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Small break in the hemorrhaging of the Euro against the Dollar this Friday, while currency traders are waiting for the name of the new (the 8th already!) Prime Minister of Emmanuel Macron.
“While a new dissolution of the National Assembly seemed the most likely outcome of this situation of political deadlock, the hypothesis of a temporary suspension of the pension reform was seen as a breath of fresh air,” analyzes Alexandre Baradez (IG France).
“But a lasting easing of the risk surrounding France on the financial markets seems improbable because the initial problem, before the political instability, was that of the budgetary trajectory with an unsustainable deficit. And a temporary suspension of the pension reform would not provide any concrete solution from this point of view. It would only shift the problem.”
Moody’s will update its rating on France (Aa3) on October 24 and Standard & Poors (Aa-) on November 28.
Bruno Colmant, member of the Royal Academy of Belgium, takes the high ground and wants to be alarmist about the dangers that the French political and budgetary situation poses to the monetary union. “Behind the French government catastrophe, and the realities of a new dissolution or, what would be preferable, a resignation of the French President, there is of course the deterioration of the French public debt, but also – because no one says it – the euro.”
“But how long will a currency cease to be unique if France enters a deep period of political indecision, and certain sovereignist parties, such as the German AfD, which will certainly be in power before the end of the decade, endanger monetary cohesion?”
On the macroeconomic agenda this Friday, priority should be given to preliminary data from the U.S. consumer confidence index (U-Mich).
At midday on the foreign exchange market, the Euro was trading against $1.1580 approximately.
KEY GRAPHIC ELEMENTS
The bullish oblique that prevailed until now (in black on the chart) is now broken, with a confirmation pullback. The negative view is offered under this oblique, while the relative strength index collapses. The 20-day moving average (in dark blue) is about to break the trajectory of its 50-day counterpart (in orange) at a significant angle.
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 1.1576 USD. The price target for our bearish scenario is at 1.1013 USD. To preserve the invested capital, we advise you to position a protective stop at 1.1721 USD.
The expected profitability of this Forex strategy is 563 pips and the risk of loss is 145 pips.
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DAILY DATA CHART
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