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Once upon a time, there was an economic power with measured but real growth and contained inflation… This dream scenario rocks J Powell’s quietest nights, and the latest economic signals to date in the United States show that although, to date, we are far from it, the dynamic which tends towards this idyllic landscape has begun.
“In economics, the “Goldilocks” scenario refers to an optimal situation where growth is modest, but very real, and inflation is moderate,” recalls Christopher Dembik, investment strategy advisor at Pictet AM.
The term is borrowed from a character in a popular tale, Goldilocks and the Three Bears, where a little girl discovers an empty house in the heart of the forest. Attracted by the tempting smell of bowls of hot chocolate (or porridge, depending on the version!), the little girl indulges in tasting the 3 bowls lined up on the table: that of Mama Bear, Papa Bear, and the little one. bear cub. His preference is for the latter, neither too hot nor too cold…
“It is now this scenario that dominates the financial markets after the publication of inflation in the United States,” continues M Dembik. “In terms of monetary policy, this has two consequences: 1) the terminal rate has certainly been reached in the United States; 2) a rate cut is perhaps on the cards. The money market predicts a first cut in May 2024 against June 2024 just a few days ago.”
A renewed appetite for risk throughout the last two weeks will have allowed the single currency to gain height, by no less than 177 pips on the “session” of Tuesday, November 14 alone. A “momentum” which can be explained by the publication of a very marked slowdown in American inflation, in the sense of consumer price indices.
As a reminder, the monthly consumer price indices (CPI), regardless of the product base chosen, all came out below expectations on Wednesday. Compared to October 2022 in particular, all products combined, inflation now stands at +3.2% compared to +3.7% the previous month, below the target at +3.3%, according to the latest data published by the Department of Labor.
Better yet, so-called “core” inflation, that is to say excluding the price of food and energy, stood at 4.0% over one year, the lowest for more than two years. years. The statistic further distances the prospect of a rate hike from the American Federal Reserve.
No major statistical figure comes to liven up the debates this Monday. We will have to wait until tomorrow and the Fed Minutes to find our bearings.
At midday on the foreign exchange market, the Euro was trading against $1.0925 approximately.
KEY GRAPHIC ELEMENTS
At this stage, an essential observation is necessary. Following the training of marubozu school Tuesday 14/11, the spot built an extremely short consolidation, pennant on the upper part of the candle mentioned, before rising early, proof of the bubbling impatience of the buying camp.
MEDIUM TERM FORECAST
Considering the key graphical factors that we have mentioned, our opinion is positive in the medium term on the Euro Dollar (EURUSD).
Our entry point is at 1.0923 USD. The price target for our bullish scenario is at 1.1100 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0839 USD.
The expected profitability of this Forex strategy is 177 pips and the risk of loss is 84 pips.
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