(News Bulletin 247) – The Euro was in a perilous position on a technical level at the very beginning of the week, with an n-th test of the $1.10 chart zone, just in the lower part of the bevel (wedge). The confidence of investors in the Euro Zone (Sentix Index) will have weighed. The index plunged to -18 this month, the lowest since July 2020, even as investors tried to come to their senses after the first lockdown. As a reminder, the Sentix index of investor confidence in the European monetary union is calculated after analysis of a past survey of 2,800 representative investors and analysts, the questionnaire relating to their forecasts over a 6-month horizon. Sentix is ​​an expert firm in behavioral finance.
In the statistical chapter on Friday, EuroStat confirmed the fears expressed earlier in the week by Ms Lagarde, namely a sharp acceleration in inflation with the specter of a contraction in the pace of economic growth in the context of major geopolitical tensions with Russia. On an annualized basis, prices in the broadest basket of products jumped 7.5% in March, well above expectations. And this against 5.9% in February. In detail, “with regard to the main components of inflation in the euro zone, energy is expected to experience the highest annual rate in March (44.7%, compared to 32.0% in February), followed by food, alcohol & tobacco (5.0%, compared to 4.2% in February), industrial goods excluding energy (3.4%, compared to 3.1% in February) and services (2. 7%, compared to 2.5% in February), “says the statistical institute. The operators also dissected the content of the NFP report, the monthly federal report on American employment. The unemployment rate continued to fall, to 3.6% of the active population against 3.7% expected, and the number of job creations in the private sector (excluding agriculture), at 431,000 jobs, fell by 60,000 expectations. A satisfactory report having also had the merit of not showing signs of overheating.
The week for traders will be dense, with a battery of PMIs (activity indicators) in services on Tuesday, US producer prices on Wednesday and Minutes, the traditional minutes of the last monetary policy meeting. “Markets will be waiting for an indication of the next rate hike, which could be 50 bps, as suggested by Jerome Powell in his last speeches. The start of Fed balance sheet reduction could also be on the table, although, despite the end of the asset purchase program in early March, the Fed’s balance sheet has continued to grow since then”, anticipates Vincent Boy, for IG France.
To follow orders to industry in the United States at 4:00 p.m. on Monday.
At midday on the foreign exchange market, the Euro was trading against $1.1010 about.
KEY GRAPHIC ELEMENTS
As long as the spot will be priced above $1.10, the oxygen supply is assured. On this side, there is no lack of technical arguments to justify the taking of selling positions. In the immediate future and in the absence of an interesting chart entry point, traders will avoid exposure. Regarding the substantive work matrix, it remains unchanged. 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. The confirmation of the formation of a bevel (wedge) is in progress. A navigation within it is still to be expected. We will therefore monitor its two terminals, represented in black on our graph. A break in the lower boundary would accelerate clearances.
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) parity.
Our entry point is at 1.1008 USD. The price target of our bearish scenario is at 1.0686 USD. To preserve the capital invested, we advise you to position a protective stop at 1.1111 USD.
The expected return of this Forex strategy is 322 pips and the risk of loss is 103 pips.
CHART IN DAILY DATA
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