KEY GRAPHIC ELEMENTS
The fog is clearing somewhat regarding potential future rate cuts. Indeed, the European Central Bank should reduce its interest rates during the summer, declared its president Christine Lagarde, while the latter spoke at the World Economic Forum in Davos. She added that policymakers should have enough wage data by the end of spring to decide whether inflation in the euro zone will continue to fall. This information comes as the dollar has strengthened in recent days following hawkish comments from members of the Fed and American macroeconomic statistics showed the resilience of the economy. Christine Lagarde, must also speak again today at 11:00 a.m. Next, investors will await U.S. existing home sales figures at 2:30 p.m., and will also pay attention to the Michigan Consumer Confidence Index at 4 p.m. Operators are reassured as the United States House of Representatives yesterday passed a short-term budget bill that will avoid a partial government shutdown. In effect, the agreement extends government spending at current levels for some federal agencies until March 1 and for others until March 8. The only downside is persistent geopolitical tensions with continued Anglo-American operations against the Houthis in Yemen who continue to attack merchant and military ships near their territorial waters. Technically the European currency is still under downward pressure under weekly resistance and should therefore reach its first support in the 1.07 zone.
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 1.0883 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 183 pips and the risk of loss is 275 pips.
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