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The Euro Dollar currency pair continued to form a pullback (graphic rejection) on $1.0550, in a chronically negative bias, against a backdrop of increasing economic imbalance between the two shores of the Atlantic.
“The euro zone is more than ever penalized by its two (former) locomotives stuck, what’s more, in political blockages. While we still wonder how France will succeed in bringing its public finances back on the right path (without , we hope, impact growth too much), Germany, for its part, must completely review its economic model in place since the 90s and reunification: exports to China, cheap Russian oil and gas and of American protectionism. three, there are none left,” coldly notes Thomas Giuduci, head of bond management at Auris Gestion.
While on the contrary, “everything seems to be going well across the Atlantic: producer prices are slowing down, tensions on the labor market are decreasing and, above all, business leaders’ forecasts are reaching two-year highs.” and a half thanks in particular to the pro-business policy desired by the new American administration.
The statistics published since the beginning of the week perfectly corroborated this dichotomy, between a gloomy IFO (German business confidence), and an American consumer confidence index (Conference Board) in great shape, as Thanksgiving approaches, a period which traditionally mark across the Atlantic, the start of end-of-year shopping.
Furthermore, the appetite for risk, directly correlated to the single currency, remained upset by Trump’s very recent comments on foreign trade. If we knew the 45th, and soon 47th President of the United States, was offensive on customs tariffs, very concrete declarations of intent shook the Asian and European stock markets.
He wants to impose customs duties of 25% on all products from Mexico and Canada and increase those for products imported from China by 10%. Donald Trump justifies these trade retaliatory measures in retaliation for illegal immigration, and drug trafficking and in particular Fentayl, a powerful opioid which is wreaking havoc in the United States.
On the macroeconomic agenda this Wednesday, to follow as a priority on the American side, preliminary Q3 GDP data, weekly registrations for unemployment benefits, orders for durable goods, the Chicago PMI, PCE prices and household spending and income , among other celebrations.
At midday on the foreign exchange market, the Euro was trading against $1.0520 approximately.
KEY GRAPHIC ELEMENTS
The currency pair has just come out from the bottom, in intense volatilityof a wedge pattern, which confirms the bearish bias, which is now fundamental. Since then, the fragile supports have broken one after the other. Negative review maintained. However, at this stage the decline and the formation of a technical rebound cannot be long in coming, we are watching for the signs.
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 1.0516 USD. The price target for our bearish scenario is at 1.0101 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0656 USD.
The expected profitability of this Forex strategy is 415 pips and the risk of loss is 140 pips.
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