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The Euro/Dollar currency pair, one of the most reliable markers of risk appetite in the eyes of investors, confirmed its passage below an oblique line. A reflux to be linked to the geopolitical situation in the Middle East.
Currency traders naturally remain on the lookout for the slightest development on tensions between Iran and Israel. The two countries exchanged threats following Tehran’s attack on the Jewish state. This has fueled speculation of a conflagration in the situation in the Middle East, and in turn fears of disruptions to the oil supply.
“Events in the Middle East are very worrying and evolving rapidly. Following Iran’s massive attacks on Israel tonight, the risk of a direct and escalating confrontation between the two countries has sharply increased and could have far-reaching consequences for the region”, alerts Thomas HEMPELL, Macro and Market research manager at GENERALI AM.
Furthermore, the other “driver” of the foreign exchange market this week is American employment, the measurement of tensions of which is essential, at the very time when the Fed is trying to negotiate its monetary shift as best as possible. We will particularly monitor the level of weekly registrations for unemployment benefits this afternoon, before looking ahead tomorrow to the most anticipated publication of the week, namely the NFP (Non Farm Payrolls) report.
Investors had a prime benchmark yesterday, with the publication of the survey by the private firm ADP, which showed that the American private sector created more jobs than expected last month, at 143,000 creations against 125,000 which were expected by consensus, and after 103,000 in August.
Finally, in the absence of decisive figures for Germany, operators are keeping a close eye on France, whose credibility of public finances is threatened given the scale of its debt. According to INSEE data adjusted to the end of September, at the end of the second quarter of 2024, public debt stands at 3,228.4 billion euros, an increase of €68.9 billion, after +58. €2 billion in the previous quarter. Expressed as a percentage of gross domestic product (GDP), it stands at 112.0%, after 110.5% in the first quarter of 2024.
“Considering the verdict of the polls on July 7, the center-right executive led by Prime Minister Michel Barnier is a fragile edifice, and a motion of censure cannot be ruled out. In addition, the modalities of implementation implementation of the required budgetary consolidation lacks clarity This results in a further increase in the risk premium on French government bonds compared to German federal bonds,” warn SwissLife AM strategists.
A first measure to increase taxes, on a marginal portion of French households, was proposed this morning. It concerns households without children earning more than €500K/year.
To follow at 2:30 p.m. new weekly registrations for unemployment benefits in the United States. Good surprise this morning on the final data from the PMI services barometer in the Euro Zone for the month of September which ultimately came out at 51.4, compared to 50.5 in initial estimates.
At midday on the foreign exchange market, the Euro was trading against $1.1040 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 positive in the medium term on the Euro Dollar parity (EURUSD).
Our entry point is at 1.1038 USD. The price target for our bullish scenario is $1.0759. To preserve the capital invested, we advise you to position a protective stop at 1.1107 USD.
The expected profitability of this Forex strategy is 279 pips and the risk of loss is 69.000000000001 pips.
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