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The mirror of risk appetite on the markets, represented by the Euro, continued to ebb against a Dollar which regained its attributes as a safe haven, in the context of growing fears about the health of the world economy, fears focused particularly on two giants, Germany and China.
Thomas Giudici (Auris Gestion) takes a step back: “After decades of unbridled growth, based on cheap exports and the distribution of credit, Xi Jinping’s desired transition to a “new normal” will not be smooth.”
“Indeed”, continues the head of bond management, “the shift towards an economy based more on household consumption, services and advanced technologies rather than exports leads to growth that is certainly of better quality but less strong. The landing is therefore difficult for China to manage as the post-covid world economy has been profoundly modified (willingness to relocate certain key industries) and is currently experiencing a slowdown.
The country’s economic situation is 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. The very strategic real estate sector, colossus at the foot of clay of the Middle Empire continues to focus attention.
In terms of statistics yesterday, note the significant disappointment on the final data for the French services PMI, at 46.0 points, significantly below the very first estimates for the month of August. Recall that after having digested the US employment report, published on Friday, forex traders learned on Tuesday of the Sentix index of investor confidence in the Euro Zone, down sharply to -21.5, lacking yet pessimistic expectations. .
On the agenda this Wednesday, to follow in priority the PMI services ISM activity indicator at 4:00 p.m. and the Beige Book of the Fed at 8:00 p.m.
The American 10-year remained particularly firm at 4.255%.
At midday on the foreign exchange market, the Euro was trading against $1.0740 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. The advantage of this investment plan is the discipline it induces by nature.
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 1.0740 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 1.0801 USD.
The expected return of this Forex strategy is 304 pips and the risk of loss is 61 pips.
The News Bulletin 247 board
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