EUR/USD: The Euro keeps its hand

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A barometer of risk appetite in financial markets, the Euro/Dollar continued to rise in an ascending channel, above its 20-day moving average (in dark blue), as traders digested the idea that the US terminal rates (top of the Fed Funds) had been reached, or almost reached. A scenario supported in particular by the confirmation last week, by the CPIs (consumer price indices) and by the PPIs (producer price indices).

“The latest inflation data in the United States sent reassuring signals about the transmission of monetary tightening,” says Thomas Giudici, head of bond management at Auris Gestion. “These publications should thus prompt the Fed to raise its key rates by a final 25bp in May before pausing. Contrary to market expectations, the central bank is unlikely to lower its key rates over the next summer; the road to disinflation is following its course but is still too slow and, as the president of the Richmond Fed reminded us, we are still far from the 2% objective!”

So certainly there is still a long way to go for the Fed, which is however more advanced in its cycle than the ECB, which could play in favor of the single currency in the coming months.

In terms of statistics yesterday, Chinese GDP in the first quarter, published overnight, (+4.5% at an annual rate) far exceeded expectations. To be statistically complete, the German ZEW Economic Confidence Index contracted very heavily, completely missing expectations, to 4.1. On Wednesday, the final data for the consumer price indices in the Euro Zone for the month of March did not deviate one iota from the consensus. In particular, excluding energy, food, alcohol and tobacco, prices increased by 5.7% at an annualized rate in the monetary union.

At midday on the foreign exchange market, the Euro was trading against $1.0930 approximately.

KEY GRAPHIC ELEMENTS

Within a thin, steep channel above its 20-day moving average (in dark blue), the Euro continued to gain ground against the Dollar in the immediate vicinity of its all-time highs. There is no immediate technical signal for a bearish reversal.

MEDIUM TERM FORECAST

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

Our entry point is at 1.0934 USD. The price target of our bullish scenario is at 1.1459 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0774 USD.

The expected return of this Forex strategy is 525 pips and the risk of loss is 160 pips.

CHART IN DAILY DATA