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#1 23-09-2020 11:44:31

johnedward
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From: Paris - France
Registered: 21-12-2009
Posts: 3594
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EUR/USD: eurozone PMIs demonstate a dual-speed economy

EUR/USD: eurozone PMIs demonstate a dual-speed economy"


A major technical fact was recorded on Tuesday, with the break, albeit with little volatility, through the technical zone of $1.1745, against a backdrop of concerns on the health front on both sides of the Atlantic. The contraction in risk appetite has been notable since the beginning of the week.

British Prime Minister Boris Johnson proceeded Tuesday to tighten traffic restrictions, inviting all employees who can work from home and by imposing the closure of pubs, bars and restaurants from 10 pm starting today. Without going as far as total containment, these measures - as well as the partial reconfinement decided in Madrid this week - are reminiscent of the decisions taken around the world in the spring, which led to a sudden halt in consumption and double-digit recessions from which the world is just beginning to painfully recover.

The health situation is also deteriorating in the United States. For example, four days ago, the number of hospitalisations due to the virus broke a record in Texas - one of the first states to deconflict, raising fears of a possible new wave of contamination. The average number of cases recorded over a fortnight is on the rise in some dozen states. The number of people with the disease now exceeds 1.9 million nationwide. The number of new daily cases is once again steadily flirting with the 49,000. 201,000 people have died from severe forms of the virus, according to the latest data compiled by the John Hopkins University.

Chris Williamson, Chief Economist at IHS Markit, says: "There are clear signs of a dual-speed economy: while manufacturing output has increased, driven by rising demand (particularly from export markets) and the reopening of the retail sector in many countries, activity in the service sector has declined as concerns about the virus have increased, particularly for businesses that are in direct contact with people."

As of right now, the euro is trading at $1.1715.

KEY CHARTS

The  pair has broken a sensitive technical zone ($1.1740/$1.1745) that we had placed under high surveillance. The signal is mechanically negative. One downside, however, is that this breach is not fully validated by volatility data. A very short and early pullback cannot be excluded. If volatility accelerates below $1.1740/$1.1745, the bottom exit of a chartist, or similar figure, plotted since the end of July, would be fully validated. Negative opinion maintained.

MEDIUM-TERM FORECAST

In view of the key chart factors we have mentioned, our opinion is negative over the medium term on the Euro Dollar (EURUSD) exchange rate.

Our entry point is $1.1711. Our target price for our bearish scenario is $1.1441. To preserve the capital employed, we advise you to position a protective stop at $1.1826.

The expected return on this Forex strategy is 265 pips and the risk of loss is 120 pips.

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