EUR/USD: Rebalancing in favor of the greenback

(News Bulletin 247) – The proliferation of statistical indicators calling for US inflation to be maintained at a high level temporarily strengthens appetite for the Dollar against a Euro which, without correcting sharply, is gradually slipping below its long moving average. Yesterday it was the turn of the producer price indices to strain the atmosphere. Combined with new signs of the chronic nature of tensions on employment, this figure sounded like yet another encouragement for the Fed to maintain a relatively firm monetary policy.

the producer price indices for the month of January in the United States, well above expectations (+0.7%), just like the weekly registrations for unemployment benefits, below 200,000 new units, have a new times showed, as leading inflation indicators, the strains on the economic machine. A new reminder for the Fed that maintaining a firm monetary policy throughout 2023 will be essential.

These price data provide strong arguments for the US Federal Reserve to continue its monetary tightening in the face of persistent inflation. “A member of the Federal Reserve (Fed) has arguments to justify an increase of 50 basis points (0.20 percentage point, Editor’s note) at the next meeting of the institution. Investors were counting so far on a increase of 25 basis points”, reports on Twitter Michael Hewson, analyst of CMC Markets, quoted by AFP.

To follow the import prices in the United States at 2:30 p.m.

At midday on the foreign exchange market, the Euro was trading against $1.0630 approximately.

KEY GRAPHIC ELEMENTS

After gradually weakening from February 6 to 14, the 50-day moving average (in orange) ended up giving way. This underlying trend line is now under threat from its 20-day counterpart (in dark blue). The sell signal would then gain in intensity if necessary. The crossings of these two remarkable moving averages have been providing excellent positioning and tracking signals for many months. trade.

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) parity.

Our entry point is at 1.0632 USD. The price target of our bearish scenario is at 1.0239 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0811 USD.

The expected return of this Forex strategy is 393 pips and the risk of loss is 179 pips.

CHART IN DAILY DATA