(News Bulletin 247) – After a vague Fed in its intentions, it is now the turn of the ECB to try to enlighten the markets, with the outcome this Thursday of the first Board of Governors of the year.
“The voluntarist tone towards inflation will be maintained given the rigidity of underlying inflation and the risk that headline inflation crosses underlying inflation (as is already the case in Spain) .” anticipates Axel BOTTE (Ostrum AM). “As a result, the ECB is not done tightening and rates could start rising again after a period of status quo if inflation does not come down convincingly.”
A rise of 50 basis points is hardly in doubt within the financial community, and all eyes are already on the press conference (2:45 p.m.), where the degree of firmness of tone, like the inflections, even minimal, in the selected language elements, will be scrutinized.
“After the November and December meetings which gave a negative feeling of inconsistency in the discourse, Emmanuel Auboyneau (Amplegest) [espère] that the European Central Bank will be clearer in its analysis and in its outlook. An increase in key rates of 50 basis points is almost recorded but Ms. Lagarde is expected at the turn on her inflation forecasts and on the indications she will give for the March meeting. It should maintain a tough tone until we have more tangible evidence of a decline in the underlying part of inflation.”
Yesterday’s FOMC monetary policy meeting ended, unsurprisingly, with a 25bp hike in Fed Funds. The tone employed at the press conference was a little more flexible than expected, favoring the single currency.
Yesterday in terms of statistics, if the job news (JOLTS) once again exceeded expectations, the ADP firm’s survey, on the other hand, showed a very clear decline in job creations in the private sector. Verdict tomorrow with the NFP report, monthly federal report on employment, whose state of tensions is scrutinized more than ever in an inflationary period. To follow as a priority on the macroeconomic agenda this Thursday, the weekly registrations for unemployment benefits in the United States at 2:30 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.0980 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. The volatility observed on Wednesday February 1st makes us switch, until further notice, the $1.0855 in graphic support.
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 1.0990 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 1.0849 USD.
The expected return of this Forex strategy is 469 pips and the risk of loss is 141 pips.
CHART IN DAILY DATA
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