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The Euro/Dollar currency pair, one of the most reliable markers of risk appetite in financial markets, followed in the footsteps of equity markets in Europe and the price of crude, against a backdrop of intense questioning over the intentions of the major central banks on both sides of the Atlantic for the coming months.
Yesterday the publication of an activity barometer (PMI ISM manufacturing) in the United States, which came out below expectations, did not help currency traders in the sense that the indicator added fog to J Powell’s glasses, President of the Fed, who sees his window of opportunity shrink every day.
“The uncertainty displayed by Jerome Powell reinforces expectations around economic data. Any employment figure (JOLTS, NFP, unemployment, etc.) or activity index (PMI, ISM, regional Fed index), is likely to significantly cause markets to react in search of visibility on the trajectory of employment and inflation, the two mandates of the Fed.” for Alexnadre Baradez (IG France).
American employment, still under pressure, will be particularly closely monitored this week with numerous publications: new JOLTS job offers, weekly registrations for unemployment benefits, and especially the survey by the private firm ADP and the federal NFP report, culminating in Friday.
On this side of the Atlantic, the European Central Bank concludes a Board of Governors meeting this Thursday. Meeting which should result, barring any major surprises, in a reduction in key rates of 25 basis points.
After this first cut, “risks are tilted towards smaller reductions, mainly due to the stickiness of services inflation, the resilience of the labor market, loose financial conditions and the management considerations of the ECB of risks”, for PIMCO strategists.
“During the second half of the year, the focus should continue to be on wage developments, particularly in light of a record unemployment rate of 6.4% and a continued high number of ‘vacant jobs.’
To be continued at 4:00 p.m. the new job offers (JOLTS) in the United States. This is a survey (Job Openings and Labor Turnover Survey) from the Bureau of Labor Statistics. Ironically, the acronym forms a word, which means shock, collision, in English…
At midday on the foreign exchange market, the Euro was trading against $1.0870 approximately.
KEY GRAPHIC ELEMENTS
The currency pair recorded a double top at $1.0885 which further asserts itself as a resistance level, below which the bearish bias can regain its rights. Especially in the event of rapid reintegration of the lower part to an oblique (drawn in black), a major graphic reference point.
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 1.0867 USD. The price target for our bearish scenario is at 1.0551 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0971 USD.
The expected profitability of this Forex strategy is 316 pips and the risk of loss is 104 pips.
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