(News Bulletin 247) – The bias remained bullish on the Euro Dollar currency pair, a sustained bias in particular thanks to the publication on Wednesday of a barometer indicator of the health of consumption across the Atlantic, feeding a little appetite for risk in the final stretch of the year.
This is the American consumer confidence index (Conference Board), an indicator with a strong impact in the event of deviation from the consensus, for an economy where structurally, most of the creation of wealth depends on domestic consumption. And there was a deviation from the consensus, since the indicator rose sharply to 108.3 points, against a target of 101.0 points.
“Consumer confidence rebounded in December, reversing back-to-back declines in October and November to reach its highest level since April 2022,” said Lynn Franco, senior director of economic indicators at The Conference Board. “The current situation and expectations indices have improved on more favorable consumer sentiment about the economy and employment. Inflation expectations fell in December to their lowest level since September 2021, recent declines in gas prices being a major reason.Vacation and travel plans have improved, but plans to buy expensive homes and appliances have slackened further.This shift in consumer preference big ticket items will continue into 2023, as will headwinds on inflation and interest rate hikes.”
The last part of the week will be dense on the macroeconomic front, with indices capable of invalidating or confirming the trends glimpsed with the recent publication of very disappointing PMI indicators (1st estimate for December). Currency traders will therefore monitor the weekly registrations for unemployment benefits in the United States at 2:30 p.m., which will make it possible to interpret and refine the degree of tension on the job market, and therefore on inflation… Also to be continued tomorrow inflation in the sense of the PCE figures (Personal consumption expenditure price index), which are the key measure for the Fed in its assessment of the rise in prices.
As a reminder, traders were particularly nervous during the press conferences following the last monetary policy meetings of the year, last week. Conferences marked by a tone rather hawkishtaking some of the trading rooms on the wrong foot.
“The Federal Reserve thinks that the American economy is still too resilient and that the persistent tensions on the labor market make it impossible to stabilize wages to date”, summarizes Emmanuel Auboyneau, Managing Partner AMPLEGEST. “The 2% inflation target is still too distant and does not justify a change in monetary policy. The Federal Reserve is therefore compromising investors’ hopes that the rate hike cycle will soon end.”
“In Europe, Christine Lagarde is also adopting a very offensive tone, far from recent market expectations. She reiterates her desire to fight inflation and warns the financial community that this fight will continue for a good part of 2023. “
At midday on the foreign exchange market, the Euro was trading against $1.0635 around.
KEY GRAPHIC ELEMENTS
The 20-day moving average (in dark blue) continues to play its role of chart support. Positive opinion kept above this trendline whose orientation is straight.
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 1.0632 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 557 pips and the risk of loss is 198 pips.
CHART IN DAILY DATA
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