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The Euro/Dollar suffered some profit-taking, in a climate marked by a return of caution, against a backdrop of fear of a general conflagration in the Middle East, and with the approach of key employment figures on Friday, figures that the Fed will use to construct its monetary policy. Yesterday, his boss J Powell “tempered certain expectations regarding the pace of rate cuts”, in the words of Alexandre Baradez (IG France).
The Chairman of the Federal Reserve spoke at the annual meeting of the National Association for Business Economics in Nashville, Tennessee.
“Jerome Powell indicated that if the economy continued to evolve as expected, there would be two additional rate cuts by the end of the year for a total of 50 bps, so logically a cut of 25 bps in November and another in December.”
“But there you have it, the markets want more and are still anticipating an additional 75 bps of rate cuts this year, that is to say still at least a 50 bps cut during one of the next two meetings…that’s what what do the probabilities of a rate cut via the Futures Fed Funds indicate with a 65% chance for the “75 bps scenario”.”
The employment figures published throughout the week could catalyze these probabilities in one direction or another. Before the traditional NFP (Non Farm Payrolls) report on Friday, currency traders will be able to deal with new job offers (JOLTS), weekly registrations for unemployment benefits and the ADP firm survey, between today and Thursday.
“All the employment figures this week will be important because the Fed has mainly pivoted from the signs of a small slowdown in the jobs market that appeared this summer,” warns M Baradez.
On the geopolitical front, “Israel’s elimination of several Hezbollah leaders on Lebanese soil rekindles tensions”, insists Romane Ballin, bond manager of Auris Gestion. “Especially since Iran has indicated that it will not leave its ally alone, which could lead to a widening of the conflict. If, at this stage, the impact on financial markets is contained, it is appropriate to remain cautious: geopolitical risk remains sustained.”
At midday on the foreign exchange market, the Euro was trading against $1.1090 approximately.
KEY GRAPHIC ELEMENTS
The oblique support line (drawn in black) has just given way, in a significant and increasing level of volatility. If the 50-day moving average (in orange) were to also give way quickly, the bearish message would be reinforced.
MEDIUM TERM FORECAST
Considering the key graphical factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).
Our entry point is at 1.1089 USD. The price target for our bearish scenario is at 1.0907 USD. To preserve the capital invested, we advise you to position a protective stop at 1.1161 USD.
The expected profitability of this Forex strategy is 182 pips and the risk of loss is 72.000000000001 pips.
News Bulletin 247 advice
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