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The Dollar continues to gain the advantage against the Euro, a situation which has persisted all week, in light of the growing tensions in the Middle East, penalizing the risk asset that constitutes the single currency, and also in light of the resilience of American employment, observed through the publications of new job offers (JOLTS), the ADP survey and weekly registrations for unemployment benefits. Persistence in employment tensions is a legitimate argument for the Fed to only slowly loosen the monetary tap…
It is in this context that currency traders will welcome in a few minutes the verdict of the NFP (Non Farm Payrolls) report, the statistical highlight of the week, the most important publication on employment for the financial markets.
Here are the expectations, in the form of three main consensuses. First of all, the unemployment rate is expected to be stable at 4.2% of the active population. Then, job creations in the private sector are expected at 148,000, far from the 190/200,000 that we had for many months, which would support the scenario of a soft landing for the American economy. Finally, the increase in average hourly wages is expected at a moderate level, at +0.2%.
“For several weeks, published employment figures have shown a form of resilience: weekly unemployment claims fell last week to their lowest level in 4 months.”
On the thorny geopolitical front, on Thursday, US President Joe Bien indicated that Israel could attack Iran’s oil infrastructure. This clearly boosted oil prices.
“Undoubtedly, this rise in the price of oil and the growing tensions in the Middle East have affected risk-taking in the markets. Nevertheless, the market remains focused on the evolution of growth and inflation in the major countries , in particular because of their impact on monetary policies”, explains Sebastian Paris Horvitz, of La Banque Postale AM.
At midday on the foreign exchange market, the Euro was trading against $1.1030 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 1.1027 USD. The price target for our bearish scenario is at 1.0759 USD. To preserve the invested capital, we advise you to position a protective stop at 1.1112 USD.
The expected profitability of this Forex strategy is 268 pips and the risk of loss is 85 pips.
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