(News Bulletin 247) – The two major central banks on both sides of the Atlantic having adopted, on Wednesday for the Fed and this Thursday for the ECB, relatively firm tones at the end of their respective monetary policy meetings, the spot EURUSD ultimately varied little, maintaining a bullish bias above its 20-day moving average (in dark blue).
J. Powell, who spoke at a press conference after the FOMC, brushed aside hopes of a pause in the rate hike process in early 2023, an option described as “premature”. No surprise, however, in terms of the extent of the rise in Fed Funds, inflated by 50 bps to reach 4.50%.
Fed members raised their rate projections to 5.1% for 2023 and 4.1% for 2024 from 4.6% and 3.9%, respectively, at their September meeting. They also anticipate higher inflation, at 3.1% for 2023, against 2.8% previously, and at 3.5% for “core” inflation, i.e. excluding the price of energy. energy and food, against 3.1% in September.
On the ECB side, whose key rate hike is also half a point, the upward slope of the single currency’s rent should continue over the next few months. The idea of ​​a pause in the ascent has also been swept away for the powerful Frankfurt institution, which, as Wilfrid Galand, Strategist Director at Montpensier Finance, underlines, “unlike its American counterpart, […] has the custody of a Monetary Union of sovereign countries and whose financial characteristics are more and more divergent.
For the time being, traders must also deal with major US macroeconomic indicators showing negative signals overall (retail sales, Philly Fed, Empire State Index), in a job market whose signs of tensions persist (weekly registrations for unemployment benefits).
At midday on the foreign exchange market, the Euro was trading against $1.0655 about.
KEY GRAPHIC ELEMENTS
The publication of a marked slowdown in US inflation is pushing the Dollar back as much as it is supporting the risky asset that is the Euro. In this sense, the anticipation of a diamond congestion pattern does not make more sense, and the 20-day moving average (in dark blue) plays its supporting role. Positive opinion kept above.
MEDIUM TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is positive in the medium term on the Euro Dollar (EURUSD) parity.
Our entry point is at 1.0659 USD. The price target of our bullish scenario is at 1.1189 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0499 USD.
The expected return of this Forex strategy is 530 pips and the risk of loss is 160 pips.
CHART IN DAILY DATA
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