EUR/USD: Unchanged market psychology

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(News Bulletin 247) – The Euro remained in difficulty against the Dollar in an inflationary environment that militates for an uninterrupted pursuit of the bellicose monetary policy of 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.”

The euro, for its part, as a risky asset, remained under pressure from the risk of the main economic poles of the monetary union (Germany, France, Italy) entering recession. The Sentix index of investor confidence, published last week at its lowest since May 2020, as well as the German ZEW, published today, largely in negative territory, are all reliable barometers of this. “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.

In terms of statistics yesterday, the New York Fed’s manufacturing index (Empire State Index) came out at -9.1, completely missing the target, without obviously causing any turmoil for the markets. Remember that anything that can encourage the Fed to give a little “slack” on the ultra-tight monetary rope is welcome…

At midday on the foreign exchange market, the Euro was trading against $0.9830 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 0.9835 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 0.9936 USD.

The expected return of this Forex strategy is 434 pips and the risk of loss is 101 pips.

CHART IN DAILY DATA

©2022 News Bulletin 247

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