(News Bulletin 247) – The psychology of the foreign exchange market remained unchanged, geared towards risk, while the first signs of the impact of monetary policies on both sides of the Atlantic on inflation are palpable. A phenomenon that continues because “in the Euro zone, the recent appreciation of the euro is also helping to control inflation. Confidence in central banks is back. Proven methods of central banks to manage inflationary pressures destabilizing works”, for the strategists of Muzinich & Co
On Tuesday, currency traders took notice of the ZEW index of confidence in the German economy, which came out very sharply, returning to positive territory unexpectedly, at 16.9. A first since February 2022, “the month of the start of the Ukrainian war” notes the president of the ZEW, professor Achim Wambach.
The score shows “a noticeable improvement in the economic situation over the next six months. The more favorable situation on the energy markets and the brakes on energy prices imposed by the Confederation have contributed to this. In addition, export opportunities for the German economy are improving thanks to the lifting of Covid restrictions in China. As a result, profit expectations from export-oriented and energy-intensive sectors have improved significantly. ‘a further decline in the inflation rate leads to improved expectations for consumer-related sectors’.
In contrast, the Empire State Index (New York Fed’s manufacturing index) plunged to -32.9, completely missing expectations. Finally, in China, the country’s growth reached 2.9% over one year in the fourth quarter and 3% on average over the whole of 2022, the lowest figure since 1976 if we exclude the year 2020 marked by the seal of the pandemic.
The final data of consumer price indices in the Euro Zone, published at 11:00 am, did not deviate from the first estimates. Excluding food, energy, alcohol and tobacco, prices increased in December by +5.2% at an annualized rate.
To be monitored this Wednesday for the United States, producer prices and retail sales at 2:30 p.m., the NAHB index of the American residential market at 4:00 p.m. and the Fed’s Beige Book at 8:00 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.0860 around.
KEY GRAPHIC ELEMENTS
The output of tidied up is now fully validated on this start of 2023. Two events to watch, on the technical front in the immediate future: the attitude of the spot close to its 20-day moving average (in dark blue) and the formation, in progress but not still validated, of a combination of candles in “ascending method”. The fifth and final candle of this remarkable pattern is being built.
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 1.0865 USD. The price target of our bullish scenario is at 1.1260 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0695 USD.
The expected return of this Forex strategy is 395 pips and the risk of loss is 170 pips.
CHART IN DAILY DATA
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