(News Bulletin 247) – The Euro / Dollar was capping at the top of the flag, as crucial monetary deadlines approached next week. The ECB ends its next Board of Governors on 15/12. The Fed for its part completes its next Monetary Policy Committee (FOMC) on 14 December. The two dates are to be marked in red on the calendars of forex traders, as the signs on the respective trajectories of the key rates are awaited.
For Erick Muller, Director of Products and Investment Strategy at Muzinich & Co, “the FOMC members’ projections (the DOTS) will send a clear message about the intentions to keep rates high for a long time, so as not to validating market expectations of a “pivot” which may seem premature for the Fed. This should result in a median projection up towards 5% for 2023 but also much more concentrated projections between 4% and 5% for 2024 than ‘last September, where the 2024 projections were very scattered.”
For the ECB, the strategist anticipates a “complex” situation. The powerful monetary institution of Francort “advocated targeted, limited and temporary fiscal support.” [Mais] “Eurozone governments are not following these recommendations, and this could lead to a higher rate hike in the Eurozone. We expect rates deposit facility rate to 3% by next summer”.
In terms of statistics on Wednesday, German industrial production in October fell (-0.1%) but much less than expected. Note that Q3 GDP data in the Euro Zone has just been revised upwards, to +0.3% quarter on quarter. To follow as a priority on the statistical agenda this Thursday, the weekly registrations for unemployment benefits in the United States. What to gauge more, after the NFP at the end of last week, tensions on the job market.
At midday on the foreign exchange market, the Euro was trading against $1.0530 about.
KEY GRAPHIC ELEMENTS
Volatility remains high on the spot which traces a broad consolidation, whose structure remains to be defined, around $1.0300. A continuation of these nervous oscillations is the preferred option, an unattractive graphic scenario for taking positions. We would prefer to stay out of the spot for the time being. The flag terminals are clearly marked, between 1.0240 and $1.05. The eventual formation of a diamond figure is not excluded.
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 1.0513 USD. The price target of our bearish scenario is at 1.0101 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0631 USD.
The expected return of this Forex strategy is 412 pips and the risk of loss is 118 pips.
CHART IN DAILY DATA
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