Beware the feverish euro, energy and inflation against the dollar: the stock market board
The euro (EUR/USD) shows a wait-and-see stance against the dollar on Tuesday, while the consumer price index (a measure of inflation) is due to be released in the US on Wednesday (which will fuel speculation about the evolution of prices) Fed monetary policy and therefore the single the currency’s trajectory against the dollar) and a new heat wave expected in Europe this week are reigniting energy tensions as electricity prices continue to soar to record highs.
On the US inflation front, consensus expects the core index to slow slightly from 9.1% to 8.7% (still the second highest in 40 years) and the core price index to accelerate from 5.9%. 6.1%. According to many observers, low unemployment (last Friday’s employment report shows good resilience in the labor market despite pressures on the economy) and high inflation should encourage the Fed to raise its key interest rate sharply (0.75 percent) in September. points, according to the general opinion), according to Western Union.
Depreciation of the euro against the dollar: good or bad?
Citi warns Fed likely to hit rising inflation hard
Citi is not ruling out a one-percentage-point hike in the key interest rate next month, which would be the strongest monetary policy tightening since 1984, the international remittance specialist said.
While the US currency is relatively stable against the Economic and Monetary Union (EMU) currency at around $1.02 per euro, this wait-and-see stance could continue until tomorrow and the release of new US inflation figures.
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If inflation surprises on the upside, the dollar “could benefit from a dual bullish catalyst: first, increased expectations for a 0.75 percentage point hike in the key rate in September, and second, possible increased volatility in equity markets amid growing fears of a recession,” Western Union said.
The euro is trading at parity with the dollar for the first time since 2002
Beware of the impact of the heat wave in Europe on the euro
West notes that the euro’s expected volatility could be exacerbated by a new heat wave expected in Europe this week, which risks “causing further turbulence in energy production and increasing electricity consumption due to increased use of air conditioners and other air-conditioning generators.” unity. And this despite the already tense context of gas cuts through Russia’s Nord Stream 1 pipeline and the final implementation of an embargo on Russian coal this month.
“Given the energy, economic (recession risk) and political (September 25 elections in Italy) issues,” the euro could fall sharply, especially against a currency like the Swiss franc (considered a safe haven). not completed,” warns Western Union.
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What does technical analysis say?
In terms of technical analysis (price action charting and mathematical analysis), the euro is following a medium-term bearish trend, falling to a 20-year low after the 2017 bottom pulverization (major horizontal limit of 1.0340). dollar, as the 67-day moving average, which acts as a bearish channel and dynamic bearish resistance formed in recent months.
In the case of rising prices, the euro will face a strong resistance zone at the level of 1.0340-1.0412 dollars. Bollinger Bands analysis suggests that price volatility may recover soon. For now, we continue to expect the continuation of the medium-term downtrend.
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Author’s declaration of interests