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In a very tense geopolitical context in the Middle East, the Euro, a reliable indicator of risk appetite on the financial markets, fell again against the Dollar, which nevertheless saw the reduction in its potential for remuneration confirmed, following the FOMC yesterday.
The meeting unsurprisingly ended with a status quo. The Monetary Institution has very clearly opened the door to a first rate cut at the start of the school year, confirming the dominant sentiment in trading rooms. A scenario with two cuts (one in September, one in December), for a cumulative 75 bps, is holding the rope.
In the statistical chapter yesterday, currency traders took note of the inflation figures in the Eurozone, in the sense of consumer prices in preliminary data for the month of July. EuroStat estimates the annual increase in prices at +2.9%, excluding food, energy and tobacco, whereas on average the economists and analysts surveyed were expecting +2.8%.. In addition, the survey by the private human resources firm ADP highlighted job creations in July (122,000) significantly lower than the consensus had suggested. This reinforces the scenario of two federal rate cuts this year, including one in September.
To follow the weekly registrations for unemployment benefits across the Atlantic at 2:30 p.m. and, still on the other side of the Atlantic, the industrial ISM at 4:00 p.m.
In the immediate future, it is the final data of the PMI activity indicators in the Eurozone that are occupying the screens of the currency traders. The manufacturing PMI is slightly up compared to the first estimates, at 45.8, thanks to the German component, which finally comes out at 43.2 points.
Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said: “There is little hope for a rebound in demand soon, with new orders falling for the 27th consecutive month in July, and at a faster pace than in June. Eurozone manufacturers are also less optimistic about an increase in activity in the year ahead, with confidence below its long-term average, and weak growth prospects have led to an acceleration in job cuts.”
“Industrial activity contracted in the majority of countries surveyed in July. Only Greece and Spain recorded notable growth in their manufacturing sectors, although expansion rates declined in both countries, while Austria and Germany posted the weakest performances. The surprising extent and intensity of the contraction in July suggest difficult times lie ahead for euro area manufacturers in the coming months.”
At midday on the foreign exchange market, the Euro was trading against $1,0795 approximately.
KEY GRAPHIC ELEMENTS
After failing against a graphical resistance level around $1.0910, the EURUSD spot has retreated, now finding itself on a congestion zone of two notable moving averages, at 20 and 50 days. Negative opinion maintained.
MEDIUM TERM FORECAST
Considering the key graphic factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar parity (EURUSD).
Our entry point is at 1.0792 USD. The price target of our bearish scenario is at 1.0601 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0866 USD.
The expected return on this Forex strategy is 191 pips and the risk of loss is 74 pips.
The News Bulletin 247 council
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