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Against a backdrop of hopes for an easing in European monetary policy, the Euro against the Dollar continued its downward movement, after the publication at 11:00 am of the consumer price indices in the Euro Zone. For the month of June, retail prices increased by 5.4% at an annualized rate, compared to a consensus of 5.5%, according to a rapid estimate published by Eurostat, the statistical office of the European Union.
The Institute also published the unemployment rate in the monetary union, stable at 6.5%. Compared to May 2022, unemployment fell in volumes and by 227,000 in the euro area.
Another big event this Friday, the publication of the PCE prices (for personal consumption expenditures), the Fed’s preferred measure of inflation. Yesterday, Q2 quarterly GDP in annualized data came out at +2.0%, well above expectations. This figure, which resonates pleasantly in the ears of the markets, nevertheless militates for the risk of economic “overheating”, which the PCE prices today and the NFP report on employment on July 7 will confirm or invalidate. Be that as it may, the Chairman of the Fed, who has been very firm in his latest speeches (FOMC, parliamentary hearing, ECB annual forum), finds himself comforted in the orientation of his monetary policy.
Unless the PCE come to reshuffle the cards….
At midday on the foreign exchange market, the Euro was trading against $1.0840 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).
A bevel (wedge) concentrates the energy of the spot. It just made a foray above, with no formal sign of a bullish reversal. On the contrary, the spot retraced this incursion in a handful of hours. Hence a very unattractive weekly candle (S25). In the diamond figure, the balance is very precarious. A bottom exit is in progress.
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 1.0844 USD. The price target of our bearish scenario is at 1.0693 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0901 USD.
The expected return of this Forex strategy is 151 pips and the risk of loss is 57 pips.
The News Bulletin 247 board
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