(News Bulletin 247) – This article, in free access, is produced by the stock market analysis and strategy research team of News Bulletin 247. To not miss any opportunity, consult all the analyzes and discover our portfolios by accessing our Privileges area.
The Euro, one of the most reliable reference barometers for measuring risk appetite in the financial markets, maintained a bearish bias against the Dollar as the Council approached on June 14 and 15 ECB Governors and a Fed FOMC. Forex traders await clarification from major central bankers even as the equation becomes more complex. Inflation persists on both sides of the Atlantic, AND signs of an economic slowdown are multiplying (German industrial production, American ISM Services).
On the ECB side, the message is maintained at a high level of firmness. According to comments reported by the Reuters agency, the central banker felt that she currently saw no “tangible proof” that underlying inflation (excluding energy and food prices) had reached “a peak”. Pricing pressures also remain “high”, she added, speaking at a hearing before MEPs. Clearly firm remarks, which set the tone before the Board of Governors.
On the Fed side, “The markets are rallying more and more to the idea that the Fed will not pass a rate hike in June before proceeding to a new increase in July”, notes Deutsche Bank. With an eye that will remain focused on prices – the CPIs will be communicated the day before the monetary verdict – and on employment, whose degrees of tension remain high. “Will employment have to turn around for inflation to be defeated?” ask the strategists of ECOFI in a note, for whom “the dynamics of employment in the United States is THE key variable to follow from now on…”
“For the moment the vacancy rate is falling, without the unemployment rate rising sharply. Companies are curbing their hiring intentions but are not laying off massively. In addition, it is tempting to think that with so much difficulty in to recruit, reinforced by the aging of the population, employers are more reluctant to part with their employees. It is nevertheless clear that new hires are spreading less and less to all sectors, and that a return to Some form of balance seems to be settling in. The timing of the first month of net job destruction will no doubt be key for the Fed and investors, if it ever materializes.”
As a reminder, the content of the report for the month of May published on Friday is confusing, with a significant increase in the unemployment rate from 3.4% to 3.7% of the active population, proof of the “efficiency”, with the quotation marks which are essential in the restrictive policy of the Fed. This slowdown is finally palpable on employment, whose dynamics of wage increases remain stable moreover… But – because there is a but -, the US economy would have created nearly 340,000 jobs in the private sector (excluding agriculture), exploding the target. What give new nodes to the brain of the Fed, whose obsession is the runaway spiral prices wages, hitherto avoided.
In terms of statistics, few things to put in their mouths yesterday. As a reminder on Monday, operators took note of “PMI” activity indicators for services, in final data for May, a little less optimistic than in the first estimate. This PMI (for Purchasing Managers Index) comes out at 55.1 for the whole of the Euro Zone and at 57.2 for Germany. Across the Atlantic, the ISM Services disappointed, plunging towards 50 points (at 50.3). Remember that below the threshold of 50 points, by construction, the score evokes a contraction of the sector considered. German industrial production for the month of April was very clearly disappointing, completely missing expectations. After the disappointing factory orders published earlier in the week, it is the manufacturing sector of the Eurozone’s largest economy as a whole that is causing concern.
To follow the American oil stocks at 4:30 p.m.
At midday on the foreign exchange market, the Euro traded against $1.0690 approximately.
KEY GRAPHIC ELEMENTS
The 20-day moving average (in dark blue) has just cut downwards the trajectory of its 50-day counterpart (in orange): the bearish message emerges strengthened. Note the importance of the crossing angle of these trend curves. Next intermediate threshold identified: $1.0550, a break in which would, if necessary, have consequences in terms of one-off downward acceleration. The short position will be held with discipline as long as the 20-day moving average gravitates below its 50-day counterpart (in orange).
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 1.0696 USD. The price target of our bearish scenario is at 1.0436 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0761 USD.
The expected return of this Forex strategy is 260 pips and the risk of loss is 65 pips.
The News Bulletin 247 board
CHART IN DAILY DATA
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
