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A faithful barometer of risk appetite on the financial markets, the Euro continued its downward movement against the safe haven Dollar, in a context of tangible signs of weakness in global economic activity. After having digested the report on US employment, published on Friday, traders took note yesterday 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”, can we read in a comment for the less decided 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.”
In China, the country’s economic situation is also the subject of concern after a slowdown in services activity last month. The PMI-Caixin services index fell to 51.8 points in August, after 54.1 in July. Beijing may have announced support measures, particularly in the very strategic real estate sector, as well as a reduction in taxes on stock market transactions, “these measures are for the moment more akin to scoops”, analyzes Thomas Giudici , head of bond management at Auris Gestion.
“Xi Jinping, who advocates financial discipline, finds himself blocked by his desire not to fall back into the excesses of past indebtedness. To this problem is added that of the currency, the renminbi having corrected sharply against the dollar while China seeks to further push its use internationally. While China naturally has the means to support its economy through large-scale measures, it seems for the moment to be taking small steps.”
On the agenda this Tuesday, to follow orders to American industry at 4:00 p.m. Note the significant disappointment on the final data for the French services PMI, at 46.0 points, significantly below the very first estimates for August.
At midday on the foreign exchange market, the Euro was trading against $1.0730 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 1.0741 USD. The price target of our bearish scenario is at 1.0436 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0861 USD.
The expected return of this Forex strategy is 305 pips and the risk of loss is 120 pips.
The News Bulletin 247 board
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