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The Euro deepened its losses against the Dollar, in the wake of the publication of disappointing activity indicators, and in the feverish expectation of the Jackson Hole symposium, the great annual mass of the planet’s great financiers. This year, the symposium will take place in a context of inflation on the way to being controlled for the main economic poles of the planet, but without reaching the target rates…
The PMIs (Purchasing Managers’ Index) which have just been published, in very first estimates for the current month, were particularly disappointing for services in the Euro Zone as a whole, at 48.7, whereas the consensus of the market foreshadowed a less significant drop, in any case above 50 points which, as a reminder, separates a contraction from an expansion of the sector in question. This is a 30 month low. The disappointment is also severe in the German industrial sector alone, a driving force for the old continent, at 39.1, very close to the target, however.
“Incorporating the flash PMI data for August into our GDP nowcasts leads us to expect a contraction in the eurozone of 0.2% in the third quarter”, commented Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. “European Central Bank President Christine Lagarde warned of the inflationary risk associated with rising wages and falling productivity. The rise in prices paid, and in particular wage costs, accelerated during the month.At the same time, the stagnation in employment, combined with the decline in production, is reflected in a decline in labor productivity.The ECB is expected to , as a result, be reluctant to forgo further interest rate hikes in September.”
On the other side of the Atlantic, the situation on the bond market remains tense. “The fear of having higher interest rates for longer has shaken the bond market: the 10-year US rate has stretched above 4.3%, the highest level since 2008 and the mortgage rate at 30 years is also at its highest for 21 years at 7.2%” notes the bond management team of Auris. “This week, all eyes will be on Wyoming, the American state that hosts the big money makers for the annual meeting in Jackson Hole. J. Powell will speak on Thursday morning, so the appointment is made! “
The speech of its president, Jerome Powell, will be fiercely scrutinized, and the least of his elements of language interpreted… Especially after the tone and tenor of the debates highlighted by the Minutes of the meeting of the policy committee July money…
To follow equivalent activity indicators for the United States at 3:45 p.m. and sales of new American homes at 4:00 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.0805 approximately.
KEY GRAPHIC ELEMENTS
The near total retracement of July’s gains does not militate at this stage for a continuation of the advance of the currency pair, without formally ruling it out. This retracement, by its magnitude, weakens the bullish message then delivered over a good part of July. The outcome of the ongoing test of the 50-day moving average (in orange) will be decisive. The bearish message takes shape with the break – now validated – of the 50-day moving average by its 20-day counterpart (in dark blue), at a significant angle. The short position will be kept as long as the last one gravitates below the first one.
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 1.0807 USD. The price target of our bearish scenario is at 1.0551 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0931 USD.
The expected return of this Forex strategy is 256 pips and the risk of loss is 124 pips.
The News Bulletin 247 board
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