EUR/USD: Steep ascending channel

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Buoyed by a range of favorable elements, the Euro remained well oriented against the Dollar, above its 20-day moving average (in dark blue).

Currency 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, apart from the very good figures for Chinese growth in Q1 (in the sense of the deviation from the consensus in any case), little to eat in this first part of the week. The calendar is finally expanding with valuable benchmarks on both employment and American activity. At 2:30 p.m., the weekly jobless claims and the Philadelphia Fed manufacturing index will be released simultaneously. A new opportunity to gauge on the one hand the persistent degrees of tension on the employment front, and the quality of economic activity, after years of firm monetary policy.

At midday on the foreign exchange market, the Euro was trading against $1.0960 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. We have depicted the steep channel in black on the chart below.

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 1.0965 USD. The price target of our bullish scenario is at 1.1459 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0795 USD.

The expected return of this Forex strategy is 494 pips and the risk of loss is 170 pips.

CHART IN DAILY DATA