EUR/USD: A battery of PMIs to dissect

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Currency traders have a lot to do this Thursday morning, with the analysis of the barometer indicators of activity – the famous PMI – in the Euro Zone. If they remain far from their American counterparts, and we will have confirmation of this this afternoon, some relatively good surprises should be noted. Notably the German industrial PMI, which is rightfully under the microscope of investors. It appears in preliminary data for the current month at 51.4, against a target of 50.6. It is therefore leaving its contraction zone, to a slightly greater extent than anticipated, without however brushing aside the recurring concerns about the German industrial model, which has shown its limits in inflationary periods.

This allows the synthetic industrial index for the entire Euro Zone to significantly beat the target, coming out at 45.9 points. However, “for the European Central Bank, these latest PMI data are hardly reassuring”, comments Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. “The rise in prices is expected to maintain a sustained pace in the services sector, as suggested by the acceleration in inflation of prices paid and prices invoiced in October, most probably linked to the persistence of strong pressures on wages, particularly prevalent in the services sector, in view of this situation, the ECB is expected to reduce its key rates by only 25 basis points in December, instead of the 50 basis points previously anticipated.”

And it is this difference in the rate of decline in rates anticipated by the market, between the two shores of the Atlantic, which is in favor of the Dollar in the immediate future.

Currency traders are also keeping a close eye on the polls, which are still extremely close, in the run-up to the American presidential election, THE big event which structures political life across the Atlantic.

“The US elections are a significant event likely to increase market volatility: political uncertainty, and market reactions can create both risks and opportunities for investors. For example, policies favoring certain sectors – green energy under the Democrats or deregulation under the Republicans – can lead to significant fluctuations in these areas”, analyzes Andrea Tueni, Head of Sales Trading Saxo Bank.

In terms of statistics, currency traders will take note of the weekly registrations for unemployment benefits across the Atlantic at 2:30 p.m., before turning tomorrow to the IFO for confidence in the German economy.

At midday on the foreign exchange market, the Euro was trading against $1.08 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 ongoing crossing of two remarkable moving averages, at 20 and 50 days. The crossing angle is important, in light of the current correction.

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 1.0798 USD. The price target for our bearish scenario is at 1.0551 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0876 USD.

The expected profitability of this Forex strategy is 247 pips and the risk of loss is 77.999999999998 pips.

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