(News Bulletin 247) – Satisfactory activity indicators, IFO barometer of confidence in the German economy of good quality, the first indicators of the week are not lacking in consistency, and constitute an antagonistic force allowing the Euro, active at ” risk”, to resist against the Dollar, in the context that is nevertheless inflammable on the geopolitical side.
“It’s the start of a Russian invasion in Ukraine,” says Joe Biden now very clearly, who immediately announced a first wave of sanctions against Moscow. As a reminder, While the possibility of a summit between Biden and Putin would have been quickly showered by the latter, who considered the option “premature”, the Kremlin is now close to the Rubicon: it recognizes, by openly supporting the separatists in the 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.
With one voice, the European Union also announced a first “train” of economic sanctions measures hitting Moscow. The risk is increased pressure on natural gas prices and supply problems. Germany, in particular, depends overwhelmingly on Russia for its supplies. “The prices of natural gas contracts in Europe have rebounded since Monday but they remain below the average prices observed since January and above all they are moving very far from the peak of stress in December”, nuance Alexandre Baradez (IG France).
Chancellor Olaf Scholz has decided to freeze the approval procedure for NordStream (a gas pipeline linking Germany to Russia via the Baltic).
This burning issue should not make us forget the essential working matrix constituted by 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.”
In terms of statistics, note the publication of the IFO business climate index in Germany, which came out above expectations at 98.9. As well as flash PMI (IHS Markit) significantly above expectations in the United States regarding the very first estimates for the current month. A reassuring indicator, the consumer confidence index (Conference Board) emerged at a firm level, boding well after worrying measures of consumer morale according to the work of the University of Michigan (U-Mich).
Published at 11:00 a.m., the various consumer price indices, in final data for January, at +2.3% in the Euro Zone, at an annualized rate, excluding volatile elements (food, energy, alcohol and tobacco).
At midday on the foreign exchange market, the Euro was trading against $1.1360 about.
KEY GRAPHIC ELEMENTS
For the first time since June 16 (then on 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
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