EUR/USD: Correction of 10-year federal sovereign bonds

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Paradoxical situation to see the Euro, traditional marker of risk appetite, rebound frankly since the second part of last week, even though the atmosphere on the financial markets is suddenly refreshed. We have to take the problem upside down, in the immediate term, and ask ourselves why the Dollar is losing ground.

Encouraged by the particularly firm and offensive tone adopted by J Powell at the beginning of last week in his semi-annual hearing before the Parliamentarians, the greenback had benefited from an increase in the probability of seeing the Fed Funds yield increase by 50 basis points at the issue of the March FOMC.

But these probabilities have gradually withered with, on the one hand, the content of the federal employment report, certain components of which have reassured on the absence of entry into a price/wage spiral, and above all by the debacle of two American banking establishments weakened by the sale at a loss of the bond portfolio in compensation for the drop in deposits.

The markets took note of the statistical highlight of the week, namely the US federal employment report (NFP report, for Non Farm Payrolls). The report, particularly awaited after the 217,000 job creations in January (revised to 504,000) highlighted 311,000 new creations in the private sector (excluding agriculture) in February, significantly above expectations. A relief is however noticeable concerning the dynamics of wages (+0.2%) and the progression of the unemployment rate to 3.6% of the active population (target however stable at 3.4%). What militate for “a more cautious increase” of the federal rates, according to the terms of the strategists of ABN AMRO.

As for the American banks, the news of which two of them brought back very bad memories dating from about fifteen years ago, the American authorities activated themselves during the weekend to avoid a bank panic at the following the setbacks of Silicon Valley Bank and Signature Bank. But the market nevertheless fears that other small banks could in turn be hit.

The 10-year Treasuries, yield on long-term US sovereign bonds, corrected sharply, below 3.60%, while they passed a head above 4% at the beginning of the month.

No major statistical figures are on the agenda for Monday. Agenda which will become more dense tomorrow with the various consumer price indices in the United States.

At midday on the foreign exchange market, the Euro was trading against

KEY GRAPHIC ELEMENTS

It’s a pullback very clear that emerges on the currency pair Euro / Dollar, with the formation (still to be validated) of a significant upper shadow at the level of the moving average at 50 days (in orange), which is inflected downwards.

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 1.0669 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 1.0801 USD.

The expected return of this Forex strategy is 430 pips and the risk of loss is 132 pips.

CHART IN DAILY DATA