(News Bulletin 247) – The appointment is ticked, for currency traders: 1:45 p.m. for the monetary policy decision itself, and 2:30 p.m. for the ECB press conference, which ends this Thursday, before a long Easter weekend, a new Board of Governors. No major decision is expected, but the tone and the language used will be scrutinized, especially since the Fed, for its part, sent a message of firmness. As a reminder, the differential in the rate hike dynamics on both sides of the Atlantic is naturally a powerful driver of the flagship currency pair.
Emmanuel Auboyneau, Managing Partner of Amplegest, warns that “Christine Lagarde’s tone could change due to the latest inflationary developments and internal pressure from certain members of the ECB who want to be more hawkish”. The Management House “thus expects a firmer speech and a more assertive will not to let inflation settle durably.” And yet this is the whole complexity of the equation: how to block inflation that is becoming chronic – and not just on energy and food prices alone – without destroying any hint of recovery, at the worst time coming out of the Covid crisis?
In terms of statistics, operators took note of the producer price index in the United States, which came out very clearly above expectations for March, in basic or underlying data. From one month to the next, producer prices rose in their widest base by 1.4%… To follow in priority, on the agenda this Thursday, across the Atlantic, retail sales and registrations weekly to unemployment benefits at 2:30 p.m.
KEY GRAPHIC ELEMENTS
Since its clear exit from a broad consolidation wedge on April 4, the selling side has been confident, with 7 red bodies over the last 8 candles drawn. A break of a fragile intermediate floor at $1.0850, which we described yesterday as a safeguard, would release additional selling energy, in a bout of volatility. This rupture is in progress, and requires validation. Our idea nevertheless remains bearish.
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 1.0914 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 1.0976 USD.
The expected return of this Forex strategy is 228 pips and the risk of loss is 62 pips.
CHART IN DAILY DATA
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