EUR/USD: The bearish entry point regains interest

(News Bulletin 247) – The day after the publication of Minutes from the Fed, without relief or particular teaching, the Euro/Dollar continued to “lateralize” below its 50-day moving average (in orange), a basic trend line blocking any additional bullish inclinations. Appetite for risk, which the variations of the single currency reflect well, remained weak after the slew of disappointing macroeconomic indicators (below expectations in any case), across the Atlantic, since the start of the week: PMI IHS, sales new homes, Richmond Fed manufacturing indicator, durable goods orders…

It is in this tense context that forex traders will take note of the two major indicators for this last part of the week, namely:

This Thursday, at 2:30 p.m.: US GDP for the first quarter, expected to contract by 1.3% quarter-on-quarter

Tomorrow, the PCE prices (Personal Consumption Expenditures), the preferred measure for the Fed in its assessment of price dynamics, with controlling inflation remaining at the heart of its priorities. “The American institution will continue […] to increase its rates as much as necessary, in an approach that is still just as “data dependent”, until inflation decreases in a “clear and convincing way”, for Sébastien GRASSET (Auris Gestion).

The whole question is to what extent the aggressiveness of US monetary policy will affect growth. “While the negative impact on growth of such a tightening is beyond doubt, the Fed Chairman continues to believe that a soft landing remains possible. Indeed, Jerome Powell considers the US economy to be particularly resilient with a low unemployment rate, solid consumption and healthy balance sheets and that it is therefore able to cope with a more restrictive monetary policy without the landing being too hard”, continues M GRASSET.

At midday on the foreign exchange market, the Euro was trading against $1.0710 about.

KEY GRAPHIC ELEMENTS

the spot EURUSD is now back in contact with its 50-day moving average (in orange), a trend line with a steep downward slope. An interesting entry point for targeting a relapse of spot towards its annual lows, while keeping a nearby stop, is now clearing.

MEDIUM TERM FORECAST

In view of the key graphic factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).

Our entry point is at 1.07140 USD. The price target of our bearish scenario is at 1.0455 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0761 USD.

The expected return of this Forex strategy is 259 pips and the risk of loss is 47 pips.

CHART IN DAILY DATA

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