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The Euro/Dollar spot, although it regained a few pips this Thursday like the DAX and the CAC, remained in a negative short-term dynamic, against a backdrop of geopolitical and monetary fears.
First of all, on the geopolitical front, which explains the renewed strength of the safe-haven Dollar, there are numerous sources of tension. Enough to weigh on the appetite for risk on the financial markets, and therefore on the single currency.
“If the inflation / central banks theme should naturally continue in 2024, this new year will not be able to ignore, once again, (geo)political risks as the subjects are numerous in the four corners of the globe” warns Thomas Giudici, head of the bond management of Auris Gestion. “In the Middle East first of all, where we thought the conflict was quite limited but which could ultimately have more repercussions on the economy than initially anticipated: tensions in the Red Sea have in fact increased a notch in in recent days with the entry of an Iranian warship into the area, reviving fears of an extension of the conflict, the day after American strikes on three Houthi ships, in response to attacks on the carrier Maersk, in part of the multinational naval force responsible for protecting ships in the area.”
“After taking a back seat for a while, the war in Ukraine is also coming back to the forefront with the recent intensification of bombings,” continued Mr. Giudici.
Then on the monetary front, currency traders see their optimism not dampened, but somewhat eroded by the slightly less likely chances of seeing the Fed begin its rate cut in March. The Fed Minutes, published last night, somewhat confirmed this. This traditional report from the Fed’s last monetary policy meeting. In a word, the markets are returning to more realism about the timetable for rate cuts. Especially on the first. The Federal Reserve’s minutes, published after the European markets closed, set the record straight a little. They showed that its members are overall much less confident than the market in the scenario of a first monetary easing from March.
The second part of the week, on the statistical side, will focus on American employment, still closely monitored, in the light of its tensions, and the impact of its tensions on inflation. We will therefore closely follow the conclusions of the ADP survey at 2:15 p.m. and tomorrow, the content of the NFP (Non Farm Payrolls) report on private employment.
Forex traders learned in the morning of a contraction in private sector activity in the euro zone in December, according to the latest S&P Global purchasing managers survey. The HCOB composite PMI index stood at 47.6 points in December, just like the previous month, after an initial estimate of 47 points.
Yesterday in the statistics department, we will note that American manufacturing activity recovered more than expected in December, to 47.4 points compared to 46.4 in November, while remaining below 50 points, a level marking the border between contraction and expansion of activity. As for job offers in the United States, for the month of November, they fell more than expected, according to the Jolts survey to 8.79 million against 8.821 million anticipated by the consensus and after 8.852 million offers in october.
Tensions on the bond markets, particularly on the yields of 10-year US Treasury bonds, have strained operators. These 10-year Treasuries surreptitiously rose above 4% before easing again.
At midday on the foreign exchange market, the Euro was trading against $1.0955 approximately.
KEY GRAPHIC ELEMENTS
A potential decline is emerging towards the 50-day long average (in orange), the direction of which remains clearly bullish. His test will also be rich in lessons.
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 1.0947 USD. The price target for our bearish scenario is at 1.0693 USD. To preserve the invested capital, we advise you to position a protective stop at 1.1055 USD.
The expected profitability of this Forex strategy is 254 pips and the risk of loss is 108 pips.
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