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The Euro/Dollar remained in a delicate position in the short term against the Dollar, in the immediate vicinity of a dynamic resistance zone in the presence of the 20-day moving average (in dark blue), as the publication of the consumer price indices in the United States (at 2:30 p.m.). prices are expected to increase by 2.9% year-on-year, food and energy included.
“The Fed is still at 5.25%-5.50% with a lack of visibility on the date of the first rate cut as well as the pace of rate cuts in 2024. The market continues to anticipate 5 rate cuts from the Fed this year, via Fed Futures Funds, while the Fed in its December projections anticipated only 3 cuts of 25 basis points”, notes Alexandre Baradez, market analyst for IG France.
“Several members of the Fed who have spoken in recent weeks also lean towards this scenario of 3 rate cuts in 2024 and do not give a feeling of imminence for the first cut.”
On this side of the Atlantic, the ZEW index of confidence in the German economy rose higher than expected, at 19.9 points. On the other hand, the assessment of the economic situation in Germany has deteriorated considerably. The corresponding indicator lost 4.4 points and now stands at minus 81.7 points.
“The German economy is in a bad way. Respondents’ assessment of the current economic situation has deteriorated to its lowest level since June 2020. In contrast, economic expectations for Germany have improved again. As a result, more than two-thirds of respondents expect the ECB to cut interest rates over the next six months, given falling inflation rates. three-quarters of respondents expect an imminent interest rate cut from the US central bank,” comments ZEW President Professor Achim Wambach on the survey results.
At midday on the foreign exchange market, the Euro was trading against $1.0780 approximately.
KEY GRAPHIC ELEMENTS
Interestingly technical fact, the 20-day moving average (in dark blue, bearish), is currently breaking its 50-day moving average (in orange, horizontal), a first contact since November 13. The graphic and technical situation is tensing under this trend line. However, the angle of attack is not very important. This trend curve, the first mentioned, which accelerates downward, will conveniently serve as a trailing stop.
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 1.0778 USD. The price target for our bearish scenario is at 1.0436 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0877 USD.
The expected profitability of this Forex strategy is 342 pips and the risk of loss is 99 pips.
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