the Euro/Dollar currency pair, with an adequate 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 0.9820 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 1.0001 USD.
The expected return of this Forex strategy is 419 pips and the risk of loss is 181 pips.
CHART IN DAILY DATA
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