(News Bulletin 247) – A very important point first of all, with the approach of two major monetary meetings: if the community of forex traders expects an ECB that is more “firm” than the Fed, it will take a more offensive than expected from C Lagarde, AND a more “flexible” tone than expected from J Powell to further catalyze, at this stage, the Euro’s catch-up against the Dollar. If the difference between the tones used by the two major central bankers is expected, the slightest elements of language allowing the rate calendar to be refined, on both sides of the Atlantic, will be scrutinized.
The ball starts this Wednesday with the Fed, which completes its FOMC. The verdict on the rates, unsurprisingly, is expected at 8:00 p.m. and the press conference at 8:30 p.m. (Paris time). The European Central Bank will complete its first Board of Governors of the year tomorrow, Thursday.
An increase limited to 25bp for the Fed Funds is almost certain, given the progress made in slowing the rise in prices. “It is above all Mr. Powell’s speech which will be scrutinized and which will have to make people forget the procrastination of the last two meetings” notes Emmanuel Auboyneau, Managing Partner of AMPLEGEST. “Mr Powell will remain focused on wage inflation and will have to give us some perspective on this structural part of inflation. He should also have an eye on economic activity which looks more resilient than expected.”
Employment continues to be a sticking point, given the chronic tensions. Precisely on employment, operators will have valuable benchmarks this week (new JOLTS offers, ADP survey, weekly jobless claims and the high point on Friday, the federal report on private employment). Any sign of persistent and chronic tension in employment will be reason to anticipate continued tension on the monetary rope. And can, if necessary, push back the pivot date estimates.
Yesterday in statistics, we noted the missed targets for the US consumer confidence index (Conference Board), which came out down to 107.1, and for the Chicago PMI to 44.3. To be followed as a priority on the macroeconomic agenda this Wednesday, the consumer price indices in the Euro Zone at 11:00 a.m., the ADP firm’s survey on American private employment at 2:30 p.m., new job offers (JOLTS) and the manufacturing ISM at 4:00 p.m. The Fed’s monetary policy decision is expected at 8:00 p.m., before a high-stakes press conference at 8:30 p.m. (Paris time).
For the time being, the Euro in an ascending position against the Dollar, after the publication of “core” inflation (excluding volatile elements*), at +5.2% at an annualized rate in the first estimate for January. What further support the thesis of a firm tone adopted tomorrow at a press conference by the powerful financial institution of Frankfurt.
At midday on the foreign exchange market, the Euro was trading against $1.0890 around.
KEY GRAPHIC ELEMENTS
The bullish trend 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 trending positive since the white marubozu on 04 November.
* food, energy, alcohol and tobacco
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 1.0892 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 1.0679 USD.
The expected return of this Forex strategy is 567 pips and the risk of loss is 213 pips.
CHART IN DAILY DATA
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