(News Bulletin 247) – The Euro / Dollar currency pair continued to benefit from the publication, yesterday, of a more pronounced slowdown than expected in the dynamics of price increases across the Atlantic, publication suggesting a softening of the tone of the Fed, which ends this Wednesday ( 8:00 p.m., Paris time), his last monetary policy committee of the Fed.
In detail, at an annualized rate, the consumer price index (largest basket) increased by 7.1% in November, against 7.7% in October. A sharp slowdown that beats the consensus. Excluding food and energy (volatile elements), prices rose by 6.0%. Something to relax the atmosphere on the eve of a Fed meeting where clues on the “terminal” rate will be gleaned, while the scenario of a rise in Fed Funds of 50 bps is now almost complete.
The advantage is twofold for the markets, in the sense of Alexandre BARADEZ (IG France): that of the hope of a more “lenient” Fed on the one hand and that of a reduction in the risk of entering a recession deep. “Market players, who already see the end of monetary tightening and even anticipate a rate cut in 2023, are not worried about the impact of monetary tightening on the economy and anticipate a soft landing”, continues M BARADEZ .
The European Central Bank will complete a Board of Governors meeting tomorrow Thursday, the conclusions of which will of course be closely monitored. “The European Central Bank should raise its rate by 50 bps and confirm the start of the balance sheet reduction during the first half of the year, while the PMIs on activity should confirm the economic slowdown”, anticipates M Baradez. […]“The ECB could then reduce its support even further during a recession, or at least a very sharp downturn in activity, but as Christine Lagarde has already pointed out on several occasions, a recession may not be enough to bring the ‘inflation.”
To be continued across the Atlantic, import prices at 2:30 p.m. and oil stocks at 4:30 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.0640 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.
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 1.0642 USD. The price target of our bullish scenario is at 1.1189 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0448 USD.
The expected return of this Forex strategy is 547 pips and the risk of loss is 194 pips.
CHART IN DAILY DATA
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