EUR/USD: The ECB is almost there

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The Euro/Dollar found a point of balance at the start of the week around $1.0830 per euro, as the outcome, at the heart of the week, of a new Council of Governors of the ECB. If a status quo on the rates themselves is an almost established scenario, the language elements which will be used at the press conference will be an opportunity to refine the estimated timetable for rate cuts.

“The ECB meeting this week is not expected to result in concrete policy decisions, as the Governing Council wishes to wait for more reassuring evidence of continued disinflation,” confirms Thomas HEMPELL, Head of Macro & Market Research at GENERALI ASSET MANAGEMENT. “As inflation in March is lower than expected (CPI of 2.4% year-on-year), President Christine Lagarde should give even clearer signs that the decisions of the meeting in June will be made “live”” .

The trajectory of inflation normalization is indeed showing more reassuring signs on this side of the Atlantic in any case. “Two more crucial inflation figures are due between next week’s April meeting and the ECB’s subsequent decision at the start of June. We are likely to see some softening in these figures – particularly at this time. which concerns services inflation – so that the ECB is confident about a rate cut in June”, note Nomura strategists.

Immediately, currency traders have just become aware of the Sentix investor confidence index in the Euro Zone, which rose to -5.9 this month, well above expectations.

Across the Atlantic, the Fed received a clear message on Friday, which supported the firm tone of several of its executives throughout the past week: the NFP report on private employment came out at a very firm level, suggesting tensions on wages, and therefore on inflation.

If average hourly wages, at +0.3%, did not move away from the target this time, job creations in the private sector excluding agriculture in March amounted to more than 300,000, exploding the target at 212,000 (275,000 creations in February). Finally, the unemployment rate, expected to be stable at 3.9%, fell to 3.8% of the active population. Enough to bring grist to the mills of the most cautious Fed executives.

As a reminder, two members of the Fed, Neel Kashkari, president of the Minneapolis Fed, and Thomas Barkin, head of the Richmond Fed, spoke this week adopting a very cautious approach, insisting on the fact that the Federal Reserve had time. And the president of the Atlanta Fed, Raphael Bostic, estimated this Wednesday that the persistence of inflation risked forcing the American central bank to only lower its rates at the end of the year.

At midday on the foreign exchange market, the Euro was trading against $1.0830 approximately.

KEY GRAPHIC ELEMENTS

While the currency pair regains support on the lower limit of the Bollinger bands (20;2.5) and the 20-day moving average (in dark blue) still gravitates above its 50-day counterpart (in orange ), the opinion remains bullish. We will target the upper Bollinger band, currently in the immediate vicinity of $1.1 per €.

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 1.0828 USD. The price target for our bullish scenario is $1.1069. To preserve the capital invested, we advise you to position a protective stop at 1.0739 USD.

The expected profitability of this Forex strategy is 241 pips and the risk of loss is 89 pips.

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