(News Bulletin 247) – The Euro/Dollar continued to consolidate with a bullish bias, while the Fed, then the ECB, will complete their first respective monetary policy meeting of the year this week.
For Thomas Costerg, US economist at Pictet Wealth Management, the Fed will remain very sensitive to labor market data, which still shows some tension. The Fed is particularly watching the JOLTS survey of job vacancies.” Survey which will be published on Wednesday, just like the survey of the private firm ADP, two days before the publication of the monthly federal report NFP (Non Farm Payrolls), which “The Fed fears persistent wage pressures pushing up inflation, particularly in services, in 2023.”
“[Elle] could continue to raise rates, in steps of 25bp, at the next meetings until a peak of 5.25% next May, in line with the projections given in December.”, continued Mr Costberg.
The powerful American monetary institution will be able to rely on a confirmation, published on the eve of the weekend, of the slowdown in the dynamics of PCE prices (Personal Consumption Expenditures), its preferred measure of inflation appreciation. It is this figure, in annualized data, that it “pilots” to arrive at the 2% objective. Unsurprisingly, prices, excluding food and energy, rose by 0.3% in December, on a monthly basis. Over one year, this so-called “core” inflation slowed to +4.4%.
On the ECB side, “Christine Lagarde will once again have to convince people that this movement is far from over. Inflexible in her mandate to fight inflation, a 50 bp increase is now guaranteed for this February meeting. All the attention will be focused on the announcements for the future: what rhythm in March? what terminal level for the deposit rate and on what horizon?” asks Julien Russo, portfolio manager, Swiss Life Asset Managers France.
In a market note aptly titled “ECB shows who’s boss of the market,” Nomura strategists argue that a 50 basis point hike is pretty much a given. While the latest European statistical releases, in particular the German PMI and IFO, have brought relief, “the ECB will likely use this positive outlook on activity as justification to continue to tighten its policy aggressively in the short term. term, and to raise concerns about the resilience of growth that could lead to even more persistent underlying inflation,” the Japanese bank’s strategists continued.
The Fed completes its FOMC on Wednesday 01 February and the ECB its Board of Governors on Thursday 02 February.
The statistical agenda, which was very poor on Monday, will become much more dense tomorrow with Q4 GDP in preliminary data in the Euro Zone, and for the United States: the consumer confidence index (Conference Board), the PMI index of Chicago as well as several real estate market health barometer indicators.
At midday on the foreign exchange market, the Euro was trading against $1.0910 around.
KEY GRAPHIC ELEMENTS
the trends bullishness of the Euro currency pair is now well established. We are in a situation where the oscillatory RSI is flirting with its “overbought” limit without ever crossing it. The advice will remain positive as long as the closing data for each daily candle is above the 20-day moving average (dark blue), which has been in positive direction since the marubozu white of November 04.
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 1.0907 USD. The price target of our bullish scenario is at 1.1459 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0784 USD.
The expected return of this Forex strategy is 552 pips and the risk of loss is 123 pips.
CHART IN DAILY DATA
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