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The Euro, one of the most accurate barometers of risk appetite in financial markets, was gaining ground against the Dollar, at around $1.1185 per euro, close to annual highs, following the announcement of measures to support the Chinese economy.
“The noise from sources “close to the discussions” has been intensifying since the start of the school year, suggesting the imminence of measures in the face of a slowing Chinese domestic economy,” notes Alexandre Baradez (IG France), who praises major announcements, “the lowering of the prudential reserve ratio for Chinese banks”, “the lowering of a short-term lending rate to banks (7 days)”, support for the stock markets and real estate.
“Even if it is not a “bazooka”, the measures taken by the Chinese authorities are relevant and targeted in relation to the difficulties that the country has been facing for several years.”
For many months, the market has been waiting for the Chinese government to deploy major resources to revive a flagging economy. The latest indicators published last week, whether retail sales or industrial production, have once again confirmed that the Chinese economy is slowing down.
The Chinese authorities finally decided to act with a first electroshock on Tuesday. The MSCI China index jumped by around 4.50%.
“The next wave of easing will likely come from fiscal and housing policy, which could change growth expectations and market sentiment, depending on the magnitude and effectiveness of the announcements,” economists at Allianz Global Investors said.
Because in the immediate future, “despite this latest initiative on the part of the Chinese authorities, investors remain skeptical,” tempers Grégoire KOUNOWSKI, Investment Advisor at Norman K. “Indeed, for many of them, the country’s economic problems remain deep, with a property market running out of steam, domestic consumption falling, rising youth unemployment, a return to price deflation and distrust of foreign investors stronger than ever.”
Yesterday in the statistics chapter, we learned about the IFO index of the business climate in the leading economic power of the Eurozone, which came out down at 85.4, without however moving significantly away from the consensus (86.1). The BCC (Business Cycle Clock) tool accompanying the publication shows a quagmire in the “Crisis” box of the matrix.
In the afternoon, they learned of an unexpected deterioration in consumer morale in September in the United States. The index measured by the Conference Board fell to 98.7 points in September, compared to 103.8 points for the consensus and after 105.6 points the previous month. Nothing new on the S&P Case Schiller index of real estate prices in around twenty representative agglomerations, up 5.9% on an annual basis, right on target compared to the consensus. Finally, there was marked disappointment regarding the Richmond Fed manufacturing index, which sank deeper into negative territory, at -19.
On the agenda this Wednesday, to follow as a priority for the United States, new home sales at 4:00 p.m. and crude oil stocks at 4:30 p.m.
At midday on the foreign exchange market, the Euro was trading against $1,1180 approximately.
KEY GRAPHIC ELEMENTS
The spot has once again weakened an oblique line of graphic support, relaunching the idea of ​​the formation of a chart pattern. A clear break of this threshold would weaken the currency pair for the coming weeks. A neutral position is adopted while waiting, if necessary, for a signal.
MEDIUM TERM FORECAST
Considering the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD) parity.
We will maintain this neutral opinion as long as the Euro Dollar (EURUSD) parity rates are positioned between the support at 1.1012 USD and the resistance at 1.1250 USD.
The News Bulletin 247 council
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