EUR/USD: The ingredients remain the same, the decline continues


(News Bulletin 247) – It has been a tough week for the Euro/Dollar currency pair, under heavy pressure from heightened geopolitical tensions between Moscow and Kiev, and Powell’s offensive tone following the January FOMC meeting.

While Russian military exercises are multiplying on the border with Ukraine, let us remember that the European Union is very largely dependent on Russia for its gas supply. The sanctions scenario in the form of a reduction in European purchases of Russian gas would have major consequences for the Russian economy, but could be a source of an additional spike, at the worst time, in energy prices.

On the monetary level this week, of course, the President did not give any clear indications concerning the timetable for raising federal rates, but adopted a tone that leaves no doubt about his determination to be firm, particularly with regard to the price dynamics and labor market tensions. In the end, a scenario, which seemed “extreme” even a few weeks ago, of five Fed Funds hikes over the year, with a “double blow” why not as early as March, does not is not totally excluded from the universe of possibilities.

For Ronan Blanc, manager-analyst at Financière Arbevel, Jerome Powell is clearly on the offensive. “After having locked himself in a transitional inflation scenario for too long”, the boss of the monetary institution “is trying to regain control, without letting himself be influenced by ambient noise (geopolitics, omicron impact, drop in equity markets )”.

The monetary adjustment cycle will be faster than in previous episodes because the underlying economic fundamentals are also more robust”, continues Ronan Blanc. And if the reduction of the balance sheet is underway, “purchases will not disappear for all that and thus prevent the yield curve from becoming too flat (and leading investors to anticipate the worst-case scenario: a recession)”.

In terms of statistics on Thursday, the very first estimates of US Q4 GDP at an annualized rate exceeded expectations, at +6.9%. RAS on the other hand concerning orders for durable goods (excluding automobiles) and weekly registrations for unemployment benefits, both perfectly in line with expectations. To follow on the agenda this Friday, PCE (personal consumption index) prices at 2:30 p.m., the preferred measure of inflation for the Fed’s monetary reflection, as well as at 4:00 p.m. the American consumer confidence index (U-Mich) in revised data for the month of December. French growth stood at 0.7% in Q4 and at +7.0% for the whole of 2021, according to the first INSEE estimates published this morning.

At midday on the foreign exchange market, the Euro was trading against 1,1135$ about.


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. He visits new levels since the end of May 2020.


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 1.1130 USD. The price target of our bearish scenario is at 1.0857 USD. To preserve the capital invested, we advise you to position a protective stop at 1.1211 USD.

The expected return of this Forex strategy is 273 pips and the risk of loss is 81 pips.


EUR/USD: The ingredients remain the same, the decline continues (©

©2022 News Bulletin 247

Source: Tradingsat

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