(News Bulletin 247) – The degree of firmness that the Fed will employ at a press conference this evening (8:30 p.m., Paris time) will be decisive for the currency pair. The powerful Institution headed by J. Powell ends this Wednesday two days of meeting of its Monetary Policy Committee. If no federal rate hike is expected before March, the tone and language used at press conferences will be under the microscope.
“After having been behind the curve for a long time, the Fed is trying somehow to catch up to try to curb inflation with a much larger hawkish turn than initially anticipated by the markets and which crystallizes some of the tensions in this start of the year. Although this week’s FOMC is the first of the year and therefore traditionally without any major announcement, it is proving to be high risk”, explains Thomas Giudici, head of bond management for Auris Gestion. .
In terms of statistics, investors learned on Tuesday of the IFO business climate index in Germany, which came out slightly higher at 95.7, slightly above expectations. On the industrial component of the score, “the index has jumped significantly”, comments Dr Klaus Wohlrabe, director of surveys at the IFO. “Companies were more satisfied with their business. They were also more optimistic for the coming months. The situation regarding supply bottlenecks in intermediate products and raw materials eased somewhat. Finally, the capacity utilization went from 84.9% to 85.6%.”
Across the Atlantic, the consumer confidence index (Conference Board) contracted less sharply than expected, even slightly exceeding its target, at 113.8 points. “Consumer confidence moderated in January, following gains in the last three months of 2021,” said Lynn Franco, senior director of economic indicators at The Conference Board. “The current situation component has improved, suggesting that the economy has entered the new year on solid footing. However, expectations for near-term growth prospects have weakened, indicating a likely moderation in the growth during the first quarter of 2022. Nonetheless, the respective proportions of consumers planning to buy homes, automobiles and major appliances over the next six months have all increased.”
At midday on the foreign exchange market, the Euro was trading against 1,1280$ 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. Forex traders will be able to gradually resume short positions on the spot EURUSD taking advantage of a much higher 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 1.1280 USD. The price target of our bearish scenario is at 1.1001 USD. To preserve the invested capital, we advise you to position a protective stop at 1.1371 USD.
The expected return of this Forex strategy is 279 pips and the risk of loss is 91 pips.
CHART IN DAILY DATA
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Source: Tradingsat
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