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The Euro Dollar remained on a short-term bearish bias, under pressure from the warming of the American 10-year, close to 4.30%, the highest since July. A warm-up further encouraged this week by a battery of very solid statistics on growth, consumption and employment. Employment will be the subject of this afternoon with the publication of the monthly NFP (Non Fam Payrolls) report.
Concerning this major statistical meeting of the day, the consensus is at 106,000 job creations in the private sector (excluding agriculture). As a reminder, in September, the American economy had created 254,000 jobs. See you at 1:30 p.m. for the verdict.
No surprises yesterday to report regarding PCE prices (personal consumption expenditures), up 0.3% monthly excluding food and energy. Note that weekly registrations for unemployment benefits are still close to the 200,000 threshold, illustrating chronic tensions on the employment front, tensions which will be confirmed or refuted today with the NFP (Non Farm Payrolls). Target exceeded for household spending (+0.4% monthly), statistics which echo the publication at the start of the week of the consumer confidence index (Conference Board).
On the political level, the “Money Time” of the race for the White House is launched while the bird words fly between the candidates, through meetings.
“As in the last elections, this could be decided by a few votes and the results could not be known the same day, each state having, moreover, its own electoral rules (and contesting the results)”, comments Thomas Giudici , head of bond management at Auris Gestion, who has the humility not to play the oracles: “It is therefore quite complicated to position the portfolios in one direction or the other as the result of the election is more of the casino than of political or financial analysis”.
If it is indeed impossible to predict the final result, which will probably not be known immediately on November 5, the two scenarios have different implications:
“If Vice President Harris wins, her expansionary tax agenda, while unlikely to be fully realized due to likely Republican control of the Senate, could nonetheless result in targeted tax measures such as an expansion of the child tax credit and an extension of some of Trump’s 2017 tax cuts”; says Michael De Palma, co-head of the global bond market at MacKay Shields LLC, in charge of Nordea AM’s US Investment Grade strategies.
In contrast, “if former President Trump wins the election, Republicans would likely control both houses of Congress, opening the door to a full extension of the expiring provisions of the 2017 tax cuts, and possibly to new tax breaks for corporations and small businesses Trump also discussed additional support for households, such as an expanded tax credit for families with children and a number of additional tax deductions for households.
At midday on the foreign exchange market, the Euro was trading against $1.0850 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. The flagship currency pair is currently in the process of finalizing a wedge pattern.
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 1.0853 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 1.0951 USD.
The expected profitability of this Forex strategy is 302 pips and the risk of loss is 98 pips.
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