(News Bulletin 247) – If the Fed Minutes, by their rather offensive content, played a catalytic role in the significant decline of the Nasdaq Composite at the heart of the week, and to a lesser extent on the extended S & P500 index, the Dollar did not take the opportunity to come out of its phase of congestion against the Euro.
The FOMC report of December 14 and 15 revealed the offensive content of the debates between its members, and it is clear that inflation, logistical bottlenecks and tensions in the labor market were the subjects major tension. And the tense discussions around the schedule for reducing the balance sheet have caused 10-year Treasuries to heat up, currently close to 1.72.
“The FOMC Minutes report that American central bankers are already thinking about a deflation of the Fed’s balance sheet, without this replacing the cycle of key rate hikes”, for Christophe MOREL, Chief Economist at Groupama AM.
“The asset purchasing policy has changed in nature from an objective of reflation to a goal of financial stability; the normalization of the financial situation and liquidity therefore justifies the normalization of the balance sheet. Then, the environment growth / employment / inflation rate is incomparably more positive today than it was in 2018. The other arguments relate to the transmission channels of monetary policy. “
In terms of statistics, forex traders took note of satisfactory figures, beyond expectations without showing any overheating, on producer prices in November (+ 1.8% in the Euro Zone on a monthly basis). Across the Atlantic, little deviation to report from their respective consensus for weekly registrations for unemployment benefits and the monthly deficit (November) of the trade balance. In contrast, the services PMI (ISM) came out at 62, far from the target (67) and from the previous month (69.1).
To be followed as a statistical highlight this Friday is the NFP (Non Farm Payrolls) report on employment in the United States, monthly federal report. As a reminder on Wednesday, operators took note of the results of the ADP (Automatic Data Processing) survey on employment. According to the private human resources firm, the US economy created 807,000 jobs in the private sector (excluding agriculture) in December, largely beating the target, the highest since May. Verdict at 2:30 p.m., to gauge the extent to which tensions in the US job market persist.
In the immediate future, inflation figures in the Eurozone have come out higher than expected, at + 2.6% in very first estimates for December, at an annualized rate, excluding food, energy, alcohol and tobacco (items volatile). A price increase that reaches the symbolic threshold of 5% if we include these elements in the basket …
At midday on the forex market, the Euro was trading against 1,1300$ about.
KEY GRAPHIC ELEMENTS
For now, the Euro / Dollar currency pair is still in the course of a wedge consolidation wedge, which fits into a strongly bearish background momentum. The configuration remains heavy, but we warn against the temptation of an early return to bearish positions, the “risk” of a false top exit, in the very short term, being present. We are still waiting for a much better entry point. So beware of action bias.
MEDIUM-TERM FORECAST
In view of the key graphical factors that we have mentioned, our opinion is neutral in the medium term on the pair Euro Dollar (EURUSD).
We will keep this neutral opinion as long as the price of the pair Euro Dollar (EURUSD) is positioned between the support at 1.1216 USD and the resistance at 1.1360 USD.
DAILY DATA CHART
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Source: Tradingsat
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