(News Bulletin 247) – While the main equity markets in Europe caught their breath a little this Wednesday in the absence of statistical benchmarks, the Euro marked a pause against a Dollar which nevertheless retains the advantage, as rising yields on long-term US government bonds, the famous Treasuries 10 years, driver essential, which have just come close to 1.89.
While the scenario of three episodes of federal rate hikes over the year 2022 seems certain, since the particularly firm tone of the last Minutes, report of the December FOMC, a scenario with 4 hikes is not excluded. The boss of JP Morgan expects the realization of this scenario: Jamie Dimon anticipates that inflation will remain well above the Fed’s 2% target in 2022 and therefore bets on more than 4 rate hikes from the central bank this year, which will lead to more volatility.
“It is therefore a much faster normalization of monetary policy than the previous one that will take place in the coming months. And the American markets have started to integrate this development since the beginning of the month with a rebound in rates”, synthesizes Alexandre Baradez, for IG France, who does not forget to mention the central role of China in the process of pressure on rates.
“Disruptions in the global supply chain, part of which is attributable to China, have the effect of perpetuating supply difficulties and therefore maintaining upward pressure on prices, which forces central banks, and especially the Fed, to beef up its rhetoric.”
In terms of statistics yesterday, the manufacturing index of the NY Fed (Empire State) collapsed to -0.7, completely missing expectations. The score had not visited negative territory since June 2020. The Federal Reserve Bank of New York specifies that “delivery times have continued to lengthen and order books to expand. Labor market indicators indicated a moderate increase in employment and a longer average working week. Both price indices fell, but remained high. Looking ahead, however, companies remained optimistic about improving conditions ahead. the scale of the next six months”.
On the other hand, on the European side, the operators took note of the ZEW index of the business climate in Germany, the leading economic power in the Euro Zone. The score (51.7) is well above expectations, allowing the single currency to cushion its decline against the greenback. The “ZEW” jumped nearly 28 points, thanks in particular to a slightly less harsh inflation outlook according to the results of the survey.
ZEW (Zentrum fur Europaische Wirtschaftsforschung) President, Professor Achim Wambach, shed the following light: “The economic outlook has improved considerably with the start of the new year. The majority of financial market experts assume that economic growth will resume in the next six months. It is likely that the economic weakness phase of the fourth quarter of 2021 will soon be overcome. The main reason for this is the assumption that the incidence of COVID-19 cases will decrease significantly by the early summer. The most positive economic expectations include the consumer and export-related sectors and thus a large part of the German economy.”
To follow on the agenda this Wednesday, as a priority, housing starts and building permits in the United States at 2:30 p.m.
At midday on the foreign exchange market, the Euro was trading against 1,1350$ about
KEY GRAPHIC ELEMENTS
We warned in our previous analyzes on the flagship currency pair against the “risk” of a false exit from above, an elongated wedge pattern. We are there, and the expression of this false exit abruptly brought the spot back against a 100-day moving average (in orange) with a sharp bearish bias. Traders will be able to gradually resume short positions on the EURUSD spot by taking advantage of a much better quality entry point.
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).
Our entry point is at 1.1344 USD. The price target of our bearish scenario is at 1.1151 USD. To preserve the invested capital, we advise you to position a protective stop at 1.1423 USD.
The expected return of this Forex strategy is 193 pips and the risk of loss is 79 pips.
CHART IN DAILY DATA
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Source: Tradingsat
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