(News Bulletin 247) – V. Putin’s chilling determination to continue his advance into Ukrainian territory continues to weigh heavily on the Euro/Dollar, whose quality as a barometer of risk appetite is currently fully illustrated. The attack on the country’s main nuclear power plant – the fire in its immediate surroundings was brought under control, and no reactor was affected – will inevitably have shocked the international community, bringing it back to memory, even if it is in a any other context, the 1986 nuclear accident at Chernobyl.
Faced with fears of a global economic slowdown, at the worst time in full post-Covid recovery, J. Powell before the American Parliamentarians, wanted to reassure about the rate of rise in federal rates, suggesting that the rise would probably be less strong. provided that. The way is thus open to an increase of 25 bps, instead of 50 bps for this next deadline.
The Fed will end a new meeting of its Monetary Policy Committee (FOMC) on March 16.
It must be said that this question of the potential slowdown in global growth, in a high inflationary context, energy in mind, completely reshuffles the cards for the big money-makers of the planet.
“In this context, central banks should be more cautious and more accommodating, particularly in Europe, in the face of the risks weighing on growth. At the same time, inflation therefore appears to be less under control knowing that it could increase significantly case of an acceleration of sanctions on the energy front, again leading to the risk of a slowdown in activity”, explain Jean-Marie MERCADAL, Director of Investment Strategies and Eric BERTRAND, Deputy CEO and Chief Investment Officer at OFI AM.
For the European Central Bank, “war means [également] a questioning of monetary policy”, can we read in an ING research note dated March 03. “Until a week ago, the main concern was the secondary effects of high inflation and a possible wage-price spiral, but thinking has changed rapidly. The main risk now seems to be whether the effects on inflation will not be seriously stagflationary in the short term, as consumer purchasing power is compressed. A resulting rapid monetary tightening would have additional negative effects on an economy already under pressure.”
As a reminder on inflation, EuroStat published the latest consumer prices in the Euro Zone on Wednesday, above expectations, at +2.7% at an annualized rate, excluding basket of volatile elements (food, energy, alcohol and tobacco).
Regarding the main statistical release yesterday morning, at 55.5, the IHS Markit synthetic service PMI for the whole of the Euro Zone came out very close to expectations. The “composite” data (industry + service) are mechanically available for February, at 55.5. Chris Williamson, Chief Business Economist at IHS Markit, provided the following insights: “Although it is still too early to assess the consequences of the conflict, increasing risk aversion as well as new sanctions will most certainly impact the business outlook. , thus hampering the post-pandemic recovery. The conflict in Ukraine, which heightens inflationary risks and darkens the outlook for activity, thus adds to the headwinds that households and businesses were already preparing to face and makes the task even more difficult challenge of the ECB to control inflation while supporting a strong economic recovery.”
Note that the US PMI Services (ISM) clearly disappointed by completely missing expectations. On the other hand, registrations for unemployment benefits for the past week came out in contraction at 215,000 new registrations.
To follow in priority, on the agenda this Friday, the federal report NFP (Non Farm Payrolls) on American employment in February. The consensus figures the number of job creations in the private sector (excluding agriculture) at 407,000 and the unemployment rate at 3.9% of the active population. It was at 4% at the end of January.
At midday on the foreign exchange market, the Euro was trading against $1,1000 about.
KEY GRAPHIC ELEMENTS
The transition phase between February 4 and 23, in the form of a slip without federation, under the 100-day moving average (in orange) is over. The underlying bearish bias aligns with the short term, and the plot of a candle conspicuous by its red body on Thursday 2/24 illustrates the firm grip of the selling side. With 4 red bodied candles over the last 4 candles, the last one still being drawn, and continued selling mobilization this week, the picture remains bleak. We are reviewing our bearish targets, at $1.0856, then if necessary at $1.0685.
MEDIUM TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).
Our entry point is at 1.1017 USD. The price target of our bearish scenario is at 1.0686 USD. To preserve the capital invested, we advise you to position a protective stop at 1.1101 USD.
The expected return of this Forex strategy is 331 pips and the risk of loss is 84 pips.
CHART IN DAILY DATA
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