(News Bulletin 247) – If the underlying bearish bias on the Euro/Dollar remained relevant, reinforced by the tenor of the FOMC press conference on Wednesday, the single currency managed to grab some pips this morning, like all risky asset classes in the wake of new hopes for an easing of the restrictive measures linked to the Covid-19 epidemic.
Wednesday, the Fed Funds saw their rent rise by 75 basis points, to 4.00%, as widely expected. What weighed, on the other hand, was the clearly stated desire to postpone the idea of a pause in the monetary tightening process (an option deemed too “premature”) as well as the clear warning on the prospects for achieving neutral rate. The objective of precise quantification of the latter is still delicate. In any case, it exceeded 5% after this monetary deadline.
Sweeping the scenario of a pause, the Fed “opens the door to more modest rate hikes, but without giving the impression of being dovish”, for Christian Scherrmann, US economist, DWS. “With policy rates currently in the 3.75-4% range, monetary policy is de facto in tightening territory. think about not raising the rates any more.”
It is American employment that will be in the spotlight this Friday with the monthly federal report (NFP), at 1:30 p.m. (Paris time). The opportunity for the Fed (and the operators!) to once again take the temperature of the tensions on the job market. Tensions confirmed this week with new job offers (JOLTS), the ADP survey, and weekly registrations for unemployment benefits. Naturally, there is a mechanical correlation between employment under pressure and price dynamics.
At midday on the foreign exchange market, the Euro was trading against $0.9790 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. 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 0.9792 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 391 pips and the risk of loss is 99 pips.
CHART IN DAILY DATA
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