The Paris Stock Exchange is marking time pending a speech from Jerome Powell following rising to major resistance.
H2: The rise in bond yields weakens the CAC 40
The Parisian index begins the week at equilibrium following rising to test major resistance at 7170 points on Friday. Traders are securing profits following taking notice of a strong US jobs report which reinforces the scenario of more aggressive monetary tightening by the Fed. Indeed, the US economy is said to have created more than half a million jobs last month, three times more than consensus expected, leading investors to expect a third rate hike of 25 basis points. Fed basis in May.
Risks are on the downside in the equity market, as traders might continue to price in the assumption of a third 25 basis point rate hike by the Fed in May. The probability of this scenario has risen from 30% before the NFP was released to 70% and might continue to climb following the numerous interventions by central bankers this week. Naturally, the US 2-year rate climbed 30 basis points and the German one 10 basis points.
The Chairman of the Fed will speak this Tuesday at the Economic Club of Washington and might take advantage of this presence to correct/adjust the expectations of market operators since his last press conference last Wednesday. The ECB’s Schnabel and the Fed’s Waller will also communicate several times this week.
H2: Daily chart of the CAC 40 price – key levels
CAC 40 price forecast
H2: The symbolic threshold at 7000 points will be decisive for the bullish outlook
Analytically, the outlook for the CAC 40 continues to be bullish and the next resistance to watch will be the January 2022 all-time high at around 7385 points. The Parisian index might eventually reach this price level, but the risk/return ratio is not in favor of medium/long term purchases at the current level following such a rise in such a short time.
The outlook for the CAC 40 would quickly turn bearish given the gloomy economic outlook in the event of a decline below the symbolic threshold of 7,000 points. In this case, a correction to the December low at around 6400 points would be expected.
| Entrée | Shorts below 7000 points |
| Stop | 7200 points |
| Objective | 6400 points |
| Risk/reward ratio | 3 |
