EUR/USD: A hint of growth plus one point of inflation, the ideal dish

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The Euro, the ultimate risk asset, was levitating as the Fed Minutes approached, the highly anticipated report from the last monetary policy meeting. The opportunity to further refine the probabilities of reaching, already or not, terminal rates. Above all, the opportunity to take stock of the time the Fed is giving itself to maintain rates at such a high level.

“Without a doubt, the “growth” theme will become central in the coming quarters and take precedence over the “inflation” theme,” says Thomas Giudici, head of bond management at Auris Gestion.

“A “soft landing”? And it is the favorable scenario of the “Goldilocks” which could be put in place, the “ideal path” hoped for by Jerome Powell. Last week was also able to give us an overview of the financial markets with a solid increase in stock market indices. In the case of a more marked recession, which is not the central scenario currently, the situation would however be different for risky markets, even in the case of a decline central bank rates.”

The term Goldilocks, which means Goldilocks, is borrowed from a character in a popular tale, Goldilocks and the Three Bears, where a little girl discovers an empty house in the heart of the forest. Attracted by the tempting smell of bowls of hot chocolate (or porridge, depending on the version!), the little girl indulges in tasting the 3 bowls lined up on the table: that of Mama Bear, Papa Bear, and the little one. bear cub. His preference is for the latter, neither too hot nor too cold…

“In economics, the “Goldilocks” scenario refers to an optimal situation where growth is modest, but very real, and inflation is moderate,” explains Christopher Dembik, investment strategy advisor at Pictet AM.

Austan Goolsbee, the president of the Chicago Fed, even speaks of an “unusual feat” for the American economy with a record drop in inflation (excluding war periods) without a recession.

As a reminder, the monthly consumer price indices (CPI), regardless of the product base chosen, all came out last Tuesday below expectations. Compared to October 2022 in particular, all products combined, inflation now stands at +3.2% compared to +3.7% the previous month, below the target at +3.3%, according to the latest data published by the Department of Labor. Better yet, so-called “core” inflation, that is to say excluding the price of food and energy, stood at 4.0% over one year, the lowest for more than two years. years. The statistic further distances the prospect of a rate hike from the American Federal Reserve.

On the agenda this Tuesday, to primarily follow sales of old homes in the United States at 4:00 p.m. and the Fed Minutes at 8:00 p.m.

KEY GRAPHIC ELEMENTS

At this stage, an essential observation is necessary. Following the training of marubozu school Tuesday 14/11, the spot built an extremely short consolidation, pennant on the upper part of the candle mentioned, before rising early, proof of the bubbling impatience of the buying camp.

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 1.0944 USD. The price target for our bullish scenario is $1.1068. To preserve the invested capital, we advise you to position a protective stop at 1.0884 USD.

The expected profitability of this Forex strategy is 124 pips and the risk of loss is 60 pips.

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