Markets

EUR/USD: Profit taking on the single currency to start 2023

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(News Bulletin 247) – Profit-taking phase on the Euro against the Dollar, forcing us to cut our bullish positions, in a market that is questioning the seriousness and consequences of the health situation in China, weighing on the risk asset that is the single currency.

“While we are talking about several hundred million new cases in a few days, the impact on the Chinese economy is immediate”, notes and warns Thomas Giudici (AURIS Management). “The activity indicators published for the month of December thus came out sharply down and are lower than those of April, during the strict containment of Shanghai.”

The inflationary theme will also continue to focus the attention of forex traders, while “the central bankers do not yet seem ready to loosen the grip of the restrictive monetary policy.”

The Euro held firm yesterday, however, in the absence of course of benchmarks from Wall Street, and in the absence of surprise on the final data of the barometer indicators of activity in industry in the main economic poles of the Zone Euro. For the monetary union as a whole, the score for December stands at 47.8, in line with initial estimates.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, provided the following insights: “Looking ahead to the year ahead, in addition to monitoring potential shifts in fiscal and monetary policy, high on the list of issues manufacturers need to to watch as we approach 2023, is the impact on supply chains and commodity prices of health policy in China, as well as the possibility of sharp swings in energy prices linked to the evolution the geopolitical situation, with the war in Ukraine, which remains the main threat to stability in the region.”

Hearty activity is expected tomorrow with a battery of indicators, including the ISM manufacturing PMI, new JOLTS job openings and Fed Minutes.

Inflation barometers, particularly on the US employment front, will be scrutinized this week. The content of the monthly report on Friday (NFP for Non Farm Payrolls) will provide valuable details. The market expects the unemployment rate to stabilize at 3.7% of the active population and a slowdown in the pace of wage increases in the private sector (excluding agriculture), to +0.4% monthly.

At midday on the foreign exchange market, the Euro was trading against $1.0530 around.

KEY GRAPHIC ELEMENTS

The break of the 20-day moving average (in dark blue), which has served us so far as a trailing stop (trail stop) perfectly materialized, imposes to cut the buying positions, while waiting for a relevant entry point. However, no pronounced bearish reversal pattern has been identified.

MEDIUM TERM FORECAST

In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).

We will maintain this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.0435 USD and the resistance at 1.0746 USD.

CHART IN DAILY DATA

©2023 News Bulletin 247

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