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#1 23-11-2021 11:59:13

johnedward
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From: Paris - France
Registered: 21-12-2009
Posts: 3176
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EUR/USD: new catalysts but market psychology remains unchanged

EUR/USD: new catalysts but market psychology remains unchanged


The resurgence of fears of new restrictive measures in Europe, mainly in Germany, continues to weigh on the euro. The dollar, on the other hand, is benefiting from the executive's nomination of J. Powell for his own succession as head of the Fed - which still has to be formally validated by the Chambers. He will be "flanked" by Lael Brainard, whose reputation as a dove is well established...

"The appointment of Jerome Powell as head of the Fed is not a surprise in itself, Lael Brainard's appointment would have been, however." observes John Plassard (Mirabaud) The US government has decided to play it safe by not taking any risks in the midst of monetary tightening. New mandate, and new challenges for Powell:

"First of all [...] to federate the members within the FOMC so as to be able to have full powers and to avoid dissensions which are more and more obvious. Then Jerome Powell must obviously read the trajectory of inflation and employment well in order not to be behind the curve (behind the curve)."

Geopolitics is also weighing on the euro's risk asset: "The emerging risks of a Russian invasion of Ukraine are worrying the authorities in Europe and the US," warns Voncent Bay (IG France). The position against this is difficult for European countries because of their dependence on Russian gas, while prices are already very high. Intervention could lead to a halt or reduction in gas deliveries and put further pressure on prices.

On today's calendar is the focal point of the week for traders, with the PCE (Personal Consumption Expenditures) inflation data, the Fed's preferred measure, the preliminary US GDP data for Q3, and the Fed Minutes, the traditional report of the last Monetary Policy Committee meeting. A very heavy programme, therefore, before the Thanksgiving break. Wall Street will close on Thursday; Friday's session will be cut short.

In the meantime, this morning, traders have seen the very first estimates (flash data) of the PMI activity indicators (purchasing managers' surveys). Both the services and manufacturing PMIs came in above expectations at 56.6 and 58.6 respectively.

Right now, the pair is trading at $1.1244.

KEY CHART ELEMENTS
As a reminder, we clarified the following last Wednesday: "A break of a fragile support zone at 1.1530 would increase volatility. The working band between $1.1530 and $1.1675 would then be obsolete. This zone has given way, with validation from volatility. This has strengthened the selling bias. Next bearish target locked at $1.1100. After which a sharp reaction of contestation is to be expected."

MEDIUM-TERM FORECAST
Given the key chart factors we have mentioned, our medium-term view on the EUR/USD is negative.

Our entry point is $1.1264. Our bearish scenario price target is $1.1001. In order to preserve the capital invested, we advise you to place a protective stop at $1.1361.

The expected return on this Forex strategy is 263 pips and the risk of loss is 97 pips.

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