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The Euro/Dollar, one of the most reliable barometers of risk appetite on the financial markets, fell below the base of a bearish graphical pattern (see technical section), as two major monetary meetings approach, on both sides of the Atlantic.
On the European side, the ECB is completing a new Governing Council meeting on September 12. Konstantin VEIT, portfolio manager at PIMCO, believes that the central bank “will reduce the interest rate on the deposit facility by 25 basis points”, but doubts that “the Governing Council will provide much guidance beyond September”. “The teams’ new macroeconomic projections should change little, and continue to show inflation close to target in 2025 and 2026.”
Thomas Giudici, head of bond management at Auris Gestion, also assures that “an easing of rates is little doubtful”, but nevertheless expects “that the ECB will get a little more involved with regard to the continuation of the easing of its monetary policy.”
There is no doubt that the ECB will refer to the continuing difficulties facing German industry, which is under very high surveillance.
On the American side, the Fed is finishing a new meeting of its Federal Open Market Committee (FOMC) on September 18. A historic meeting that will mark the beginning of the monetary easing process through direct action on rates. “If a 25 bps cut in key rates seems to be a given (a first since the plateau reached over a year ago), is it possible that the latest economic data will allow the American institution to proceed with a 50 bps cut?” asks Thomas Giudici, who considers that “the latest employment data are not bad enough to justify an overreaction by the Fed even though they confirm the slowdown in the labor market.”
On Friday, the monthly report on private employment in the United States, without being catastrophic, revived doubts, to the point of weighing heavily on Wall Street, more particularly on the technological side of the stock market.
Because if the unemployment rate remains stable at 4.2% of the active population, the number of job creations in the private sector (excluding agriculture) comes to 142,000, well below the target. So, of course, the result is not as bad as in July (114,000), but it rekindles the debate on the nature of the landing of the American economy. In other words, the soft landing, and a fortiori the kiss landing, is no longer so relevant. Finally, the average hourly wage, at +0.4%, exceeds the consensus.
In terms of statistics on Monday, there was little to get our teeth into. Investors took note of the Sentix investor confidence index, down to -15.4, missing expectations that were already pessimistic. Naturally, Germany weighs heavily in this score.
At midday on the foreign exchange market, the Euro was trading against $1,1030 approximately.
KEY GRAPHIC ELEMENTS
A pattern (pattern) chart shoulder, head and shoulders, on a slanting neckline basis, is emerging, even as the relative strength RSI indicator sends negative messages.
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 1.1030 USD. The price target of our bearish scenario is at 1.0759 USD. To preserve the capital invested, we advise you to position a protective stop at 1.1111 USD.
The expected return on this Forex strategy is 271 pips and the risk of loss is 81 pips.
The News Bulletin 247 council
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