(News Bulletin 247) – At the end of a high-stakes week for the Euro and the Dollar, the bullish bias of the spot ultimately remained unchanged, after the relatively firm tones adopted by the big moneymakers on both sides of the Atlantic. After the Fed on Wednesday, it was the ECB’s turn on Thursday to complete its last Board of Governors of the year.
Currency traders were nervous at the time of the press conference following the various monetary announcements. A press conference “characterized by a particularly “Hawkish” language”, [c’est à dire offensive, bellliqueuse]for Francesco Pesole, economist at ING, “Christine Lagarde explicitly stressing that the markets are underestimating the monetary tightening necessary to bring inflation back to its target.”
What remains “uncertain about the pace and extent of ECB rate hikes, given the great uncertainties surrounding the dynamics of inflation”, for Konstantin VEIT, portfolio manager at PIMCO. “The market is currently pricing a final rate of around 3.25%, which doesn’t seem unreasonable after the hawkish statements.”
The big questions remain those of the shape of the curve of Fed Funds (more flattened? longer?), that of the value of the terminal rate, and the risk of entering a recession in the United States, which the first estimates of the PMIs for December came to underline on Friday. Missing the target, the US services PMI came out sharply down to 44.4 and the industrial component to 46.2.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, shed the following light: “Survey data suggests Fed rate hikes are having the desired effect on inflation, but the economic cost is increasing and the risks of recession are increasing significantly”.
In the immediate future, the IFO index of the business climate in Germany, up to 88.6, beyond expectations, allows the single currency to resist profit taking.
At midday on the foreign exchange market, the Euro was trading against $1.0620 around.
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 1.0615 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 1.0434 USD.
The expected return of this Forex strategy is 574 pips and the risk of loss is 181 pips.
CHART IN DAILY DATA
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