EUR/USD: Contraction of risk appetite, moving average in danger

(News Bulletin 247) – Major technical fact this Friday: the 50-day moving average (in orange) is chaotic, against a backdrop of weakening risk appetite, as operators are forced to come back to reality in terms of rates. Central banks, in particular the Fed, will have to maintain a firm attitude and tone for many more months, to fight against inflation that is certainly decelerating, but still very significant, in the context of additional exacerbated tensions on American employment.

Alexandre Baradez rightly insisted on “a divergence […] between the markets (especially the equity markets) and the clearly stated intentions of the central bankers.”

“Jerome Powell recalled last Wednesday that there was “no room for complacency”, that the markets should “reflect the degree of monetary tightening put in place”, that according to the Fed’s expectations, it will not there would be no rate cut this year […] Jerome Powell recalled the notion of “higher for longer” for rates, meaning that even after reaching the terminal level, rates would remain high for a relatively long period before being lowered. The Fed Chairman made it clear that there would be “more” rate hikes as part of the market was convinced that March would mark the last 25 basis point rate hike. Without forgetting the references to the job market which remains “extremely tense” to use the words used.

This divergence, notable in recent weeks on the single currency, may give way to profit-taking on risky asset classes.

To follow this Friday the preliminary data of the American consumer confidence index (U-Mich), at 4:00 p.m. A data with a strong potential impact, for an economy where traditionally, domestic consumption remains the main driver of national wealth creation.

At midday on the foreign exchange market, the Euro was trading against $1.0690 approximately.

KEY GRAPHIC ELEMENTS

As seen in the preamble, the 50-day moving average (in orange), whose bullish orientation is visibly weakening, is threatened. In the event of a break with significant volatility – which is not yet the case – and confirmation at the end of the week, we would switch to a reflux regime.

MEDIUM TERM FORECAST

In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).

We will keep this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.0645 USD and the resistance at 1.1045 USD.

CHART IN DAILY DATA