(News Bulletin 247) – After a rather lukewarm Fed in its intentions, and particularly attentive to the issue of labor market tensions on Wednesday following the FOMC, it was the ECB’s turn on Thursday to complete its Board of Governors.
The meeting ended with an increase in its key rates by 50 basis points. Its president Christine Lagarde said the risks to the outlook for inflation and growth had become “more balanced” since December, especially for “short-term” inflation. For the markets, the tone used by the central banker was perceived as more flexible.
“In the end, these announcements do not contain any real surprises. On the other hand, the markets are delighted with a marginally more optimistic discourse on the current dynamics, and less categorical on the prospects for future increases”, summarizes Raphaël Thuin, Director of Strategies at capital markets at Tikehau Capital.
The tone will have been “hawkish” [offensif, belliqueux]according to Vincent CHAIGNEAU, Research Director of GENERALI INVESTMENTS, who foresees “a further increase of 50 basis points in March, followed by two further increases of 25 basis points in the second quarter of 2023, which would bring the deposit rate to 3.5%. This forecast is in contradiction with the markets which have revised their expectations somewhat downwards and envisage a peak at 3.4%.
The big statistical meeting of the day this Friday is the NFP report (for Non Farm Payrolls), monthly federal report on American employment. But Mr J Powell heavily insisted on Wednesday on the worrying nature of the tensions on the labor market, tensions themselves generating inflation through wages. Meet at 2:30 p.m. to find out about the unemployment rate, expected to increase slightly to 3.6% of the active population, the rate of increase in hourly wages in the private sector (consensus at +0.3%) and creations jobs (target at 193,000, down from December).
At midday on the foreign exchange market, the Euro was trading against $1.0935 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. The volatility observed on Wednesday February 1st makes us switch, until further notice, the $1.0855 in chart 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 1.0935 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 1.0699 USD.
The expected return of this Forex strategy is 524 pips and the risk of loss is 236 pips.
CHART IN DAILY DATA
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