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The Euro/Dollar currency pair tested its 50-day moving average (in orange) on Wednesday, as geopolitical tensions in the Middle East weighed heavily on risk appetite. Even Wall Street, hitherto spared, lost ground yesterday.
“Israel’s elimination of several Hezbollah leaders on Lebanese soil rekindles tensions, especially since Iran has indicated that it will not leave its ally alone, which could lead to a widening of the conflict,” warned Monday Romane Ballin, bond manager of Auris Gestion in a note. “If, at this stage, the impact on the financial markets is contained, we must remain cautious: the geopolitical risk remains high.”
On Tuesday, the renewed tension came as several news agencies, such as Bloomberg and AFP, reported that the United States had indications that Iran was preparing to launch “an imminent ballistic missile attack “against Israel. Both agencies cited an unnamed senior U.S. official. According to AFP, Hezbollah, a Lebanese terrorist group supported by Iran, also claimed to have targeted an air base near Tel Aviv.
According to the Israeli army, Iran fired 180 missiles into its territory. A “large part” of its projectiles were intercepted by the anti-aircraft defense of the Jewish state, aided by the United States.
Another major subject likely to shift the flagship currency pair this week: American employment.
“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. To follow this Wednesday the results of the ADP firm’s survey on employment at 2:15 p.m., and tomorrow the weekly registrations for unemployment benefits, before, as the highlight of the week, the publication on Friday of the federal Non Farm Payrolls report on the health of private employment in September. Yesterday new job openings (JOLTS) exceeded expectations, at 8.040 Million.
This measure of persistent tensions on the employment front, while the battle against inflation is about to be won, is essential data for the Fed in the construction of its monetary policy.
At midday on the foreign exchange market, the Euro was trading against $1.1070 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. This test is in progress.
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 1.1066 USD. The price target for our bearish scenario is at 1.0801 USD. To preserve the capital invested, we advise you to position a protective stop at 1.1141 USD.
The expected profitability of this Forex strategy is 265 pips and the risk of loss is 75 pips.
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