EUR/USD: In search of geopolitical and monetary visibility

by

(News Bulletin 247) – The Euro remained under pressure, below its 100-day moving average against the Dollar in the context of a loss of risk appetite in the financial markets, as V. Putin approaches the Rubicon in the Ukrainian folder. The head of the Kremlin recognises, by openly supporting the separatists in Dombass, the independence of two regions of this eastern part of Ukraine, which constitutes an additional step in the escalation, and further materializes the entry into a new Cold War with the West.

This burning issue should not make us forget the essential working matrix that constitutes monetary policies on both sides of the Atlantic. But the degree of aggressiveness of the Fed in March is not yet perfectly legible. “We are monitoring the risk of overly aggressive tightening by the Fed, which could lead to a marked economic slowdown and a widening of credit spreads”, warns César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management. “Markets still don’t know what the Fed’s scheduled March meeting has in store. Few central bank officials have spoken in the past week, making expectations difficult. Governors appear to be evenly split between ‘hawks’ and “doves,” the minutes from their last monetary policy meeting showing that voting members remained sharply divided, both on the pace of interest rate hikes and on shrinking the Fed’s balance sheet.”

On the statistical side, in the absence of American benchmarks due to a public holiday, the operators turned to barometer indicators of activity in the Euro Zone. (PMI by IHS Markit) for services and industry. While the figures are rather close to expectations for industry, the score for services (55.8) is well above expectations. Chris Williamson, Chief Business Economist at IHS Markit, commented on the latest figures from the Flash PMI survey: for many consumer services – including travel, tourism and leisure – and helped ease supply challenges.With businesses anticipating a broader reopening of the economy in the coming months, the outlook for business also improved during the month, and the pace of job creations strengthened.”

On Tuesday, the single currency managed to resist with the publication of the IFO business climate index in Germany, which came out above expectations at 98.9. As a reminder, the construction of the score is based on The IFO business climate is based on approximately 9,000 monthly responses from German companies in industry, services, commerce and construction. Companies are invited to give their assessment of the current business situation and their expectations for the next six months.

To follow for the United States, at 3:45 p.m. the services and manufacturing PMI in flash data for the current month.

At midday on the foreign exchange market, the Euro was trading against $1.1340 about.

KEY GRAPHIC ELEMENTS

For the first time since June 16 (then on a sudden break), the spot was close to its 100-day moving average (in orange), the underlying trend line still very significantly bearish. The much broader consolidation has taken shape below $1.1460 which is a chart resistance level. The field is immediately open towards the lower limit of this very wide range, around $1.1115. Currency traders will however avoid taking an immediate position in the absence of a satisfactory entry point, outside the rules of money management.

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 1.1260 USD and the resistance at 1.1360 USD.

CHART IN DAILY DATA

EUR/USD: In search of geopolitical and monetary visibility (©ProRealTime.com)

©2022 News Bulletin 247

You May Also Like

Recommended for you