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The Dollar was already moving forward against the Euro, thanks to the support of its reputation as a safe haven, after the conflagration of the geopolitical situation in the Middle East, after the deadly terrorist attacks perpetrated by Hamas towards ‘Israel this weekend. However, no panic on the markets (shares, oil) has yet been reported.
However, the Euro ended the week well, with a rebound in protests, after the publication of a monthly federal employment report that was particularly vigorous from the point of view of job creation, but rather reassuring regarding unemployment and the dynamics salaries.
This NFP (for Non Farm Payrolls), certainly highlighted a stability in the rate of increase in wages, and in the unemployment rate at 3.8% of the active population, but the volume of job creation in the private sector ( excluding agriculture), has very (too) greatly exceeded expectations: 336,000 against a target of 171,000. Enough to naturally provide arguments to the most hawkish members (offensive, restrictive in terms of monetary policy) within the Federal Reserve .
These BEA data constitute solid support for the Fed in constructing its monetary policy. They are crossed with PCE price dynamics, consumer confidence, leading indicators and, among other statistics, growth data, to adjust the remuneration of the Fed Funds, with the aim of reducing inflation to a reasonable level.
The CME’s FedWatch tool predicts a 25 bps rise in Fed Funds next month with a probability of 23.7%. The latter is declining after experiencing a significant jump following the publication of the American employment report in September.
In the immediate future, currency traders have just become aware of a further drop in the Sentix investors’ index in the Euro Zone (-21.9), a contraction that is nevertheless less severe than anticipated in the sense of the market consensus (-24). .
“The global economy is still in a difficult situation at the start of autumn in the northern hemisphere. In the euro zone, and particularly in Germany, the economic situation remains weak and recessionary trends persist. There is at least one slight glimmer of hope in the form of growing expectations. However, it would be premature to announce a turnaround. If we look further into other regions, we see a largely unchanged situation. Cooling trends dominate. Here too , no positive trend reversal is visible.” completes the Sentix in a commentary accompanying the raw data.
No major American figures are on the agenda this Monday.
At midday on the foreign exchange market, the Euro was trading against $1.0530 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 took 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 retained as long as the latter gravitates below the first. The latter, precisely, increasingly plays a graphic role of resistance.
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 1.0525 USD. The price target for our bearish scenario is at 1.0101 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0701 USD.
The expected profitability of this Forex strategy is 424 pips and the risk of loss is 176 pips.
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