EUR / USD: A KEY TECHNICAL MOMENT
The high-stakes test of the 100-day moving average (in orange) on the Euro / Dollar currency pair is still underway in a context of gradual weakening of risk appetite, against the backdrop of a return of a intense inflationary questioning.
“Central bank communication remains at the center of the debate,” according to Barclays analysts. This “communication from central bankers around the world continues to adjust in order to contain any risk of too sudden an appreciation in interest rates and therefore an early tightening of financing conditions for governments, businesses and households,” could be read in a CIC Market Solutions research note today.
In particular, on the Fed side, “patience remains more important than ever, as confirmed by L. Brainard and M. Daly. The first explicitly questions the justification for such an upward movement (a first for the Fed ) while the second once again evokes how much remains to be done on the inflation and employment front before considering a reduction in monetary support.These two issues remain very closely linked to the budget support that will be voted in Washington. The latter will not stop at the stimulus plan under discussion in the Senate but will integrate a massive infrastructure plan while the declarations in this direction are made more and more urgent.
The highlight of the day for traders is a speech by Powell at 6:05 p.m. (Paris time) at an online event organized by the Wall Street Journal.
On the European side too, this balancing act is under scrutiny. “German Governor Jens Weidmann tempered the recent remarks of some of his counterparts by explaining that the rise in sovereign rates was not yet particularly important to jeopardize the achievement of the inflation target. earlier today, ECB officials reportedly said they did not consider a drastic reaction to be necessary at this point, according to press reports. ” noted the strategists and economists of CIC Market Solutions, who shed some light on the situation: “These speeches recall the internal dissensions within the ECB concerning the extent of the monetary support necessary in the coming months, an element which will be particularly scrutinized during the next meeting on March 11 (note that Jens Weidmann will not vote) during which the economic forecasts will be updated. “
In the statistical chapter on Wednesday, after good industrial PMI on Monday, it was the turn of PMI Services to come under the magnifying glass of investors. They will have appreciated the overshooting of the target of several PMI components by IHS Markit in Europe. Synthetic data for the Euro Zone as a whole are far from reaching 50 points, the bar which separates by construction an expansion from a contraction, but at 45.7, they are still progressing by one point over a month. ISM Services across the Atlantic fell sharply from 58.7 to 55.3. But the most striking figure yesterday on the American side was the conclusion of the ADP survey on American employment, “foretaste” of the publication on Friday at 2:30 pm of the NFP (Non Farm Payroll) report for the month of February. According to the private human resources firm, the US economy has managed to create 117,000 jobs, completely missing the target (beyond 200,000).
This Thursday in terms of statistical figures, for the Euro Zone, the morning was rich with retail sales in particular which fell sharply, by 5.9% in monthly terms for the month of January, that is to say compared to the month of December 2020. In December 2020, the volume of retail trade had increased by 1.8% in the Eurozone. As for the unemployment rate, it remains stable at 8.1% of the active population of the monetary union. Eurostat estimates that in January 2021, 15.663 million men and women were unemployed in the EU, of which 13.282 million were in the euro area. Compared with December 2020, the number of unemployed increased by 29,000 in the EU and 8,000 in the euro area. Compared with January 2020, unemployment increased by 1.465 million in the EU and by 1.010 million in the euro area.
Across the Atlantic, to follow the job cuts (Challenger) at 1:30 p.m., revised productivity data at 2:30 p.m., as well as weekly registrations for unemployment benefits at 2:30 p.m. also.
At midday on the forex market, the Euro was trading against around $ 1.2040.
KEY GRAPHIC ELEMENTS
Here are the technical elements that we offered at the end of last week on the Euro Dollar currency pair. This framework remains relevant in close proximity to important technical levels:
“The very large high wick (upper shadow) of Thursday’s daily candle on the Euro Dollar currency pair seriously compromises the pace of the weekly candle, which is almost complete. Continued selling pressures on Friday, amid increasing volatility , argues for a further decline in the direction of the 100-day moving average (in orange), a trendline that is still upward, but whose test will be essential. “
We are currently in this phase of long moving average testing. Its envisaged break would open new bearish targets towards levels not seen since November 24, 2020.
In view of the key graphical factors we have mentioned, our opinion is negative in the medium term on the pair Euro Dollar (EURUSD).
Our entry point is at 1.2037 USD. The price target for our bearish scenario is at 1.1876 USD. To preserve the committed capital, we advise you to position a protective stop at 1.2101 USD.
The expected return on this Forex strategy is 161 pips and the risk of loss is 64 pips.