EUR/USD: Poor PMIs, particularly in France

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The Dollar found itself strengthened, against the Euro, after the Fed’s FOMC on Wednesday, which clearly opened the way to high rates, or even higher rates, for a long period. It should also be noted that the yield on 10-year US government bonds was now close to 4.50%. The Euro, a “risky” currency, remained penalized by the general market atmosphere, an atmosphere further weighed down this Thursday by the publication of particularly disappointing activity indicators in services and industry.

This is preliminary data from PMI services. The French component, in particular, for the services sector alone, comes out at 43.9, completely missing expectations. The French industrial sector is not left out. “In terms of weak industrial conditions, France is now catching up with Germany,” comments Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. “

“The PMI index for the French manufacturing sector actually fell back in September, while across the Rhine, the corresponding PMI index recovered somewhat compared to its very low level in August. The services sector, on the other hand, is performing much weaker in France than in Germany, with the activity of German service providers showing signs of stabilization while that of their French counterparts has declined again. This difference may “explained by the importance of the luxury market in France, this sector generally suffering more acutely the effects of an economic slowdown than other services.”

We will follow at 3:45 p.m. equivalent publications for the United States.

At midday on the foreign exchange market, the Euro was trading against $1.0630 approximately.

KEY GRAPHIC ELEMENTS

The almost complete retracement of July’s gains does not militate at this stage for a continuation of the advance of the currency pair, without formally excluding it. This retracement, by its magnitude, weakens the bullish message then delivered over a good part of the month 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 an important angle. The short position will be retained as long as the latter gravitates below the first. The advantage of this investment plan is the discipline that it inherently induces.

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).

Our entry point is at 1.0640 USD. The price target for our bearish scenario is at 1.0301 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0761 USD.

The expected profitability of this Forex strategy is 339 pips and the risk of loss is 121 pips.

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