(News Bulletin 247) – While the prospect of continued monetary tightening by the ECB seems inevitable, especially since yesterday’s publication of record inflation in the Euro Zone, the Euro/Dollar currency pair remained below perfect parity (1 Dollar per Euro), with the approach tomorrow of the outcome of a new Monetary Policy Committee of the Fed.
The challenge, beyond a widely anticipated increase of 75 basis points in Fed Funds is to refine the “neutral” rate projections, ie the interest rate beyond which the Fed acts as a braking force preventing the economy from overheating. The Federal Reserve will be able to rely on the PCE indices published on Friday. Consumer prices according to this index (Personal Consumption Expenditures Price Index) increased by 6.2% over one year. Over October, prices rose 0.5%, within target. The Fed will naturally take into account, moreover, tensions on employment, while the monthly figures (NFP) are expected for Friday. Tomorrow, the survey of the private firm in HR ADP will give a valuable taste. This Tuesday, new job offers (JOLTS) will be scrutinized.
“At this stage, if the “dovish pivot” seems to be approaching, it is not yet certain! Indeed, despite the onset of recession, the signals militating for a continuation of the monetary tightening cycle have not yet dissipated and encourage us to remain cautious” warns Romane Balin, (Auris Gestion). Be careful, therefore, “of the false start, in terms of “dovish pivot””, and this, on both sides of the Atlantic.
As a reminder, the inflation figures (consumer price indices as an initial estimate for the current month) showed a surge in the Euro Zone, at +10.7% at an annualized rate, and +5.0% excluding food, energy, alcohol and tobacco, the most volatile elements. “As for the main components of inflation in the Eurozone, energy is expected to experience the highest annual rate in October (41.9%, compared to 40.7% in September), followed by food. , alcohol & tobacco (13.1%, compared to 11.8% in September), industrial goods excluding energy (6.0%, compared to 5.5% in September) and services (4.4%, compared to 4.3% in September)” detailed EuroStat.
To follow the manufacturing ISM at 3:00 p.m.
At midday on the foreign exchange market, the Euro was trading against $0.9930 about.
KEY GRAPHIC ELEMENTS
In high 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).
Our entry point is at 0.9927 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 1.0001 USD.
The expected return of this Forex strategy is 261 pips and the risk of loss is 74 pips.
CHART IN DAILY DATA
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