EUR/USD: Inflation, relief in the Euro Zone, suspense for the United States

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The Euro followed the DAX and the CAC in their technical rebound, at the end of this week which will be marked, at 2:30 p.m., by the publication of PCE (personal consumption expenditures) prices, the Fed’s preferred measure in its assessment of inflation. . A meeting which will be all the more followed as the last two weeks have been marked by a surge in long-term rates to be linked to the firm nature of the attitude of the major European central banks. The market expects high rates for a long time.

Risk appetite, compressed since the beginning of August, made a timid return this Friday thanks to rather reassuring inflation figures in Germany. According to the latest EuroStat data, across the Euro Zone as a whole, prices adjusted for volatile elements are now showing an annualized increase of 4.5%, compared to a more pessimistic target of 4.8%. Enough to bring a feeling of relief, and enough to advance the idea that the terminal European rates may already have been reached.

“As for the main components of euro zone inflation, food, alcohol & tobacco are expected to see the highest annual rate in September (8.8%, compared to 9.7% in August), followed by services (4.7%, compared to 5.5% in August), industrial goods excluding energy (4.2%, compared to 4.7% in August) and energy (-4.7%, compared to -3.3% in August), adds the pan-European statistical institute.

On the agenda this Friday, to follow in priority the PCE prices at 2:30 p.m. The opportunity to recall that the PCE differs from the basic CPI (core CPI) in the sense that it only measures goods and services intended for and consumed by individuals. Prices are weighted based on total spending per item, which provides important insights into consumer spending behavior.

At midday on the foreign exchange market, the Euro was trading against $1.0610 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 took 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 latter, precisely, increasingly plays a graphic role of resistance.

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 negative in the medium term on the Euro Dollar (EURUSD).

Our entry point is at 1.0610 USD. The price target for our bearish scenario is at 1.0239 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0731 USD.

The expected profitability of this Forex strategy is 371 pips and the risk of loss is 121 pips.

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