EUR/USD: A long moving average exerts strong pressure

(News Bulletin 247) – Between a Dollar reinvigorated by the prospect of three hikes in federal key rates, or even four, and powerful technical catalysts, the currency pair validated its pattern of false exit from a wedge to resume its basic bearish bias, which would be invalidated in the event of a clear reconquest of the 100-day moving average (in orange). In the immediate future, bearish positions can be attempted below this basic trend curve.

In terms of statistics, Friday reported retail sales, a sharp benchmark that has a place of choice on the screens of operators, as domestic consumption is THE main driver of national wealth creation in the United States. And these sales, in their monthly dynamics, were very disappointing. Excluding automobiles in December, they fell by 2.3%, completely missing the target. The federal report on industry also missed expectations, whether for December production, which contracted slightly, or for the productive capacity utilization rate, at 76.5%.

Traders took a close look at growth data in China this morning, Monday’s main statistical meeting. In the fourth quarter, growth rose at an annualized rate of +4.0%, well above expectations. This did not prevent the People’s Bank of China from lowering its key rates, in contrast to its main counterparts, to further boost growth.

Note the lack of landmarks from Wall Street on Monday, a public holiday and a day off (Commemoration of the birth of Martin Luther King).

At midday on the foreign exchange market, the Euro was trading against 1,1420$ about.

KEY GRAPHIC ELEMENTS

We warned in our previous analyzes on the flagship currency pair against the “risk” of a false exit from above, an elongated wedge pattern. We are there, and the expression of this false exit abruptly brought the spot back against a 100-day moving average (in orange) with a sharp bearish bias. Traders will be able to gradually resume short positions on the EURUSD spot by taking advantage of a much better quality entry point.

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).

Our entry point is at 1.1418 USD. The price target of our bearish scenario is at 1.1217 USD. To preserve the capital invested, we advise you to position a protective stop at 1.1502 USD.

The expected return of this Forex strategy is 201 pips and the risk of loss is 84 pips.

CHART IN DAILY DATA

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