(News Bulletin 247) – Thanks to a new pullbackthe Euro regained its level of parity against the Dollar, amid hopes of an easing of restrictive measures in China, linked to the Covid-19 epidemic. In particular, the Chinese authorities are considering abolishing a system which prohibits airlines from taking certain routes to China, depending on the number of Covid-19 positive passengers they carry, according to the Bloomberg agency.
However, the underlying trend remains positive for the Dollar, whose remuneration differential is likely to remain significant in the coming months against the single currency. The tone of the last FOMC, last week, was unambiguous. Furthermore, the content of the federal monthly report on employment (NFP for No Farm Payrolls) will have shown, on Friday, significant chronic tensions. Only the slight increase in the unemployment rate, to 3.7% of the labor force, can be seen as a sign of the effectiveness of the Fed’s monetary tightening measures. For the main other indicators, the average hourly wage rose more than expected, at +0.4% monthly, and the number of job creations in the private sector (excluding agriculture) exceeded 260,000, beyond expectations as well.
Immediately, the energy of the pullback is maintained by two publications which stand out significantly above expectations: German industrial production (+0.6% in September on a monthly basis) and the Sentix index of investor confidence in the Euro Zone which at -30.9, although than in negative territory, made a nice comeback. The firm specializing in behavioral finance provided the following reading keys: “The global index rose by 7.4 points to -30.9, which is still not a signal of a trend reversal. But the rise in situation and anticipation values ​​show how sensitively investors react in their economic expectations to signals from the energy market, because this is the cause of promising changes. October showed higher than usual temperatures and that means gas storage facilities in Germany, for example, are full to the brim.more than expected for November, gas prices on the spot market have collapsed and fears of a catastrophic gas shortage are fading.
At midday on the foreign exchange market, the Euro was trading against $0.9980 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. The current main issue is positioning relative to the 50-day moving average (in orange). Knowing that the last green body dates from the “session” of 10/26, and that this trendline is in the phase of reaffirmation of its negative slope, we will speak of false exit and reintegration. We are now witnessing a second pullback on the perfect parity (1 Dollar per Euro). The bearish message is reinforced.
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 0.9981 USD. The price target of our bearish scenario is at 0.9501 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 480 pips and the risk of loss is 114 pips.
CHART IN DAILY DATA
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