EUR/USD: The heart of December will be decisive

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(News Bulletin 247) – Against the background of persistent questions about the rate of increase in Fed Fundseven as the next major monetary deadlines approached, the Euro / Dollar currency pair consolidated, the single currency failing to capitalize on the scheduled end, de facto, of the Zero Covid policy in China. Macroeconomic signals continue to send diverging signals, difficult to read, on both sides of the Atlantic, suggesting that the American economy is not slowing down (ISM services, NFP) and that the European economy, in particular Germany, may already be in recession; we will have confirmation of this at the beginning of next year.

On the question of a possible inflation peak behind us in the Euro Zone, Nomura’s strategists are on the other hand rather confident, extrapolating the latest results of the Sentix survey, a firm specializing in behavioral finance. “This is likely due to a continued improvement in the energy supply situation this month and signs that inflation may have peaked.” Note that the Sentix index, while remaining in negative territory, jumped nearly 10 points. The Japanese bank’s strategists believe that “this will give the ECB more confidence to opt for a 75 basis point rate hike in December.”

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. Both dates are marked in red on the calendars of traders.

To follow crude stocks across the Atlantic at 4:30 p.m. Note that Q3 GDP data in the Euro Zone has just been revised upwards, to +0.3% quarter on quarter.

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 1.0532 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 1.0636 USD.

The expected return of this Forex strategy is 431 pips and the risk of loss is 104 pips.

CHART IN DAILY DATA

©2022 News Bulletin 247

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