EUR/USD: The Dollar regains (a little) color

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The Euro accentuated its decline at the turn of the year, the greenback regaining some lost feathers after the probabilities of a loosening of the monetary tap from March had contracted slightly, according to the CME’s FedWatch tool. . The majority of operators have nevertheless decided that the Fed will begin to lower the yield of its Fed Funds in the very short term, from the FOMC in March. And this in particular after the publication at the end of last year of a downward revision of GDP in Q2 and a very clear slowdown in inflation in the sense of PCE, the Fed’s preferred measure in its assessment of price dynamics.

This Tuesday, RAS concerning the final industrial PMI data in the Euro Zone for the month of December. These leading indicators came out with no significant deviation from the first estimates, at 44.4, compared to 44.2. This is a 7-month high.

Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, provided the following insights: “The Eurozone manufacturing sector remains mired in a sharp contraction, and December HCOB PMI data shows little improvement in the economic situation compared to the previous month. The survey continues to highlight marked declines in activity and new orders, the decline in sales having slowed only slightly compared to its sustained pace in November. Sluggish demand reflects the current economic gloom, which is also reflected in our HCOB nowcast model, which suggests a decline in the region’s GDP in the fourth quarter. If true, this new quarterly contraction would confirm the start of a technical recession in the euro zone since the third quarter of 2023.”

The week for currency traders will be busy with, among other celebrations, on the agenda, the Fed Minutes and the new JOLTS job offers tomorrow, the ADP survey and weekly registrations for unemployment benefits on Thursday, and as a highlight Friday, the federal report on private employment. A week under the sign of employment, therefore, the persistent signs of tensions will be gauged. Because although the specter of a price-wage spiral has fortunately been avoided, employment remains under the microscope of the Fed.

At midday on the foreign exchange market, the Euro was trading against $1.0975 approximately.

KEY GRAPHIC ELEMENTS

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 1.0969 USD. The price target for our bearish scenario is at 1.0763 USD. To preserve the invested capital, we advise you to position a protective stop at 1.1071 USD.

The expected profitability of this Forex strategy is 206 pips and the risk of loss is 102 pips.

DAILY DATA CHART