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In a market environment that was not conducive to risk taking in the short term, the Euro continued its consolidation with a bearish bias against the Dollar, near $1.0920. Currency traders, who digest the particularly firm tones of the major central bankers, are also attentive to the very sluggish nature of the economic recovery in China.
In the immediate future, the big meeting for forex traders this Wednesday is the hearing of J Powell by the Financial Affairs Committee of the House of Representatives. What to expect, in substance or form? Possible new elements of language on the complex equation with which the great treasurer must face: to fight against inflation without giving too brutal a brake to the economy. For investors, every sentence uttered by Jerome Powell will be an opportunity to detect clues about the Fed’s future intentions to fight inflation.
This semi-annual hearing precedes another intervention this time in the Senate tomorrow.
In the meantime, currency traders are somehow digesting the monetary policy decisions of the Fed and the ECB last week.
Matthieu Bailly, deputy managing director and bond manager at Octo AM sees there a perfect “continuity in their on-sight navigation, with speeches that are still just as uncertain about statistics, the effects of rate hikes, and the total absence of clear and consistent on the future, even though the markets have been hoping for several months that the FED and ECB will return to their standards of the 2010 decade and take them by the hand month after month…”
In terms of economic statistics, apart from a few flat figures on American real estate, there is little to eat in this first part of the week. The statistical high point will no doubt be reached on Friday, with the publication of the PMI activity barometer indicators.
For César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management, “the purchasing managers’ indices (PMI) published this week could confirm that the American economy is heading for a soft landing.”
Expectations for this flash data for June are 48.5 for industrials, and 54.0 for services in the US.
It will be recalled that by construction, a score lower than 50 evokes a contraction of the sector considered, and conversely, a score higher than the bar of 50 evokes an expansion. These surveys are carried out with purchasing managers, for the propensity of these professionals, by the very nature of their activity, to “feel” the health of business in the coming months. Hence their name PMI (Purchasing Managers Index).
For Europe too, these indicators are eagerly awaited. Particular mention should be made of the German industrial PMI, which will be watched closely as the leading economic power in the Euro Zone has entered a technical recession. He is expected at 43.6 points.
Go here to view the full consensus on these PMIs.
At midday on the foreign exchange market the Euro was trading against $1.0920 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 breach of which would have consequences in terms of occasional 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). Immediately a bevel (wedge) concentrates the energy of the spot. It just made a foray above, with no formal sign of a bullish reversal.
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 1.0919 USD. The price target of our bearish scenario is at 1.0785 USD. To preserve the invested capital, we advise you to position a protective stop at 1.1001 USD.
The expected return of this Forex strategy is 134 pips and the risk of loss is 82 pips.
The News Bulletin 247 board
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