EUR/USD: Eyes on US growth

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In the midst of questioning the resilience of the European and American economies after years of restrictive monetary policy, the Euro/Dollar, one of the most reliable barometers of risk appetite on the markets, managed to hold its position at the within a thin ascending channel, the lower limit of which gradually turns into a “safeguard”.

At the same time, traders remain tormented by the Fed’s short-term strategy. Will it take a break at the end of the next FOMC next month, a way of recording the confirmation of a slowdown in inflation, or will it maintain a firm course for a few more months at the risk of weighing more on a weakened economy? Currency traders are therefore on the lookout for statistical publications on employment, inflation and growth. On this last point, the main driver of US growth is naturally domestic consumption. However, the “sacrosanct” index of consumer confidence (Conference Board) contracted yesterday, below the consensus, to 101.3.

Published yesterday, durable goods orders rose 3.2% in March, month on month. Excluding transport equipment, the increase is much less impressive, but far exceeds the target. See you at 2:30 p.m. (Paris time) for major indicators likely to influence the Fed’s decision: the very first estimates of growth in the first quarter, expected at +2% on an annualized basis, and weekly registrations for unemployment benefits, expected at a level close to 250,000 new units.

Currency traders will naturally continue to be attentive to the consequences of the setbacks of three regional banking establishments on economic activity. “While being cautious about the possible contagion of the FRB’s situation to other regional banks, in particular on large withdrawals of deposits which would weaken certain institutions, [les stratégistes de la Banque Postale AM pensent] “that the American authorities have all the means to restore calm and restore confidence.”

“On the other hand […], it is difficult to consider that this episode will not have consequences on the distribution of credit in the economy. Thus, for us, the probable greater restriction of credit should accentuate the transmission belt of the monetary tightening in progress. It is in this context that [LBPAM] now[ient] [son] scenario of a recession, even if moderate, in the United States by the end of the year.

At midday on the foreign exchange market, the Euro was trading against $1.1045 approximately.

KEY GRAPHIC ELEMENTS

The identified channel, drawn in black on the graph below, is currently seeing its lower limit tested quite nervously, with no clear signal. We will maintain, out of discipline, as mentioned in our previous analyzes on the currency pair, our long positions within the channel, while being ready to make arbitrages if necessary, in the event of an exit from the bottom with confirmation in daily data.

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 1.1040 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 1.0859 USD.

The expected return of this Forex strategy is 419 pips and the risk of loss is 181 pips.

CHART IN DAILY DATA