EUR/USD: After ISM Manufacturing, a Close Eye on the Employment Report

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The Euro regained a few pips against the Dollar, in a market which nevertheless remains tense in the face of geopolitical risk, impatient for the normalization of monetary policies of the major central banks of the planet.

“The “higher for longer” policy on rates, led by the American monetary institution, has gradually borne fruit and inflation fell back to 2.6% in June, not yet at the 2% target but at a level low enough to accelerate discussions on a first rate cut,” notes Alexandre Baradez, head of analysis at IG France.

This is the whole meaning – the only one, moreover – of the last FOMC in the middle of the week, before a first cut in the Fed Funds in September. Over the rest of 2024, a 75 basis point cut, in two installments, is a scenario that holds the rope. A confirmation of the lull in prices, and an easing of tensions on employment, will confirm this working scenario.

Employment will be the topic of discussion this Friday, at 2:30 p.m. (Paris time), with the monthly federal NFP report on the health of American private employment in July. Here are the various consensuses: a stable unemployment rate at 4.1% of the active population, 176,000 job creations in the non-agricultural private sector, and a monthly increase in average hourly wages of +0.3%.

The publication of the ISM manufacturing index yesterday, 2 points below the consensus, argued for a net slowdown in American industrial activity.

At midday on the foreign exchange market, the Euro was trading against $1,0820 approximately.

KEY GRAPHIC ELEMENTS

After failing against a chart resistance level around $1.0910, the spot EURUSD has retreated, now in 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 1.0818 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 217 pips and the risk of loss is 48 pips.

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