(News Bulletin 247) – This article, with open access, is produced by the stock market analysis and strategy research team at News Bulletin 247. To ensure you don’t miss any opportunities, consult all the analyzes and discover our portfolios by accessing our Privileges area.
The momentum remained bearish on the Euro/Dollar currency pair, the day after the publication of the Fed Minutes, and as the publication of consumer prices approached.
The Minutes constitute a valuable document for currency traders, especially now, when the Fed is negotiating a delicate monetary shift, against a backdrop of fears of “no landing” in the American economy. The Minutes are concretely a chronological report, hence their name, of the last meeting of the Monetary Policy Committee of the Federal Reserve.
This document “showed that all participants agreed to the September reduction and that a large majority of them supported the cut of 50 basis points (0.5 percentage points)”, comments Barclays. The bank anticipates two more rate cuts of 25 basis points this year from the American central bank.
As for the next meeting, in less than thirty days, and according to data from the CME Group’s FedWatch tool, the probability of a 25 basis point drop in Fed Funds is 86.7%.
As a reminder, the unemployment rate first published, expected stable at 4.2% of the active population, fell to 4.1%. Job creation in the private sector (excluding agriculture) exploded to 254,000, against a consensus of 147,000 (!). Finally, average hourly wages increased by 0.4%, extending the trend from August (+0.5%). Figures which show great resilience in private employment, and which could theoretically push back expectations of a rate cut. The market preferred to see the glass half full, reassuring itself about the capacity of the American economy to land softly, or even… not to land at all (no landing). A scenario that is starting to worry the stock market.
In the geopolitical chapter, “the gears in the Middle East are accelerating”, notes Geoffroy Landoeuer, Director of Financial Management at Turgot AM. “In Lebanon, Israel managed in just a few days to injure thousands of Hezbollah soldiers and decapitate its staff. While the Iranian response was feared – it finally materialized on October 1 – oil prices , which have declined sharply over the period (-8%) due to the deteriorating international situation, will be worth watching…” Enough to weigh on the barometer of the appetite for risk that constitutes the single currency.
On inflation, in the broadest price basket, retail prices are expected to rise by 2.3%, compared to 2.5% the previous month. Any higher result would tense up the trading rooms. See you at 2:30 p.m. for the verdict on these consumer prices across the Atlantic.
“Inflation in services could still constitute a risk for monetary easing, as could the next presidential elections,” warns Bénédicte Kukla, Senior Investment Officer at Indosuez Wealth Management. “Indeed, the two main candidates are considered unfavorable to budgetary sustainability, but a revival of Donald Trump’s campaign would increase economic and social uncertainty, while his foreign policy based on an increase in customs duties would revive concerns inflationary.”
At midday on the foreign exchange market, the Euro was trading against $1.0930 approximately.
KEY GRAPHIC ELEMENTS
The oblique support line (drawn in black) has given way in a significant and increasing level of volatility. The 50-day moving average (in orange) also gave way quickly, the bearish message is reinforced. Next graphic event to watch, the imminent crossing of two remarkable moving averages, at 20 and 50 days.
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 1.0931 USD. The price target for our bearish scenario is at 1.0665 USD. To preserve the invested capital, we advise you to position a protective stop at 1.1031 USD.
The expected profitability of this Forex strategy is 266 pips and the risk of loss is 100 pips.
News Bulletin 247 advice
DAILY DATA CHART
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
