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The Euro/Dollar currency pair, within reasonable margins, continued to form its bearish bias against the Dollar, against a backdrop of fear of entering a period of political instability in France. The Barnier government is in a suspended situation, while in the middle of the week, in all likelihood, one of the two motions of censure tabled by the opposition parties will be voted on, following the use of article 49.3 for the forceful passage of the 2025 social security finance law.
Christopher Dembik, investment strategy advisor at Pictet AM, wants to put the situation into perspective: “The budget for 2024 will likely be renewed and possible adjustments will be discussed in January and February by the interim government or a new government. there is no risk of a shutdown and even less of a financial crisis or speculative attack from France, as has been mentioned here and there.”
“The spread is expected to remain within the range observed in recent days over the coming weeks, depending on political developments, with a significant risk that the market will test the 100 basis point threshold from January, when trading activity financing will resume”, for Mauro VALLE, Head of Fixed Income at Generali Asset Management (Generali Investments). This spread, that is to say the difference in basis points between the Bund and the 10-year OAT, had risen to 190 basis points in November during the crisis in the Euro Zone. We are still very far from it.
Yesterday in the statistical chapter, currency traders took note of the industrial PMI activity barometer in the Euro Zone at 45.2 points, with no deviation from the first estimates. Remember that a score below 50 points means a contraction in activity. the American manufacturing ISM, expected at 47.7, beat expectations, at 48.4.
To follow at 1:00 p.m. new job offers (JOLTS) in the United States at 4:00 p.m. This week will also be under the sign of American employment, with, among other publications, job cuts, weekly registrations for unemployment benefits, the investigation by the ADP firm, and as a highlight the federal NFP report Friday.
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.
In the immediate term, the flagship currency pair completes a pullback (graphic rejection) of school on $1.0550.
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 1.0525 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 1.0681 USD.
The expected profitability of this Forex strategy is 424 pips and the risk of loss is 156 pips.
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