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The Dollar regained momentum at the turn of the week in the wake of an upward reaction in government bond yields. The 10-year Treasuries returned, around 4.33, to a level which had not been relevant since the end of November. An explanation may come from the very good quality of the latest macroeconomic publications, on growth and consumer confidence in particular, while inflation is showing signs of resistance.
GDP now reaches an annualized rate of +3.4% for this Q1. Operators also took note of revised consumer confidence index (U-Mich) data on Thursday at 79.4, above expectations. But THE big market event, the publication of the PCE index, the American Federal Reserve’s preferred measure for gauging inflation, took place on Friday afternoon. The Paris market was then closed. Without deviation from expectations, the index of personal consumption expenditures rose 0.3% monthly, excluding food and energy.
On this side of the Atlantic, this Tuesday is the day of publication of the final data of the PMI activity indicators, for the month of March. Across the entire Euro Zone, this industrial PMI reached 46.1, exceeding the first estimate by 0.4 points.
Not very optimistic, Dr. Cyrus de la Rubia, Chief Economist at the Hamburg Commercial Bank, comments on the latest results of the survey: “It is discouraging to note that, although the HCOB PMI index of manufacturing production in the zone euro has recovered over the last eight months, it still remains in negative territory at the end of the first quarter of 2024. Although it has gradually approached the 50.0 mark which separates contraction from growth, its progression has however, was hampered by the weak performance of Germany and France. Given the current environment, it is not surprising that our nowcasting model, incorporating the latest PMI data, suggests a further recession in the manufacturing sector of the euro zone.”
To follow at 4:00 p.m. the new job offers across the Atlantic (JOLTS).
At midday on the foreign exchange market, the Euro was trading against $1.0740 approximately.
KEY GRAPHIC ELEMENTS
Consistent with our previous papers, we build a bullish position, which we maintain as long as the 20-day moving average (in dark blue) gravitates above the 50-day moving average (in orange). The difference between these two curves is small.
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 1.0739 USD. The price target for our bearish scenario is at 1.1068 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0692 USD.
The expected profitability of this Forex strategy is 329 pips and the risk of loss is 47 pips.
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