EUR/USD: Neutral before US inflation

KEY GRAPHIC ELEMENTS

Forex traders continue to be timid on the foreign exchange market with the euro stable for several sessions against the dollar. Investors are now focused on the publication of the CPI inflation index released tomorrow afternoon. An unpleasant surprise, with statistics above expectations in particular, would thwart the hopes of more than two thirds of investors to see the key rates of the American central bank be lowered next March. Concerning the European Central Bank, according to François Villeroy de Galhau, the institution will reduce its interest rates this year when it has noted that the inflation outlook has stabilized in accordance with its objective of 2%. If the slope of the curve is heading towards the objective, some jolts affect the views of investors. Indeed, inflation accelerated to 2.9% in December compared to 2.4% in November, mainly due to technical factors such as the end of government subsidies and the drop in energy prices in particular. Technically the European currency multiplies the candlesticks of indecision. Any rebound from 1.10 constitutes an opportunity to position ourselves downward on the European currency to aim for 1.07 initially.

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 1.0947 USD. The price target for our bearish scenario is at 1.0700 USD. To preserve the invested capital, we advise you to position a protective stop at 1.1158 USD.

The expected profitability of this Forex strategy is 247 pips and the risk of loss is 211 pips.

DAILY DATA CHART