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48 hours before the end of a new meeting of the Council of Governors of the European Central Bank, the Euro/Dollar currency pair remained under pressure, emerging from a wedge pattern, in the immediate vicinity of $1.0550 for one euro.
“Political decisions will remain dependent on data, but the deterioration of economic indicators, notably weak European growth, argues in favor of continuing this easing. Despite political tensions in France and Germany, it is unlikely that the ECB will “deviates from its line of conduct”, anticipates David Zahn, Head of European bond management at Franklin Templeton.
The consensus is clear, for a 25 basis point drop in the main key rate in the Euro Zone on Thursday. The margin is indeed comfortable for Christine Lagarde. “No economic data currently seems to indicate any rebound in activity, the French and German situations not helping. With 125 bps of key rate cuts expected by the market by next June, the ECB has the necessary weapons to put juice back into the machine”, commented Thomas Giudici, Head of bond management at Auris Gestion.
Basically, the market psychology governing the EURUSD pair remained the same, the Dollar remaining supported by the insolent health of the American economy, and the Euro suffering from the chronic difficulties of the German economy and French budgetary problems.
The latest macroeconomic publications to date confirm this framework. The NFP in particular, the traditional monthly report on the health of private employment in the United States, came out at a particularly solid level on Friday, without however reducing the probability of seeing the remuneration of Fed Funds fall by 25 basis points on the 18th. next December.
Published yesterday morning, the Sentix index of investor confidence in the Euro Zone plunged deeper into negative territory at -17.5, compared with a consensus close to the last publication of the indicator, at -12.4. This is the worst score since November 2023, both on the “inventory” component and for the “forecast” component. The only German component “states of affairs” falls suddenly below -50, in the wake of the announcement of new elections to the Bundestag.
Forex traders continue to monitor China where markets are hoping for further announcements of stimulus measures this week. On Monday, China’s Politburo said a “moderately accommodative” monetary policy should be conducted in 2025, as well as a “more proactive” fiscal policy.
At midday on the foreign exchange market, the Euro was trading against $1.0530 approximately.
KEY GRAPHIC ELEMENTS
The wedge formed since November 22 is coming to an end, and the energy contained is now compressed. An exit from the bottom, consistent with the entry from the top in the second part of November in a volatile environment, is anticipated.
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 1.0524 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 1.0661 USD.
The expected profitability of this Forex strategy is 423 pips and the risk of loss is 137 pips.
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