EUR/USD: The short-term bias remains bearish, US employment under the magnifying glass

(News Bulletin 247) – The Euro continued to show a negative bias against the Dollar over the last part of the week, while the indices showing lasting inflation multiplied on both sides of the Atlantic.

Latest publication to date, by EuroStat: inflation in the sense of the CPI, at +8.5% for the month of February at an annual rate, beyond expectations. In data adjusted for volatile elements (core inflation), prices rose at an annual rate of 5.6%. Enough to put pressure on the European Central Bank (ECB) in its monetary management for the coming months.

For its part, the Dollar is regaining color as the debates on the extent of the Fed Funds hike at the next FOMC are gaining momentum. In this sense, the next figures on employment (ADP survey, and NFP report for February next Friday will be scrutinized). Major benchmarks which will constitute a solid working basis for the Fed in the construction of its monetary policy for the months to come, and which will in any case allow in the short term to tip the balance in favor of +25 or +50 points Fed Funds hike basis for the next FOMC.

Yesterday, weekly registrations for unemployment benefits once again came out below the threshold of 200,000 new units.

To follow the American ISM services at 4:00 p.m. On the European side, the final services PMI data for the month of February came out with little difference from the initial estimates, at 52.7. Remember that a score above 50 suggests an expansion of the sector in question.

At midday on the foreign exchange market, the Euro was trading against $1.0600 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 indeed provided excellent positioning and trade monitoring signals for many months. This crossing is carried out, validated and moreover in a relatively important angle.

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 1.0595 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 1.0731 USD.

The expected return of this Forex strategy is 356 pips and the risk of loss is 136 pips.

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