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The Dollar continued to maintain a small advantage against the Euro in the context of the rise in 10-year federal rates.
“Jerome Powell’s change of tone has therefore maintained upward pressure on American rates which are now trading at the levels of early November,” summarizes Thomas Giudici, head of bond management at Auris Gestion.
After the dovish pivot of December, here is the hawkish pivot of April… The president of the Fed has, in fact, indicated that the recent inflation figures in the United States had not provided the necessary confidence in the return of inflation. inflation towards the 2% target.
The week ahead will be relatively poor in major statistical benchmarks that can directly influence the currency pair. But from Thursday, everything will accelerate with the publication of the very first estimates of GDP for the first quarter in the United States. Then the next day the PCE prices will be published (personal consumption expenditures), the Fed’s preferred barometer in its assessment of price increases.
“The calculation methodology is very different from that of the consumer price index (CPI),” explains Christopher Dembik, investment strategy advisor at Pictet AM. “Therefore, the strong inflationary pressures observable in the latest CPI publication should not be perceptible in the PCE core. This does not change the situation from a monetary policy perspective across the Atlantic.”
“Jerome Powell was clear last Tuesday: “If inflation persists, the Fed can keep the rate level unchanged for as long as necessary”. It is certain that the American Federal Reserve will lower its rates later than most banks G10 power stations.”
Furthermore, the season of quarterly results from large groups will intensify on both sides of the Atlantic, with in particular copies of some members of the Magnificent 7: Microsoft and Alphabet. Other tech giants will publish such as Intel or Qualcomm.
In the immediate future, however, currency traders are dealing with the first estimates of PMI activity indicators in Europe. On the scale of the entire Euro Zone, these barometers appear contrasting, below expectations for industry (45.6) and above for services (52.9).
Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, comments on the latest survey figures: “Given the latest PMI data, the ECB may hesitate to lower its interest rates in June. Some members of the Central Bank are indeed worried about the acceleration of cost inflation, driven not only by the increase in oil prices but also, and more worryingly, by the increase in wages. prices charged by service providers recorded during the month also raises fears of the continuation of underlying inflation in the services sector. If the ECB nevertheless seems determined to ease its monetary policy, it should do so cautiously and. not with a “pragmatic gradualism, without haste but without exaggerated wait-and-see attitude” as recommended by the governor of the Bank of France, François Villeroy de Galhau.
At midday on the foreign exchange market, the Euro was trading against $1.0660 approximately.
KEY GRAPHIC ELEMENTS
THE pullback very clear Thursday 04/18 on a resistance zone ($1.0693) will invite people to take short positions again on the EURUSD currency pair, especially as the break of the 50-day moving average (in orange) by its counterpart at 20 days (in dark blue) was made at a relatively large angle.
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 1.0663 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 1.0756 USD.
The expected profitability of this Forex strategy is 227 pips and the risk of loss is 93 pips.
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