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The Euro / Dollar currency pair found some air yesterday, in the wake of the easing in the American bond markets, easing itself caused by reassuring figures on employment (the JOLTS, for Job Openings and Labor Turnover Survey) showing the beginning of a lull in the chronic tensions on the labor market.
At the end of July the number of job vacancies stood at 8.830 million, according to data from the US Labor Office, a decrease of 338,000 units over one month. Economists polled by MarketWatch were expecting a figure of 9.490 million. This is a first tangible sign of relaxation on the employment front, which has been chronically in high tension for many months. Remember that the degree of employment tension is an essential element for the Fed in the construction of its monetary policy.
A lull which will naturally have to be confirmed, with the next employment statistics meetings. And there are plenty of them this week. First and not least, the survey of the private human resources firm ADP (Automatic Data Processing) to be published this Wednesday at 2:15 p.m., which will allow us to assess the dynamics of job creation in the American private sector. A precious foretaste before the highlight that will be Friday’s federal monthly report NFP (for No Farm Payrolls).
Currency traders are therefore digesting this week, in the light of new benchmarks on employment, prices and consumption, the remarks relatively hawkish (restrictive, offensive) held by J Powell during the Jackson Hole colloquium last Friday.
On the occasion of the famous symposium in Wyoming, Jerome Powell did not change his speech or reserve any big surprises. The chairman of the Federal Reserve (Fed) US estimated that although it has passed its peak, inflation in the United States “remains too high”. Hopes of a rate cut by the end of the year have clearly been dashed. “We stand ready to raise rates further if necessary, and we intend to keep our policy restrictive until we are confident that inflation is sustainably approaching our target,” the banker continued. central during his speech on Friday, assuring that the Fed maintained its objective of 2% inflation.
It should be noted, for statistical completeness, that the consumer confidence index (Conference Board) disappointed, contracting to 106.1, far below expectations. Tomorrow we will closely follow the highly anticipated publication of the PCE (Personal Consumption Expenditures) prices, the Fed’s favorite measure for its inflation assessment.
At midday on the foreign exchange market, the Euro was trading against $1.0890 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 1.0889 USD. The price target of our bearish scenario is at 1.0551 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0991 USD.
The expected return of this Forex strategy is 338 pips and the risk of loss is 102 pips.
The News Bulletin 247 board
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