(News Bulletin 247) – The Euro/Dollar currency pair fell below the level of perfect parity ($1 for €1), against a background of tension as very important figures on US inflation approached. The meeting, crucial for forex traders, is at 2:30 p.m. (Paris time). On an annualized basis, and for the broadest basket of products (food and energy included), prices are expected to rise by 7.9%, compared to 8.2% last month. Excluding volatile items, prices are expected up 0.5% month-on-month. Any upward overshoot of the consensus would naturally mark an increase in “neutral rates”, i.e. the optimal level of Fed Funds, from which could the economy stop its “overheating”. It should be noted that these consumer prices are always to be studied in perspective with employment data. However, on this side, the tensions are still largely palpable.
“U.S. inflation data released this week will come under scrutiny, after the latest jobs data confirmed the continuing labor shortage. policy of extreme tightening”, note the strategists of the BlackRock Investment Institute, in the conclusions of their forum on the “new market regime”.
Something to shed new light on the latest FOMC. The different readings that can be made of it are indeed far from being binary, and the components of the equation are becoming more complex. César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management notes that J Powell “suggested that the final Fed Funds rate – estimated at 4.6% in the central bank’s dotted trajectory – could be revised at the end of the day. rise (the market currently anticipates a final rate close to 5.2% in mid-2023).”
“The process of raising rates could therefore be slower, but also longer, while aiming higher,” analyzes the asset management decision-maker.
At midday on the foreign exchange market, the Euro was trading against $0.9945 about.
KEY GRAPHIC ELEMENTS
After two false exits above the 1 to 1 parity level, the spot drew a double top marking resistance near 1.01. The reintegration of the zone below $1, if it were to be confirmed by a break in the 50-day moving average (in orange), would further reinforce the bearish technical message delivered.
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 0.9938 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 1.0101 USD.
The expected return of this Forex strategy is 272 pips and the risk of loss is 163 pips.
CHART IN DAILY DATA
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