EUR/USD: Cap on Jackson Hole

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The Euro-Dollar is evolving in a waiting phase, while investors are preparing for the Jackson Hole Jackson symposium this afternoon. This annual meeting, closely followed by all markets, could provide valuable indications on the orientation of the monetary policy of the Federal Reserve.

The European currency remains weakened after touching its lowest level since August 6, at 1.1583 dollars. The latest economic statistics illustrate a contrasting situation between the two banks of the Atlantic. In the euro zone, the August PMI indices indicate an expansion for the eighth consecutive month, carried by a net recovery in the manufacturing sector. In the United States, PMIs also confirm the vigor of the activity, but the unemployed weekly registrations have recorded their highest increase in almost three months, revealing an underlying fragility of the labor market.

This double signal maintains the uncertainty about the intentions of the Fed. Donald Trump accentuates political pressure by calling for a rapid and marked drop in interest rates, saying that current monetary policy weighs on credit access and slows down the economy. But inflation, always greater than the target of 2 %, encourages the officials of the Fed to delay. The markets nevertheless assess almost 70 % the probability of a reduction of 25 basic points in September, according to CME Fedwatch data, against more than 90 % last week.

Geopolitical tensions add an additional element of complexity. The Russian-Ukrainian conflict remains clear out of the way despite the mediation attempts, and trade discussions between the European Union and the United States result in a strengthening of customs barriers, especially in the automobile and semiconductors. These elements increase the growth prospects of the old continent.

The markets are therefore waiting for 4:00 p.m. Paris time, for the intervention of Jerome Powell. The tone used could determine the immediate evolution of currencies. A message perceived as accommodating would relaunch the euro against the dollar, with the possibility of rallying the $ 1.20 zone. Conversely, a more restrictive discourse would weaken the European currency and break the oblique of the medium term which still supports the upward trend.

Medium term

In view of the key graphic factors that we have mentioned, our opinion is positive in the medium term on Euro dollar parity (Eurusd).

Our entry point is 1,1594 USD. The course of course in our Haussier scenario is at 1.2000 USD. To preserve the committed capital, we advise you to position a protection stop at 1,1380 USD.

The profitability hope of this Forex strategy is 406 pips and the risk of loss is 214 pips.

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