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The attempted rebound of the Euro against the Dollar, over the first three days of last week, will have been completely showered over the last two days, the monthly federal report on employment (NFP) not having been able to generate a revival risk appetite in financial markets.
While this report does not formally conclude that there has been a lasting decline in tensions on the job market across the Atlantic, it is clear that certain signals are encouraging. In particular, the unemployment rate, expected to be stable at 3.5% of the active population, rose significantly, to 3.8%, making it possible to envisage a cooling of the economic machine…. That’s good the declared objective of the Fed, after all!
In addition, average hourly wages will have increased in August by only 0.2% from one month to another, where the consensus foreshadowed an increase of 0.3%. This is also an encouraging sign that can dismiss the specter of the price/wage spiral. On the other hand – and this is where the shoe pinches – the number of job creations in the private sector, excluding agriculture, amounts to 187,000, against a target of 169,000 and a month of July revised to 157,000.
“The August data signal a reduction in job creation, a rise in unemployment and less strong wage pressures which would favor a decline in inflation (firm at +4.2% a year in July on the PCE deflator “heart “), summarizes Jeanne Asseraf-Bitton, Head of Research and Strategy at BFT IM, who also notes a “solid increase in household spending at +7.1% per year, at the expense of the savings effort.”
Forex traders need more proof that the US economic machine is cooling, and reassuring data on China, after the authorities had to announce new stimulus measures, including a halving of the stamp duty, a tax on stock market transactions. Other home financing announcements were also made on Thursday. Real estate, colossus at the foot of clay of the Middle Kingdom, nervously focuses attention on the slightest publication, both micro and macroeconomic. Precisely, the publication on Monday of a jump in sales of existing homes in Shanghai and Beijing this past weekend (an increase of more than 100%, according to Bloomberg) thus supports the market. The Shanghai Composite gained 1.4%.
In the immediate future, traders have just taken note of the Sentix index of investor confidence in the Euro Zone, down sharply to -21.5, lacking yet pessimistic expectations. “The situation in Germany remains particularly precarious,” reads a commentary accompanying the publication. The Sentix measured for this publication “the weakest values since July 2020, when the economy was slowed by the first confinement due to the coronavirus. Germany is also weighing heavily on the euro zone economy as a whole. The recession is deepening. But even in the United States, which has so far resisted well and defied the Fed’s restrictive policy, economic data is in sharp decline. The tipping point of a global recession is less distant than we think. might think so.”
Note the absence of benchmarks on Monday from Wall Street, closed due to a holiday (Labor Day, Labor Day).
At midday on the foreign exchange market, the Euro was trading against $1.0795 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 maintained 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 1.0797 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 1.0881 USD.
The expected return of this Forex strategy is 246 pips and the risk of loss is 84 pips.
The News Bulletin 247 board
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