(News Bulletin 247) – The Euro remained under strong pressure against the Dollar, in a chronic inflationary context which is now pushing Treasuries at 10 years in the immediate vicinity of the psychological threshold of 3%. An inflationary context which also prevails on this side of the Atlantic, weighing on the asset barometer of the risk that the single currency constitutes. And this while the Energy Ministers of the members of the European Union are meeting in Brussels to adopt a common position in the face of the Kremlin’s demand to be paid in rubles, under penalty of closing the gas tap. . The challenge is to measure the degree of solidarity on this issue, while the degree of dependence of EU members on Russian gas is very variable, between the first two powers in particular, France and Germany.
In addition, the week for forex traders will be particularly busy on the American employment front, with a preview of the new job offers (JOLTS) tomorrow, the survey of the private firm ADP on Wednesday, the weekly registrations for unemployment benefits on Thursday and culminating in the federal jobs report for the month of April on Friday. Data particularly followed by the Fed in its assessment of the degree of tension in the job market. Fed which will end a new meeting of its Monetary Policy Committee on Wednesday. A rise in Fed Funds of 50 basis points is on the table.
In terms of statistics on Monday, the manufacturing PMI activity index in final data for the month of April in the Euro Zone came out at 55.5, very close to expectations. Chris Williamson, Chief Business Economist at S&P Global commented on the PMI survey: “Strong inflationary pressures are likely to weigh on demand. inventories at suppliers, has led to the largest increase in manufacturers’ selling prices in at least two decades of comparable data collection for this variable. decline in production and soaring prices.
On Friday, the main meeting for currency traders was the publication of inflation in the Euro Zone, which came out at an annual rate for April at 7.5%, up from April (+7.4%), in line with expectations. “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.”
To follow the final data of the American ISM industrial PMI at 4:00 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.0520 approximately.
KEY GRAPHIC ELEMENTS
Since its sharp exit from a broad consolidation wedge on April 4, the selling side has been confident, with 18 red bodies over the last 22 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 1.0520 USD. The price target of our bearish scenario is at 1.0251 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0651 USD.
The expected return of this Forex strategy is 269 pips and the risk of loss is 131 pips.
CHART IN DAILY DATA
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