(News Bulletin 247) – While the Euro/Dollar had regained some air since the beginning of the week, under the effect of remarks deemed reassuring by Fed executives, the forces tended to balance each other out approaching the end of the meeting of the Governing Council of the ECB. Verdict on the monetary decisions themselves at 1:45 p.m. – a status quo is expected – before a press conference at 2:30 p.m.
If the tone adopted by the ECB is much less hawkish that across the Atlantic, “real uncertainty reigns before the ECB’s decision and Christine Lagarde’s press conference : the money markets in the euro zone continue to “price” a rate hike by December, while the latest communications from ECB members postponed this hypothesis to 2023 at the earliest.” notes Alexandre Baradez (IG France). “We could witness a pivot […] on that issue.”
‘It would therefore be surprising if the message delivered were as accommodating as some still expect.“, warns M Baradez. “The President of the Eurogroup said on Wednesday that the recovery in prices was affecting growth and the purchasing power of citizens and that the ministers of the euro zone were naturally concerned,” he continues.
The ECB will therefore have to take into account a new surprise acceleration in prices in the Euro Zone. Published yesterday, the first inflation estimates in annualized data in the Euro Zone show an increase of 2.3% in the corrected prices of energy, food, alcohol and tobacco. This is significantly above the ECB’s target (2.0%) and the market consensus (+1.9%). Including volatile elements, the rise in prices over one year reached +5.1%.
Across the Atlantic, the ADP (Automatic Data Processing) survey highlights a “destruction” of more than 300,000 jobs, where the financial community was rather expecting a soft landing, after almost 800,000 job creations in the sector. private sector (excluding agriculture) in December. Friday’s NFP report will be all the more followed. To follow this Thursday the weekly registrations for unemployment benefits at 2:30 p.m. and the ISM Services activity index in final data for January at 4:00 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.1280 about.
KEY GRAPHIC ELEMENTS
The breakout of $1.1260 rhymed with a powerful increase in volatility. The spot visited levels not seen since the end of May 2020, before recovering. The exercise now consists in assessing what the form of the consolidation to come may be in order to optimize a new bearish entry point. Patience is a virtue, beware of action bias.
MEDIUM TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).
We will maintain this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.1260 USD and the resistance at 1.1360 USD.
CHART IN DAILY DATA
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Source: Tradingsat
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