(News Bulletin 247) – The euro, one of the most reliable barometers of risk appetite, fell sharply, following in the footsteps of equity markets on both sides of the Atlantic, while hopes for a diplomatic resolution of the conflict in Ukraine remained only semantic for the time being, and that geopolitical tensions remained ardent. The American President did not hesitate to warn China that sanctions could be taken in the event of Xi Jinping’s support for Russia.
“The geopolitical crisis is a challenge for Europe. In the second round, it is more so for the United States because of the “price-wage” loop and the challenge of monetary normalization which the Fed will face”, summarizes Christophe MOREL, Chief Economist at Groupama AM.
Fed which ended Wednesday a meeting at the end without surprise, of the Policy Committee of the Fed. This FOMC gave birth, as J. Powell had already clearly suggested, of a 25 basis point rise in Fed Funds. The post-meeting press release now leaves the way open for a continuation of the monetary shift, with an increase at the end of each meeting for the year 2022. easily digested by the markets.
In the statistical chapter yesterday, the publications were concentrated on the American side. The Philly Fed at 27.4 and weekly jobless claims at 214,000 new units both beat expectations. RAS on the side of the federal monthly report on industry, close to the consensus both on the dynamics of the volume of production and on the rate of capacity utilization. Note this Friday the publication of a lower than expected monthly trade deficit for the Euro Zone, at -7.7 billion euros in January. To follow the sales of old homes in the United States as well as the index of leading indicators (Conference Board) at 3:00 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.1040 about.
KEY GRAPHIC ELEMENTS
The transition phase between February 4 and 23, in the form of a slip without federation, under the 100-day moving average (in orange) is over. The underlying bearish bias aligns with the short term, and the plot of a candle conspicuous by its red body on Thursday 2/24 illustrates the firm grip of the selling side. With 5 red-bodied candles from March 1 to 7, and continued selling mobilization in week 09, the picture remains gloomy. We are reviewing our bearish targets, at $1.0848, then $1.0685. A quick break from the $1.10 threshold would accelerate the move. Warning to harami being trained, the validity of which must be ensured.
MEDIUM TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).
Our entry point is at 1.1041 USD. The price target of our bearish scenario is at 1.0686 USD. To preserve the invested capital, we advise you to position a protective stop at 1.1141 USD.
The expected return of this Forex strategy is 355 pips and the risk of loss is 100 pips.
CHART IN DAILY DATA
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