EUR/USD: The bearish entry point is no longer optimal

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(News Bulletin 247) – In the wake of the meeting of the Fed’s Monetary Policy Committee yesterday, the Dollar fell somewhat against the Euro, the tone of J. Powell having been considered visibly less “aggressive” than anticipated. The Fed unveiled its decision to raise its Fed Funds by 50 basis points, while announcing the start of the gradual reduction of its balance sheet. If future rate hikes of an equivalent magnitude are on the table, J. Powell made it clear that increases of a greater magnitude (75 bps) were not “actively considered” by the members of the Board. A tone that allowed an easing movement on government bond yields, Treasuries 10 falling sharply, below 2.92, before recovering.

Ronan Blanc, Managing Analyst at Financière Arbevel, notes that the Federal Reserve “is therefore not giving in to ever-increasing market expectations while remaining vigilant on the price front (risk still high post-invasion of Ukraine, not to mention the lockdowns in China). It also considers (rightly) that quantitative tightening is a mechanism that will also contribute to the tightening of credit conditions.”

For the months to come, the Fed will have to take into account the chronic tensions on the labor market, tensions which themselves generate inflation. Before the publication this Friday of the federal NFP (Non Farm Payrolls) report, investors had a “taste” yesterday with the publication of the ADP survey. The private human resources firm highlighted 247,000 job creations in the private sector (excluding agriculture) last month, well below expectations (more than 380,000). To follow at 2:30 p.m. the new weekly registrations for unemployment benefits.

At midday on the foreign exchange market, the Euro was trading against $1.0600 approximately.

KEY GRAPHIC ELEMENTS

While the underlying bearish bias remains on the currency pair, the entry point is no longer optimal since the start of a rebound yesterday after the Fed’s decisions and the press conference. Forex traders will therefore prefer to stall, waiting for a much more interesting entry point.

MEDIUM TERM FORECAST

In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).

We will maintain this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.0454 USD and the resistance at 1.0758 USD.

CHART IN DAILY DATA

©2022 News Bulletin 247

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