EUR/USD: After the Board of Governors, on the way to the FOMC…

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The Euro remained under pressure against the Dollar, in a climate of unclear risk appetite, between the monetary policy meetings of the ECB (last week) and the Fed (this week).

If the powerful Frankfurt Monetary Institution increased the rent of the Euro by a quarter of a basis point, it suggested that this turn of the screw would probably be the last, before entering a plateau phase. A source of relief in the trading rooms, which can be based on the idea of ​​finally reaching a terminal rate, in the absence of a pivot scenario. The ECB, which has significantly lowered its growth forecasts and raised its inflation extrapolation curve, therefore intends not to give up its efforts.

“The ECB press release and Christine Lagarde’s speech [ont] gave substance to the hypothesis that the peak in rates had been reached”, for Alexandre Baradez (IG France).

In terms of statistics on Friday, targets were largely exceeded on the Empire State index (NY Fed manufacturing index) and on the monthly report on American industry. On the other hand, the consumer confidence index (U-Mich, preliminary data) sank to 67.7.

If this week begins very discreetly on this point, with the NAHB index of the American residential market, the program will expand with consumer prices in the Euro Zone tomorrow. The outcome of the Fed’s FOMC is scheduled for Wednesday, 8:00 p.m. (Paris time). The highly anticipated press conference will begin at 8:30 p.m. Even if a status quo on rates itself is almost certain, Christian Scherrmann, US Economist DWS, thinks that “far from declaring victory on inflation, the Fed will most likely maintain its usual hawkish orientation, namely higher prices for longer.”

The motto “Higher for Longer” would become “High for Longer and Longer”…

At midday on the foreign exchange market, the Euro was trading against $1.0670 approximately.

KEY GRAPHIC ELEMENTS

The almost complete retracement of July’s gains does not militate at this stage for a continuation of the advance of the currency pair, without formally excluding it. This retracement, by its magnitude, weakens the bullish message then delivered over a good part of the month of July. The outcome of the ongoing test of the 50-day moving average (in orange) will be decisive. The bearish message takes shape with the break – now validated – of the 50-day moving average by its 20-day counterpart (in dark blue), at a significant angle. The short position will be retained as long as the latter gravitates below the first. The advantage of this investment plan is the discipline that it inherently induces.

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is positive in the medium term on the Euro Dollar (EURUSD).

Our entry point is at 1.0673 USD. The price target for our bullish scenario is $1.0436. To preserve the capital invested, we advise you to position a protective stop at 1.0772 USD.

The expected profitability of this Forex strategy is 237 pips and the risk of loss is 99 pips.

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