(News Bulletin 247) – After a moment of very high volatility in the main risky asset classes yesterday in the wake of the publication of the consumer price indices across the Atlantic, the point of equilibrium seems to have been found as early as mid- day on Wednesday, in a market that anyway favors the Dollar over the long term. Yesterday the CPIs clearly militated for an unabated continuation of an aggressive monetary policy on the part of the Fed, accentuating the probabilities of seeing the gap in “remuneration” increase between the two currencies of the spot.
The publication of the CPIs will have taken on a particular meaning in the aftermath of the Fed Minutes, whose main message to remember is the will, whatever the cost, of the Institution to fight against the rise in prices. In detail, the consumer price index, excluding food and energy, jumped 0.6% in September, against a target of +0.4%. For the largest basket of products, inflation reached 8.2% at an annualized rate. Enough to augur a continuation without pause of the process of raising federal rates. Increases in the housing, food and medical care indexes were the largest among many other causes of the seasonally adjusted monthly increase.
The market matrix therefore remains unchanged, namely the maintenance, whatever the cost, of a bellicose monetary policy on the other side of the Atlantic. The latest jobs report (NFP) and CPIs yesterday showed that the economic “pot” is still too hot for J. Powell’s liking. The option of raising Fed Funds of 75 bps is more than ever on the table for the next deadline.
Yesterday, moreover, weekly registrations for unemployment benefits (+228,000) came out at a level that is still just as low, in a job market in need of manpower, therefore under tension in a certain number of sectors, in particular building.
To follow retail sales in the United States at 2:30 p.m. and the consumer confidence index (U-Mich, preliminary data) at 4:00 p.m. This morning, the Euro is also penalized by the figures for the trade balance in the Euro Zone in August, whose deficit, admittedly structural, increased to -47.3 billion euros, much more than did not let it augur the consensus.
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 0.9739 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 0.9891 USD.
The expected return of this Forex strategy is 338 pips and the risk of loss is 152 pips.
CHART IN DAILY DATA
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