EUR/USD: Return to form of the single currency after the Fed

(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, the reference barometer of the appetite for risk on the financial markets, reflected the warmth of the reception of the remarks considered accommodating by J Powell, at a press conference at the end of the Monetary Policy Committee of the Fed.

fully reassured the financial community by confirming that the scenario of three cuts in federal rates held up, and that inflation continued, on trend, to decrease, despite some “stirs”. A status quo on rates for this maturity was confirmed, as widely expected.

Whitney Watson, Co-Head & Co-CIO, Fixed Income & Liquidity Solutions, Goldman Sachs Asset Management believes that “the progress of inflation over the past year and the signals of disinflation, with the rebalancing of several markets ( particularly the labor, property and rental markets), will lead the Fed to begin its cycle of rate cuts this summer.”

“Overall, despite recent hiccups on the road to inflation, major central banks remain on track to cut rates in the coming months.”

The June FOMC should be the starting point for this rate cut, with a probability of 74.4% according to the CME’s FedWatch tool.

In the immediate future, currency traders are turning to the very mixed publication of barometer indicators of activity in the Euro Zone. In first estimates for the current month, the industrial PMI (45.7) comes out clearly below expectations due to the German component, while the services PMI, on the contrary, pleasantly surprises by returning significantly above the bar from 50 points, synonymous with expansion, to 51.1, beyond expectations.

“The easing of price tensions in the services sector (a sector particularly sensitive to wage increases) will somewhat reassure the European Central Bank. In fact, the increase in prices paid by service providers slowed slightly in March, the prices charged having otherwise followed the same trajectory. The level of inflation remains high, however, and this latest development in PMI price data will not be enough to modify the ECB’s project, which seems to foresee a reduction in its key rate in June rather than April,” commented Norman Liebke, Economist at Hamburg Commercial Bank.

To follow at 1:30 p.m. the Philly Fed index (manufacturing index of the Philadelphia Fed), and weekly registrations for unemployment benefits.

At midday on the foreign exchange market, the Euro was trading against $1.0920 approximately.

KEY GRAPHIC ELEMENTS

Consistent with our previous papers, we build a bullish position, which we maintain as long as the 20-day moving average (in dark blue) gravitates above the 50-day moving average (in orange). The difference between these two curves is small.

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 1.0918 USD. The price target for our bullish scenario is $1.1143. To preserve the invested capital, we advise you to position a protective stop at 1.0809 USD.

The expected profitability of this Forex strategy is 225 pips and the risk of loss is 109 pips.

DAILY DATA CHART