The high-stakes 100-day moving average test (in orange) on the Euro / Dollar currency pair is still underway against a backdrop of gradually weakening risk appetite. The greenback was strengthened by the adoption by the House of Representatives of Joe Biden’s $ 1.9 billion stimulus plan, the high slice envisaged. Just like the FDA validation of the Covid vaccine developed by Johnson & Johnson.
In terms of statistics, traders learned on Tuesday of the consumer price index in the Euro Zone for the month of February. At an annualized rate and on the broadest basis, price growth is stable, + 0.9% according to the latest figures from EuroStat. This Wednesday, after good industrial PMI on Monday, it is the turn of PMI Services to come under the magnifying glass of investors. While waiting for the American ISM Services at 4:00 p.m., traders 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.
Chris Williamson, Chief Business Economist at IHS Markit, commented: “February’s fourth consecutive monthly decline in private sector activity in the euro area puts the region on course for a double-dip recession, the slowdown contraction, however, suggesting that this phase of economic downturn should be much less severe than that recorded last spring, at the start of the pandemic. As service providers, including the many companies linked to the accommodation and leisure fields, continue to be impacted by restrictions imposed to combat the spread of the coronavirus, the performance of the manufacturing sector remains strong and helps to mitigate the effects of containment measures on the economy as a whole. Among the most affected parts of the service sector, some also show greater resilience compared to last year, suggesting a certain degree of adaptation to the constraints of social distancing. “
“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,” can 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.
To follow at 4.30 p.m. the stocks of crude across the Atlantic and the Fed’s Beige Book at 8 p.m. But above all the investigation of the private HR firm ADP, at 2.15 p.m.
At midday on the forex market, the Euro was trading against around $ 1.2100.
Here are the technical elements that we offered on Friday on the Euro Dollar currency pair.
“The very large high wick (upper shadow) of Thursday’s daily candle on the Euro Dollar currency pair very 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 that we have mentioned, our opinion is negative in the medium term on the pair Euro Dollar (EURUSD).
Our entry point is at 1.2086 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 1.2159 USD.
The expected return on this Forex strategy is 210 pips and the risk of loss is 73 pips.