CAC 40: US inflation and European monetary policy on the menu this week

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(News Bulletin 247) – Worried about US bond yields, and with a long-awaited European monetary meeting approaching (ECB Board of Governors on Thursday), the Paris market traced a perfect candle of indecision in doji Monday, a candle that calls for caution.

If on the side of the Fed, the monetary turn is intended to be offensive, including in the camp of the members reputed to be the most “dovish” (dove, that is to say follower of flexibility in monetary matters), “on the side of the ECB, the message is a little more blurred”, for Thomas Giudici, co-head of bond management at AURIS Gestion. “If the path of tightening is certain, divergences remain between the members. While some believe that an accelerated monetary tightening would have little or no impact on inflation, essentially driven by oil prices energy, the most hawkish members believe, on the contrary, that the ECB’s inflation forecasts are far too optimistic (return to 2% from 2023) and are therefore less patient in the face of the uncertainty generated by the Ukrainian crisis.

Verdict Thursday at 1:45 p.m. for the actual monetary decision and at 2:30 p.m. for the press conference, particularly expected in the context of chronic inflation.

In terms of statistics, while no major figures were on Monday’s agenda, this Tuesday will be rich in important meetings, on this side of the Atlantic with the ZEW index of confidence in the German economy at 11 a.m. and the various consumer price indices across the Atlantic at 2:30 p.m.

On the values ​​front, this context which pushes up bond yields has benefited the banking sector, Crédit Agricole taking 1.24% to 10.008 euros, BNP Paribas 1.88% to 48.745 euros and Société Générale taking off by almost 5%. (4.96% to 22.95 euros), supported by the announcement that its withdrawal from Russia would not cost the establishment too much, allowing it in particular to maintain its dividend despite the depreciation in the value of its stake in Rosbank . Conversely, the “Growth” side of the rating was under pressure, like files like Kering (-2.90% to 535.30 euros), Hermes (-3.21% to 1,252.50 euros) and Dassault Systèmes (-3.37% to 40.555 euros).

On the other side of the Atlantic, red dominated all the flagship indices, especially the growth-biased indices. While the Dow Jones contracted 1.19% on Monday to 34,308 points, the Nasdaq Composite fell 2.18% to 13,411 points. The S&P 500, the benchmark barometer of risk appetite in the eyes of fund managers, lost 1.69% to 4,412 points.

A point on the other risky asset classes: around 08:00 this morning on the foreign exchange market, the single currency was trading at a level close to $1.0870. The barrel of WTI, one of the barometers of risk appetite in the financial markets, was trading around $96.40.

KEY GRAPHIC ELEMENTS

The 6,760 points, which we have identified so far as a gradually weakened floor, gave way, on a wide gap on Thursday 02/24, opening the way to a new market phase. Recall that the index traced from February 16 to 18 a combination of candles in three crows. This combination was immediately followed by a very significant bearish engulfing structure, accompanied by volumes that were far from timid for a session, let’s not forget, without American benchmarks due to a public holiday. The last phase of weakening of the aforementioned support will therefore have been aggressive.

the pullback of Friday 25/02 will have been of surgical precision. A phase of high volatility has thus begun. The school marubozu drawn on Tuesday 01/03 is a first step. Second stage Friday 04/03 with a candle of the same type (opening on the high points, closing on the low points) in even more fed volumes. A new bearish leg would open under 6,000 points, already broken on Monday 07/03, before the formation of a dispute rebound.

On Wednesday, March 09, we witnessed a first phase of an explosive protest rebound, which pushed the index back to its 100-hour moving average (in orange in hourly view), a curve that retains a marked downward bias. The gap on Wednesday March 16 is not a signal to return to buying, and the high volatility phase is therefore not yet over. The configuration, in the form of a combination of candles, in three black crows over the last three sessions of week 12, calls for the greatest caution. As evidenced by the harami traced immediately after a reconquest of 6,760 points, for a single closing, that of March 29. Note the bearish engulfing character of the weekly candle of week 14 on the candle of week 13.

Negative review offered. With monitoring of the possible formation of an island of reversal under the gap of March 16th.

FORECAST

In view of the key graphic factors that we have mentioned, our opinion is negative on the CAC 40 index in the short term.

This bearish scenario is valid as long as the CAC 40 index is trading below the resistance at 6760.00 points.

Hourly data chart

Chart in daily data

CAC 40: US inflation and European monetary policy on the menu this week (©ProRealTime.com)

©2022 News Bulletin 247

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