(News Bulletin 247) – The “scissors” effect we talked about in our previous analyzes on the Euro/Dollar currency pair is confirmed. The prospect of an even faster-than-expected rise in Fed Funds is weighing on the single currency, as are fears of an impact of lockdowns in China on global growth and new developments in the conflict in Ukraine, while forty powers, including the United States, met yesterday morning in Germany to agree on additional aid to kyiv. The Euro finds itself trapped by this “scissors” effect: the combination of a loss of risk appetite, which it pays for as a barometer, and the prospect of less “remuneration” in the years to come against to dollars.
The Fed’s rhetoric has particularly firmed up, since J. Powell clearly put on the table the option of a 50 basis point increase in Fed Funds, as of the next FOMC in early May, to face an inflation of which no one sees the “peak”. In addition to price dynamics, it will be particularly interesting to measure the evolution of tensions on the labor market, an essential and predictive criterion for wage increases. Verdict at the end of next week with the April NFP report.
“The foreign exchange market has a strong conviction: the rate increases will be significant in the United States in the coming months, which will support the rate of the American dollar”, slice William Gerlach, Country Manager France at iBanFirst, who confirms that “the US Federal Reserve’s FOMC meeting scheduled for May 3 and 4 should mark an acceleration in the process of monetary normalization in the United States in order to fight against inflation (which reached 8.5% in March over one year and could easily climb to 10% by June)”.
In terms of statistics, which took a back seat yesterday, currency traders dealt with the publication of durable goods orders for the month of March, up 1.1% month on month, excluding transport equipment. Moreover, the US consumer confidence index (Conference Board) remained almost perfectly stable at 107.3, slightly below expectations.
To follow in priority, on the agenda this Wednesday, the American trade balance and the sales of housing in the United States at 2:30 p.m.
KEY GRAPHIC ELEMENTS
Since its sharp exit from a broad consolidation wedge on April 4, the selling side has been confident, with 16 red bodies over the last 19 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 1.0574 USD. The price target of our bearish scenario is at 1.0250 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0711 USD.
The expected return of this Forex strategy is 324 pips and the risk of loss is 137 pips.
CHART IN DAILY DATA
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