(News Bulletin 247) – Weekly registrations for unemployment benefits, U-Mich consumer confidence indices, PCE retail price index… Statistical data showing an overheating of the American economy, against a backdrop of chronic inflation and tensions on employment will not have failed in the second part of last week. As a consequence, the foreign exchange market is faced with a reality: that of having to deal with Fed Funds still high throughout this year, with no certainty about the value of the so-called terminal rates.

High point on Friday, the PCE (for personal consumption expenditures), the Fed’s favorite measure in its inflation assessment, came out above the target on Friday (+0.6% month-on-month vs. +0.4%).

“Members of the Fed in the United States or the ECB in Europe, toughened their tone a little more, indicating that the fight against inflation was far from over and that monetary policy should continue to tighten and that it should remain restrictive for longer than investors anticipated,” notes Vincent Boy (IG France).

Moreover, the geopolitical situation reminds investors of risky assets on the occasion of the first anniversary of the Russian military aggression in Ukrainian territory. If “the problem of a possible collapse in the supply of raw materials in Europe has been largely resolved, […] a Russian offensive in the spring could quickly create a new situation,” said Marcus Poppe, co-head of European equities at DWS.

To follow as a priority on the macroeconomic agenda this Monday, across the Atlantic, durable goods orders at 2:30 p.m. and housing sales in progress at 4:00 p.m.

At midday on the foreign exchange market, the Euro was trading against $1.0565 approximately.

KEY GRAPHIC ELEMENTS

After gradually weakening from February 6 to 14, the 50-day moving average (in orange) ended up giving way. This underlying trend line is now under threat from its 20-day counterpart (in dark blue). The sell signal would then gain in intensity if necessary. The crossings of these two remarkable moving averages have indeed provided excellent positioning and trade monitoring signals for many months. This crossing is in progress, moreover in a relatively important angle.

MEDIUM TERM FORECAST

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

Our entry point is at 1.0561 USD. The price target of our bearish scenario is at 1.0239 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0701 USD.

The expected return of this Forex strategy is 322 pips and the risk of loss is 140 pips.

The News Bulletin 247 board

EUR/USD
Negative to 1.0561 €
Objective :
1.0239 (322 pips)
Stop:
1.0701 (140 pips)
Resistance(s):
1.0645 / 1.1045 / 1.1460
Medium(s):
1.0435 / 1.0238 / 1.0100

CHART IN DAILY DATA