(News Bulletin 247) – The Dollar showed a powerful resistance yesterday against the publication of the American GDP in the first quarter. As a reminder, the growth rate across the Atlantic was down 1.4% quarter on quarter, against expectations of +1.1%, according to the latest figures from the BEA, published yesterday before the opening of Wall Street. The second estimate is scheduled for May 26. This is enough to rule out the hypothesis of a 75 bp increase from the next FOMC on May 3 and 4, and to further reinforce the scenario that holds the rope: that of a 50 bp increase in Fed Funds.
This Friday, the main meeting for currency traders is the publication, this morning at 11:00 a.m., of inflation in the Euro Zone, which came out at an annual rate for April at 7.5%, up from April (+7.4%). , as expected. “Inflation should stabilize at a high level over the next few months,” notes Vincent Manuel, Investment Director at Indosuez Wealth Management. “Compared to the United States, energy represents a larger contribution and could be a source of adjustment in the near future. Obviously, the EU’s energy vulnerability and the current geopolitical situation reduce the visibility for the coming months. In this context, a more pronounced energy shock cannot be completely ruled out.”
Excluding food, energy, alcohol and tobacco, prices increased by 3.5% in the Euro Zone, well beyond expectations. To follow the PCE price index in the United States at 2:30 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.0540 approximately.
KEY GRAPHIC ELEMENTS
Since its clear exit from a broad consolidation wedge on April 4, the selling side has been confident, with 17 red bodies over the last 21 candles drawn. A break of a fragile intermediate floor at $1.0850, which we characterized as a safeguard, released additional selling energy, in a bout of volatility. This now validated break leads to the locking of new bearish targets, towards $1.0250. It will then be time to anticipate in a contrarian way a powerful rebound of contestation.
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 1.0545 USD. The price target of our bearish scenario is at 1.0251 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0671 USD.
The expected return of this Forex strategy is 294 pips and the risk of loss is 126 pips.
CHART IN DAILY DATA
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