(News Bulletin 247) – The Euro/Dollar will have benefited from a slightly stronger tone last week hawkish from Christine Lagarde, with a final gain of more than 300 pips over the week as a whole, gains largely made after the ECB Governing Council.
Under pressure after the publication, on Wednesday, of an unprecedented surge in inflation in the euro zone (+5.1% over one year in December, + 2.3% corrected for the corrected prices of energy, diet of alcohol and tobacco), Christine Lagarde acknowledged that the rise in consumer prices was stronger than expected, also admitting that the risks were on the upside, while repeating expecting a slowdown by the end of the year. The ECB President also assured that the institution’s Governing Council would not take a hasty decision on monetary policy but did not reaffirm that a rate hike this year was “very unlikely”, as she had said at the last meeting.
“The ECB has taken a further step by estimating that inflation was higher than expected and that it could remain so for longer than expected, at least for several months”, for Vincent Manuel, Chief Investment Officer at Indosuez Wealth Management . “What has also changed”, he continues, “is the perception of the labor market, which should at some point generate upward pressure on the level of inflation, but to a lesser extent than ‘in the United States or the United Kingdom. With a record unemployment rate of 7% and a participation rate back to pre-pandemic levels, the labor market is perceived to be very strong and could lead to upward pressure on wages, which the ECB does not yet see. This can be interpreted as a critical point that will have an impact on ECB policy in the future.”
On Friday, the statistical high point for forex traders was the NFP report on US employment, which in its content sent confusing signals and little information on the degree of tension in the job market across the Atlantic.
The unemployment rate has – it is a surprise – slightly increased to 4% of the active population, but job creations have exploded expectations, while earlier in the week, the ADP cabinet survey showed a balance negative. Such a gap between ADP and NFP is rare, even if the methodologies are different. The Bureau of Labor Statistics has therefore just published 467,000 job creations, literally exploding the consensus (110,000). “Job growth continued in leisure, events, business services, retail trade, and transportation and warehousing,” the latest report read.
In the immediate future, the Sentix index of investor confidence in the Euro Zone rose more than expected, to 16.6 points. Christine Lagarde will speak this Monday, for a hearing before the Economic and Monetary Affairs Committee of the European Parliament at 4:45 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.1420 about.
KEY GRAPHIC ELEMENTS
For the first time since June 16 (then on sudden break), the spot was close to its 100-day moving average (in orange), the underlying trend line still very significantly bearish. Traders will continue to adopt a posture of patience, awaiting a satisfactory entry point, as the consolidation that began at the end of November takes on a very broad form.
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 1.1360 USD and the resistance at 1.1530 USD.
CHART IN DAILY DATA
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