The euro's attempt to rebound against the USD, over the first three days of last week, was completely dampened over the last few days, with the monthly federal employment report (NFP) not having been able to spark a revival of risk appetite in the financial markets.
While this report doesn't allow us to formally conclude that there has been a lasting reduction in tensions on the job market in the US, it is clear that certain signals are encouraging. In particular, the unemployment rate, expected to be stable at 3.4% of the active population, rose significantly to 3.9%, making it possible to envisage a cooling of the economic machine.... This is good the stated objective of the Fed, after all!
Furthermore, average hourly wages will have only increased by 0.2% from one month to the next in August, where the consensus had predicted an increase of 0.3%. This is also an encouraging sign allowing us to ward off the specter of the price/wage spiral. On the other hand - and this is where the problem lies - the number of job creations in the private sector, excluding agriculture, stands at 188,000, compared to a target of 170,000 and a month of July revised to 158,000.
"The August data indicate a reduction in job creation, a rise in unemployment and less strong wage pressures which would favor a decline in inflation (firm at +4.1% per year in July on the PCE deflator "core")," summarises Jeanne Asseraf-Bitton, Head of Research and Strategy at BFT IM, who also notes a "solid increase in household spending at +7% per year, at the expense of savings efforts."
Forex traders need more evidence of cooling of the American economic machine, and reassuring data on China, after the authorities had to announce new stimulus measures, including a halving of the stamp duty, a tax on stock market transactions. Other announcements on real estate financing were also made on Thursday. Real estate, the clay-footed colossus of the Middle Kingdom, nervously focuses attention on the slightest publication, both micro and macroeconomic. Precisely, the publication this Monday of a jump in sales of existing homes in Shanghai and Beijing this last weekend (an increase of more than 100%, according to Bloomberg) thus supports the market. The Shanghai Composite gained 1.3%.
In the immediate future, currency traders have just become aware of the Sentix investor confidence index in the Euro Zone, down sharply to -21.4, missing expectations that are nevertheless pessimistic. âThe situation in Germany remains particularly precarious,â we can read in a sharp comment accompanying the publication. The Sentix measured for this publication "the lowest values since July 2020, when the economy was slowed by the first coronavirus lockdown. Germany is also weighing heavily on the euro zone economy as a whole. The recession is progressing. But even in the United States, which has so far held up well and defied the Fed's restrictive policy, economic data is in sharp decline. The tipping point of a global recession is less distant than we think. might think so."
Note the absence of a marker yesterday from Wall Street, closed due to a public holiday (Labour Day).
Right now, the EUR/USD is trading at $1.0795.
KEY GRAPHIC ELEMENTS
The almost complete retracement of July's gains does not point - at this stage - to a continuation of the advance of the currency pair, without formally excluding it. This retracement, by its magnitude, weakens the bullish message then delivered over a good part of the month of July. The outcome of the ongoing test of the 50-day moving average (in orange) will be decisive. The bearish message takes shape with the break - now validated - of the 50-day moving average by its 20-day counterpart (in dark blue), at an important angle. The short position will be retained as long as the latter gravitates below the first.
MEDIUM TERM FORECAST
Considering the key graphical factors that we have mentioned, our opinion is negative in the medium term on the EUR/USD.
Our entry point is at $1.0797. The price target for our bearish scenario is at $1.0551. To preserve the invested capital, we advise you to position a protective stop at $1.0881.
The expected profitability of this forex strategy is 246 pips and the risk of loss is 84 pips.
