EUR/USD: Powell to hint at rate cut timetable

(News Bulletin 247) – This article, with open access, is produced by the stock market analysis and strategy research team at News Bulletin 247. To ensure you don’t miss any opportunities, consult all the analyzes and discover our portfolios by accessing our Privileges area.

The Euro continued its downward movement against the Dollar, in a foreign exchange market impatient to have more certainty on the timetable for lowering key rates on both sides of the Atlantic. Last week, the ECB Governing Council unsurprisingly delivered a monetary status quo.

“In the eurozone, the ECB left rates unchanged, but adopted a dovish stance in recognizing that inflationary pressures may be less strong than previously thought and that wage growth is starting to decline. Ms. Lagarde , at the press conference, and some comments from the ECB after the meeting, appeared to leave the door open for a cut in April, although other comments from the ECB suggested that if it waited longer until “If it is certain, it could then reduce its rates more aggressively, rather than reducing them by 25 basis points,” say Nomura strategists.

Because it is this difficult control of the price trajectory which remains one of the major conditions for a relaxation of the monetary rope. Precisely on Friday, across the Atlantic, the PCE prices, the Fed’s preferred measure in its reading of inflation, were published. In December, this index increased by 2.9% over one year, excluding energy and food prices, a little less than the 3% expected by economists surveyed by the Wall Street Journal. This is its lowest level in almost three years, according to Agence France Presse.

It will be the Fed’s turn on Wednesday to complete its FOMC. François Rimeu, senior strategist at La Française AM, believes that “allusion to the timetable for cuts will be made at this meeting. Jerome Powell will likely maintain his dovish rhetoric that surprised markets during the December 2023 press conference, as the Fed is increasingly confident that inflation is sustainably approaching the PCE inflation target of 2%. However, it will remain cautious about the scale of reductions in 2024 by reaffirming the 75 point rate cut core, as predicted in the December 2023 projections, although the Fed will make its monetary policy decisions based on the data.”

To follow in the meantime, the consumer confidence index (Conference Board), expected to rise on Tuesday to 113.9, as well as new job offers (JOLTS).

At midday on the foreign exchange market, the Euro was trading against $1.0820 approximately.

KEY GRAPHIC ELEMENTS

Interestingly technical fact, the 20-day moving average (in dark blue, bearish), is currently breaking its 50-day moving average (in orange, horizontal), i.e. a first contact since November 13. The graphic and technical situation is tensing under this trend line.

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 1.0819 USD. The price target for our bearish scenario is at 1.0551 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0946 USD.

The expected profitability of this Forex strategy is 268 pips and the risk of loss is 127 pips.

DAILY DATA CHART